How long have you been saving for retirement? Are you hesitant to break into your retirement funds and start living it up once you retire?
This week I share two Retirement Headlines articles. The first is called Right-Sizing Retirement and it comes from the Financial Planning Association. In this article, the authors pose an important question: why save for retirement if you're not going to spend it?
We’ll also check out another article from Wharton Magazine entitled The Economics of Living to 100. Is your retirement plan ready for you to live until 100? Listen to this episode to understand how you can best combat the uncertainty that retirement brings.
Outline of This EpisodeDavid Blanchett and Warren Cormier recently wrote an article for the Financial Planning Association in which they explore the first 10 years of retirement. What they discovered from the RAND Health and Retirement Study is that early retirees tend to underspend. The authors wanted to find the underlying reasons for why we are seeing this trend in America. This research explores the retirement consumption gap and considers both the wealth available to fund retirement and spending before and after retirement.
There are 2 types of retireesRetirees can be broken down into 2 main categories: those who have saved enough to cover their levels of pre-retirement spending and those who did not. Interestingly, both of these types of retirees tend to underspend in early retirement but for different reasons.
Only 18 percent of households in America have enough wealth to cover their pre-retirement spending during retirement. This tells us that most households will not be able to maintain their pre-retirement lifestyle in retirement because they don’t have enough money.
You may think that only those that don’t have enough saved cut their spending in retirement, however, the data shows that most households that have saved more than enough to fund their lifestyles in retirement also decrease their spending in early retirement.
Why don't well-funded households spend more in retirement?Many well-funded households could increase consumption but don’t. So, why does this group of retirees spend less during early retirement? Potential reasons include the desire to leave a legacy, uncertain medical expenses, or an uncertain life expectancy. There also could be psychological or other reasons not easily discerned from survey data.
Uncertainty leads to spending lessThe main reason for this lack of spending in the first 10 years of retirement is uncertainty. Does the uncertainty that retirement brings give you pause to live out your retirement fully?
One way to combat this unpredictability is with contingency planning. If you’re listening to a retirement podcast then you probably have a retirement plan, but do you have a plan B? What will you do if life throws a wrench in your plans? Listen in to hear what you can do to combat the uncertainty that retirement brings.
Resources & People MentionedSubscribe to Retirement Starts Today on
Apple Podcasts, Stitcher, TuneIn, Podbean, Player FM, iHeart, or Spotify
Will Your Kids Ruin Your Retirement? Ep #82
Retirement Rehearsal (Revisited) Ep #81
Why I Won’t Work With Your Kids, with Shannah Game Ep #80
Do You Need Bernie Madoff Insurance? Ep #79
How Can a Forcing Mechanism Improve Your Retirement?, Ep #78
Are You Aware of the Top 10 Scams Targeting Seniors? Ep #77
How to Survive Grey Divorce and Being Single in Retirement with Sara Stanich, Ep #76
How to Get the Most Out of Your Employer-Sponsored Retirement Plan with Aaron Pottichen, Ep #75
Change Your Tax Status by Changing Your Domicile Ep #74
What We Can Learn From The Time Use And Happiness of Millionaires, Ep #73
How John Bogle Put Money In Your Pocket, Even If You’ve Never Invested With Vanguard, Ep #72
Listener Submitted Retirement Questions (Asked & Answered #3), Ep #71
Are Children Responsible For Their Parent’s Debts?, Ep #70
How Your Best Year Ever Could Happen in 2019, Ep #69
Podcast Goals For 2019 – And An Exciting Personal Update, Ep #68
Simple Tax Strategies For Retirees In 2018
Become Wealthy by Doing What The Wealthy Do, with Sarah Stanley Fallaw, Ep #66
Chris Hogan: How Ordinary People Built Extraordinary Wealth – and How You Can Too
Whats the Worst Investment You’ve Ever Seen? 4 Advisors Weigh in
Rewire Your Retirement – An Interview with Jamie Hopkins
Create your
podcast in
minutes
It is Free
Jim & Bill (It‘s Another Day)
Pharmacy Podcast Network
HauntingLive
The Tucker Carlson Show
The Ben Shapiro Show