Reluctant Spenders

John Yeigh, 2:02 pm ET

A 2021 SURVEY by the Employee Benefit Research Institute found that three-quarters of retirees said the value of their financial assets was the same or higher than when they first retired. This finding was consistent from the poorest respondents to those with the most wealth. The typical time in retirement for the respondents was seven to 10 years.

One implication: Retirees may be underspending their accumulated wealth. EBRI examined five reasons for this possible underspending:

  • Saving assets for unforeseen costs later in retirement
  • Don’t feel spending down assets is necessary
  • Want to leave as much as possible to heirs
  • Feel better if account balances remain high
  • Fear of running out of money

The first two reasons—”saving for tomorrow” and “no current need to spend”—were reported by almost half of respondents. By contrast, a “fear of running out of money” was mentioned by only a fifth of those surveyed.

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5 months ago

I think anyone who prepared adequately for retirement will see their assets grow after they retire. If they withdraw 4% the first year and then pull that same amount of money adjusted for inflation that will happen most of the time based on historical data. We spend without any limitations,but less than 4%, and have seen our assets up more than seven figures in the six years we’ve been retired. That’s typical of most of my retired friends. If your portfolio is sufficient for a good retirement then its growth should exceed your spending easily. If it doesn’t increase then you’ve got the real chance of running out of money.

5 months ago

Two things worth noting about this survey:

  1. It was limited to those with less than $1 million in assets;
  2. The complete survey included two additional groups that were omitted from this report: Struggling retirees and Just Getting By retirees.

Last edited 5 months ago by parkslope
Jack Hannam
Jack Hannam
5 months ago
Reply to  parkslope

Agree. Another thought is that the S&P 500 annualized returns over the past 7-10 years have been above average, so we might expect that retirees have enjoyed an above average rate of growth in their portfolios. Reasonable asset allocation with rebalancing should help to limit the potential future declines when stock market returns revert back to the mean.

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