Half of Retirees Afraid to Use Savings

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protagonist
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Re: Half of Retirees Afraid to Use Savings

Post by protagonist » Mon Oct 07, 2019 6:04 pm

Young people tend to be relatively fearless, and they become more fearful as they age.
OK, I admit, I didn't read any studies....but that seems to be my anecdotal experience. When you are young you feel like you are invincible, no matter what you do to yourself.
On the other hand, many old people that I have known throughout life seem much more motivated by fear than they were when they were younger and "crazier". Part of that is the fear that they might stand a chance of running out of money by the time they reach 95 or 100 or whatever....they just don't want to take any chances.

So they spend a life saving for a retirement that they are subsequently afraid to enjoy.

I'm not sure I understand that from a biological perspective. If anything, I would think that we would have a genetic propensity to be more careful as youngsters, since our health is important in being able to propagate the species and nurture our young. Once we get past that child-rearing age, we no longer serve any genetic purpose....you would think we should become less fearful and just enjoy ourselves , whatever the future may bring!!

Alas the old adage....youth is wasted on the young.

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willthrill81
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Re: Half of Retirees Afraid to Use Savings

Post by willthrill81 » Mon Oct 07, 2019 6:30 pm

randomguy wrote:
Mon Oct 07, 2019 4:57 pm
People not spending down their accounts is an expected result of any type of conservative spending plan. You could argue that maybe these people should be upping their spending, but how many 75+ years are going to change up thier lifestyles much because they have more money? Not many in my experience. You would have to look at individual situations to know if this is .real problem or a made up one.
That's a good point.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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willthrill81
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Re: Half of Retirees Afraid to Use Savings

Post by willthrill81 » Mon Oct 07, 2019 6:36 pm

protagonist wrote:
Mon Oct 07, 2019 6:04 pm
Young people tend to be relatively fearless, and they become more fearful as they age.
OK, I admit, I didn't read any studies....but that seems to be my anecdotal experience. When you are young you feel like you are invincible, no matter what you do to yourself.
On the other hand, many old people that I have known throughout life seem much more motivated by fear than they were when they were younger and "crazier". Part of that is the fear that they might stand a chance of running out of money by the time they reach 95 or 100 or whatever....they just don't want to take any chances.

So they spend a life saving for a retirement that they are subsequently afraid to enjoy.

I'm not sure I understand that from a biological perspective. If anything, I would think that we would have a genetic propensity to be more careful as youngsters, since our health is important in being able to propagate the species and nurture our young. Once we get past that child-rearing age, we no longer serve any genetic purpose....you would think we should become less fearful and just enjoy ourselves , whatever the future may bring!!

Alas the old adage....youth is wasted on the young.
The young are actually at greater risk in many ways of the old, but their limited life experience makes them think that 'it won't happen to me', and they're often (usually?) right. The old have seen those risks manifested in themselves and others and consequently seem to overestimate the likelihood of risks going forward.

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“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Mr.BB
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Re: Half of Retirees Afraid to Use Savings

Post by Mr.BB » Mon Oct 07, 2019 6:41 pm

willthrill81 wrote:
Mon Oct 07, 2019 6:36 pm
protagonist wrote:
Mon Oct 07, 2019 6:04 pm
Young people tend to be relatively fearless, and they become more fearful as they age.
OK, I admit, I didn't read any studies....but that seems to be my anecdotal experience. When you are young you feel like you are invincible, no matter what you do to yourself.
On the other hand, many old people that I have known throughout life seem much more motivated by fear than they were when they were younger and "crazier". Part of that is the fear that they might stand a chance of running out of money by the time they reach 95 or 100 or whatever....they just don't want to take any chances.

So they spend a life saving for a retirement that they are subsequently afraid to enjoy.

I'm not sure I understand that from a biological perspective. If anything, I would think that we would have a genetic propensity to be more careful as youngsters, since our health is important in being able to propagate the species and nurture our young. Once we get past that child-rearing age, we no longer serve any genetic purpose....you would think we should become less fearful and just enjoy ourselves , whatever the future may bring!!

Alas the old adage....youth is wasted on the young.
The young are actually at greater risk in many ways of the old, but their limited life experience makes them think that 'it won't happen to me', and they're often (usually?) right. The old have seen those risks manifested in themselves and others and consequently seem to overestimate the likelihood of risks going forward.

Image
LOL. +1
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

protagonist
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Re: Half of Retirees Afraid to Use Savings

Post by protagonist » Mon Oct 07, 2019 7:03 pm

Mr.BB wrote:
Mon Oct 07, 2019 6:41 pm
willthrill81 wrote:
Mon Oct 07, 2019 6:36 pm
protagonist wrote:
Mon Oct 07, 2019 6:04 pm
Young people tend to be relatively fearless, and they become more fearful as they age.
OK, I admit, I didn't read any studies....but that seems to be my anecdotal experience. When you are young you feel like you are invincible, no matter what you do to yourself.
On the other hand, many old people that I have known throughout life seem much more motivated by fear than they were when they were younger and "crazier". Part of that is the fear that they might stand a chance of running out of money by the time they reach 95 or 100 or whatever....they just don't want to take any chances.

So they spend a life saving for a retirement that they are subsequently afraid to enjoy.

I'm not sure I understand that from a biological perspective. If anything, I would think that we would have a genetic propensity to be more careful as youngsters, since our health is important in being able to propagate the species and nurture our young. Once we get past that child-rearing age, we no longer serve any genetic purpose....you would think we should become less fearful and just enjoy ourselves , whatever the future may bring!!

Alas the old adage....youth is wasted on the young.
The young are actually at greater risk in many ways of the old, but their limited life experience makes them think that 'it won't happen to me', and they're often (usually?) right. The old have seen those risks manifested in themselves and others and consequently seem to overestimate the likelihood of risks going forward.

Image
LOL. +1
Good point, willthrill.
And the more I think about it, perhaps from an evolutionary standpoint it may be more important for a young hunter to take more chances to kill the tiger that threatens the tribe or village- maybe they need to be less afraid to put their own lives on the line. So maybe it could be justified genetically if we look at historical perspective.
But in 2019 it seems to make a lot more biological/genetic sense for 70 year olds to be hang gliding and bungee jumping and experimenting with drugs (I don't mean Viagra or Prep. H) than for 20 y o would-be or young fathers and mothers to be doing the same. And the same goes for finances.

hudson
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Re: Half of Retirees Afraid to Use Savings

Post by hudson » Mon Oct 07, 2019 7:06 pm

JackoC wrote:
Thu Sep 26, 2019 2:58 pm
rich126 wrote:
Thu Sep 26, 2019 10:35 am
I'm sure it can be a tough thing to do. Spend down something that you can't replace. Of course while some of those people would probably have a more enjoyable retirement if they spent some money, many obviously can live w/o touching it. Most people can't afford not to spend savings if they want to survive, although that assumes they even have any money saved for retirement.
Seems to me a common situation that BH's wouldn't naturally think of would be people with relatively little savings, who are basically surviving on Social Security and pensions. That's in contrast to the average relatively younger and relatively well off BH where the standard is generally to not expect a private pension and even be uncertain about receiving SS (not to debate the merits of that concern) but anyway savings will have to provide a lot or most of their retirements. But a person basically getting by on SS/pension with a bit set aside for emergencies wouldn't be as likely to spend that emergency money.

In between I think of my late parents. They each had pretty generous public employee pensions, plus fairly significant assets, over $1mil which included their house but this was also 20+ yrs ago's $'s. While my dad was around he kept all financial stuff to himself but after he passed I had to help my mom unsnarl the rat's nest (generally successful investing, but all over the place with no master list of what was where) and then could see she was steadily adding to savings from SS+pension. I guess they generally had been ever since retired.

My mom in particular was psychologically scarred by the Great Depression: her family went from upper middle class to a long struggle not to be out on the street. So she was quite afraid of running out of money. OTOH they lived completely comfortably, not wild spenders but not super-frugal like some internet people at least claim to be nowadays, on just pension and SS, though also without a monthly mortgage or rent payment.
My grandparents all born around the 1890s had to live carefully to get through the Great Depression. I remember being coached by them: "Save your money!" "Waste not, want not." In the 1950s and 1960s they were still living carefully. There was not much left when they passed away; their children didn't have to support them. My parents and wife's parents...born in the early 20s were also influenced by the depression. They had more than their parents, but they didn't spend freely. I always wanted my own car; that wasn't going to happen until I had my own job.
I think that I'm not unlike them...but not nearly as extreme. We have more waste; we eat out more; we have more vehicles. Because of the threat of long term care, we don't go crazy. I'm not going to buy a vacation house. I'm going to stick with Toyotas; I'll continue to live in house that we bought in 1975.

MomBasenji4
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Re: Half of Retirees Afraid to Use Savings

Post by MomBasenji4 » Mon Oct 07, 2019 7:28 pm

protagonist wrote:
Mon Oct 07, 2019 6:04 pm

So they spend a life saving for a retirement that they are subsequently afraid to enjoy.
My husband and I taught our kids as we have been taught - it's possible to enjoy life without spending a lot of money.
Biggest example I can think of: Our son was in the Navy, the nuclear propulsion rate. He had to stay in 6 years, and when the ship was in a war zone, they offered him $100,000 to re-enlist. He did not accept the offer, knowing it would be tax free because of the war zone. All 3 of them have demonstrated that they understand, money is not everything in life. They all seem to enjoy life

MathIsMyWayr
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Re: Half of Retirees Afraid to Use Savings

Post by MathIsMyWayr » Mon Oct 07, 2019 10:56 pm

protagonist wrote:
Mon Oct 07, 2019 6:04 pm
Young people tend to be relatively fearless, and they become more fearful as they age.
OK, I admit, I didn't read any studies....but that seems to be my anecdotal experience. When you are young you feel like you are invincible, no matter what you do to yourself.
On the other hand, many old people that I have known throughout life seem much more motivated by fear than they were when they were younger and "crazier". Part of that is the fear that they might stand a chance of running out of money by the time they reach 95 or 100 or whatever....they just don't want to take any chances.

So they spend a life saving for a retirement that they are subsequently afraid to enjoy.

I'm not sure I understand that from a biological perspective. If anything, I would think that we would have a genetic propensity to be more careful as youngsters, since our health is important in being able to propagate the species and nurture our young. Once we get past that child-rearing age, we no longer serve any genetic purpose....you would think we should become less fearful and just enjoy ourselves , whatever the future may bring!!

Alas the old adage....youth is wasted on the young.
The root cause why people become more conservative as they age is the recognition and acceptance that their abilities decline with age once they pass a certain age. Any change is usually for the worse. Many opportunities are also being shut closed to them. The realization that things will not be better tomorrow plays big psychologically. This applies to spending during retirement. If something really bad happens, there are not many ways to dig out of the big financial mess.

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Re: Half of Retirees Afraid to Use Savings

Post by SevenBridgesRoad » Mon Oct 07, 2019 11:35 pm

MathIsMyWayr wrote:
Mon Oct 07, 2019 10:56 pm

...The root cause why people become more conservative as they age is the recognition and acceptance that their abilities decline with age once they pass a certain age...
If you are declaring a root cause, please cite your evidence.
Retired 2018 age 61 | "Not using an alarm is one of the great glories of my life." Robert Greene

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hand
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Re: Half of Retirees Afraid to Use Savings

Post by hand » Tue Oct 08, 2019 8:46 am

willthrill81 wrote:
Mon Oct 07, 2019 3:57 pm
hand wrote:
Mon Oct 07, 2019 3:29 pm
People saved all of their lives to make sure they will enjoy retirement. So why are they so reluctant to spend the money for the purpose it was intended?
Great straw man to begin a click-bait article... I wouldn't be suprised to see a follow-up pitch for an annuity.

My take is that of the people who save all their lives, many do so to ensure 1) they will have a secure retirement or 2) to ensure security for their descendents. Additionally, those retired today are very likely to have significantly more money than they expected given *great* returns over the past decades. It does not suprise me that people who have more than expected (and possibly more than pre-retirement) and who care about security and their descendents are not spending every last penny of their nest egg.
It's not a straw man. Data from the BLS and other sources support the argument that many retirees don't spend down their assets much, if at all, during retirement. As I noted above, the reasoning for this is simple: many retirees don't have enough assets to comfortably spend down at all.

I'm not sure what "great returns over the past decades" you're referring to. The most recent decade was very good, but returns since 2000 have been well below average for stocks (3.68% real) and bonds (2.65% real).
I think you're missing my point - I'm not disagreeing with BLS data, but rather than objecting to the premise that "people are reluctant to spend money for the purpose it was intended" and that they are not "enjoying retirement" because they are underspending.

Current retirees have *more* today than they could have reasonably expected given the *great* sequence of returns over the last decades (in retirement planning average return is much less meaningful than sequence of return).

Assumption in the article seems to be that not fully spending one's nest egg represents a problem. I disagree as there are plenty of valid and obvious reasons not to spend it all:
1) You don't want to outlive your assets and don’t know when you’ll die
2) You prefer to leave a legacy (to kids / charities) vs. gratuitous spending on yourself
3) You have more money than planned, but don't value increased consumption
4) Enjoyment of retirement is dependent on amount of money spent

If the article was documenting a mass of millionaire retirees eating dogfood, I’d be more receptive, but I don’t think they’ve made the case that that underspending is a problem vs. a phenomenon.

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jose
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Re: Half of Retirees Afraid to Use Savings

Post by jose » Wed Oct 09, 2019 7:05 pm

Continuing with the human capital concept,

When you are young you have human capital, and no financial capital.
When you work and save, you convert human into financial capital.
When you are retired you have no human capital, only financial.

When are you more wealthy?

I think most people are most wealthy when they are young. Human capital only depends on skills and the economy working, and it is fully COLA'd. Financial capital is more risky, depends on the economy, financial markets, inflation, and the impact of out health on being able to manage. When I was under 30 I was a saver, but for the short term (next car, trip). I knew money would just keep coming in. Not anymore. I felt wealthier when I was 30 with 100k in the bank.

Some people (say over $2 or 3 million net worth) are probably wealthier now because they have done better than they expected when they were young.

jose

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Re: Half of Retirees Afraid to Use Savings

Post by latesaver » Wed Oct 09, 2019 8:21 pm

willthrill81 wrote:
Mon Oct 07, 2019 6:36 pm
protagonist wrote:
Mon Oct 07, 2019 6:04 pm
Young people tend to be relatively fearless, and they become more fearful as they age.
OK, I admit, I didn't read any studies....but that seems to be my anecdotal experience. When you are young you feel like you are invincible, no matter what you do to yourself.
On the other hand, many old people that I have known throughout life seem much more motivated by fear than they were when they were younger and "crazier". Part of that is the fear that they might stand a chance of running out of money by the time they reach 95 or 100 or whatever....they just don't want to take any chances.

So they spend a life saving for a retirement that they are subsequently afraid to enjoy.

I'm not sure I understand that from a biological perspective. If anything, I would think that we would have a genetic propensity to be more careful as youngsters, since our health is important in being able to propagate the species and nurture our young. Once we get past that child-rearing age, we no longer serve any genetic purpose....you would think we should become less fearful and just enjoy ourselves , whatever the future may bring!!

Alas the old adage....youth is wasted on the young.
The young are actually at greater risk in many ways of the old, but their limited life experience makes them think that 'it won't happen to me', and they're often (usually?) right. The old have seen those risks manifested in themselves and others and consequently seem to overestimate the likelihood of risks going forward.

Image
I am not sure what "of the old" means. Maybe it should be "vs the old".

Reading this thread, i think it is worth differentiating between the young that patronize this blog and "the young" in general. I went through (and lost my job during) the recession of 2008/2009. So i fit into the former class. i was lucky that i didn't have a lot of $ in the market during the recession. i did see a lot of people lose a lot of money. and "a lot of money" refers to more money than many people make in a lifetime.

as a somewhat-avid reader of the posts on this blog, i am overly conservative. i am only 40 years old but have enough saved up for a 3.15% SWR. however i enjoy my job, have my peak earning years ahead of me and have no intention of relieving myself of the golden handcuffs i currently sport. i also have a 2 year old and may have another on the way soon, like other young professionals in my age group and income class. i am also an extremely competitive personality so watching my brokerage accounts go down is something i am not comfortable with.

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