How much we spend in retirement is a key component of our overall retirement plan. Recently, I wrote a column about how retirees often don’t spend all of their savings in retirement. The data in the article was based on research conducted by the Employee Benefit Research Institute (EBRI), they did additional research to uncover why people spend the way they do when they retire. This research was conducted in 2020, they surveyed 2,000 individuals between the ages of 62 and 75, 97% of which reported being retired, and the findings were released in early 2021.
Key findings: people generally wish they saved more, only 18% of respondents reported that they had saved more than what was needed, and 46% said they saved less than required. Most don’t want to spend down their assets, despite the comment above about folks wishing they’d saved more, only 43% of those in the study intended to spend down all or a significant portion of their assets in retirement. The majority planned to only spend a portion of their assets, just the interest or expected their investments to show growth in retirement. Fear of running out of money isn’t the primary motivator: when asked about the reason for not spending down assets in retirement, savings for an unforeseen cost was actually the most common response. A close second was feeling that spending down assets is unnecessary, third and the most common rationale was wanting to leave as much as possible to heirs, feeling happier when the account balance remains high was fourth, and fifth on the list was fear of running out of money. Priorities change during retirement. Staying healthy proved to be by far the most important goal at the time of retirement, 81% said this was very or extremely important. Health became even more important as retirement progressed. In stark contrast, traveling became less important for a quarter of the folks in the study. The reality of retirement is highly aligned with how they expected or planned for their retirement to be. The findings of the study were more or less what I expected. However, the fact that only 24% of folks said retirement matched their expectations was a surprise. In my view, the way we approach finances, our view of money, and how we collectively save and spend, is largely learned behaviour. For decades, we diligently work to have money and form financial patterns that are hard to change. I believe some findings in the study reflect that. This isn’t a bad thing. If you are content with your current level of spending and having a bit extra provides a feeling of security, then do that. I think it’s important to be aware of financial behaviour, but we don’t necessarily have to change it. Chat with your financial professional to ensure your plan is properly updated. CANACCORD GENUITY WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA The comments and opinions expressed in this article are solely the work of Clinton Orr, not an official publication of Canaccord Genuity Corp., and may differ from the opinion of Canaccord Genuity Corp’s. Research Department. Accordingly, they should not be considered as representatives of Canaccord Genuity Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this article, is for general information only, does not constitute legal or tax advice, and the author Clinton Orr does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability. Tax & Estate advice offered through Canaccord Genuity Wealth & Estate Planning |
AuthorClinton Orr is a Senior Wealth Advisor and Senior Portfolio Manager with Canaccord Genuity Corp. Archives
July 2023
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