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.
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Social Security Earnings Test, Ep #205
Overcoming Frugality Syndrome, Ep # 204
Can I Go Fishing for the Next 25 Years and Forget About Work?, Ep #203
Boomers Want to Stay Home - Senior Housing Now Faces Budding Glut, Ep # 202
Affluent Americans Rush to Retire in New ‘Life-Is-Short’ Mindset, Ep #201
Affluent Retirees Scared To Draw Down Savings, Ep #200
Planning Multi-Generational Disney Trips with Lou Mongello, Ep #199
Sabbaticals Are Essential For The Way We Work with Paul Millerd, Ep #198
Summer Travel Series: Travel Hacking with Lee Huffman, Ep #197
7 Steps for Widows and Widowers to Manage Their First Year Alone, Ep # 196
Do You Know the Difference Between Being Rich and Being Wealthy? Ep #195
Cheaper Health Insurance Before Medicare? Ep # 194
Improving the 4% Rule, Ep # 193
The 6 Phases of Retirement, Ep # 192
Time for a Gap Year? Ep # 191
Deducting Your Home Office in a Work from Home World, Ep # 190
The Future Is Foggy, Plan Accordingly, Ep #189
What You Need to Know About Your My Social Security Account, Ep # 188
Fidelity & Schwab Donors Set Record for Charitable Giving in Response to Pandemic, Ep #187
Why We’re Experiencing Zoom Fatigue and How To Fix It, Ep # 186
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