Retirees Spend Down Their Assets Much Less Than You Probably Think — My Money Blog

Deep in my accumulation stage, I drastically underestimated how much retirees hate spending down their nest eggs. I have since struggled to convince my parents to spend their money, while also working longer than I planned (albeit not crazy hours) for likely similar underlying reasons. Watching your hard-earned nest egg shrink is hard.

Check out these findings from the Blackrock whitepaper titled To spend or not to spend? [pdf]:

This was not what we expected to find: on average across all wealth levels, most current retirees still had 80% of their pre-retirement savings after almost two decades of retirement according to research conducted jointly with the Employee Benefit Research Institute (EBRI). One-third even grew their assets over the course of retirement.

Why is this? Here are my takeaways:

• The majority of retirees favor financial security over maximizing spending.
• Spending is hampered by a deep-seated fear that they may experience a critical financial or medical shock or otherwise outlive their money.
• Recent retirees report higher anxiety and pessimism than those retired for 10+ years. Fear of major investment loss is more concerning to recent retirees. They feel more comfortable with spending as they reach further into retirement.
• Only 1 in 4 retirees feels they will have to spend down principal at all to fund their desired lifestyle.
• Retirees with pension income are the least likely to spend down their assets. (Not really surprising.)
• Retired women report higher levels of financial worry and are more risk-averse than retired men. (Also quite justifiable due longer lifespan and less assets on average.)
• Blackrock believes that due to the decline in pensions and longer lifespans, the “strong retirement asset retention seen in this last generation of retirees will not likely be repeated for much longer”.

I was still surprised to see that 1 out of 3 managed to end up with more money after 17 years. If I’m honest with myself, this is probably going to be me. I don’t necessarily think that’s a good thing, but I guess I have some company.