"Hoarding cash" is
highly loaded language. It's probably not "cash," and "hoarding" is one of the most negative-sounding words you could use to describe what they are doing. As for a chart like this,
if the implication is that these people are doing something wrong, it's not so. In fact it's the logical consequence of doing what investment firms probably want you to do: finance your retirement from a portfolio, rather than purchasing an income annuity. Spending all of your retirement money on yourself is an insoluble problem for an individual. If you budget your spending prudently to last into a ripe old age, should you be fortunate enough to live that long, then it follows logically that you'll have something like half of it left if you only live to an average age.
Many of us would like to live so that "the check to the
underwriter undertaker bounces." If that's what you want do to, you can do it by buying an income annuity. There's no way to do it by spending from an individual portfolio, because you don't know how long you will live. That's not a detail, if you look at the numbers the uncertainty is huge, I mean a factor of two or three, and it doesn't decrease with age.
Let's be clear on this. The higher your spending rate, the higher your risk of running out. And once again, I'm not sure why, there seems to be a drumbeat of articles saying, simply, "your risk tolerance is wrong. You need to be trained to take more risk."
There's a lot of "cheerful" talk being published lately, under the guise of sound advice, along the lines of "eat, drink and be merry, for tomorrow you die." Scott Burn's "hedonic tilt." A recent
article by Meir Statman asserting baldly "you'll die sooner than you think." And now this. We need to train seniors to be optimistic, because there is an objectively correct level of optimism we should have, and old people are wrong and younger people are right.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.