Rich Retirees are Hoarding Cash Out Of Fear - Bloomberg

[Accidental Fire]

I'll just leave this here....  https://www.bloomberg.com/news/articles/2017-05-16/rich-retirees-are-hoarding-cash-out-of-fear

Some good quotes:
"As a result, millions of Americans are living too frugally, said Matt Fellowes, United Income’s CEO"

"“We found that even in a worst-case scenario, they could have spent more,” said Texas Tech University Professor Christopher Browning, one of the study’s authors. “There have to be other explanations,” he said–reasons that aren’t rational."

[spokey doke]

and we see plenty of evidence that it is not only retirees, but lots of folks working longer out of similar fears...just...can't...believe...the numbers...

[Dicey]

and we see plenty of evidence that it is not only retirees, but lots of folks working longer out of similar fears...just...can't...believe...the numbers...

Or the spouses of those people. Seems we've seen a rash of those lately.

[Scandium]

The first chart show that the average person die with ~$300,000 left over. I thought that was pretty good? Cutting it close enough for my taste. Most people aren't mustiacian, and even here many want ~$1Mill to retire on. On the 4% rule that is also likely to increase. So being down to 1/3 by the time they lie down in the soil don't seem half bad? :S Personally, if I was 70 and only had $300k to my name, to live maybe 20 more years on, I'd be a bit nervous to be honest..

Also amusing that the article ends with talk of annuities and financial planners. Sure is a good way to get rid of that pesky money problem by giving 1-2% away every year...

[PizzaSteve]

The first chart show that the average person die with ~$300,000 left over. I thought that was pretty good? Cutting it close enough for my taste. Most people aren't mustiacian, and even here many want ~$1Mill to retire on. On the 4% rule that is also likely to increase. So being down to 1/3 by the time they lie down in the soil don't seem half bad? :S Personally, if I was 70 and only had $300k to my name, to live maybe 20 more years on, I'd be a bit nervous to be honest..

Also amusing that the article ends with talk of annuities and financial planners. Sure is a good way to get rid of that pesky money problem by giving 1-2% away every year...

Exactly.  Whats wrong is people are not spending on useless new stuff and wasting fees on unneeded insurance and financial producrs like good little trained consumers. 

This is also a side effect of the information economy.  Since information is valued and free to share, inceasingly self fulfillment can be achieved at shockingly low marginal cost of production.  Hence we live wealthy lives with less overspill to corporate profits.  This may be a corporate profit issue, but it is not a social problem.  This breaks several traditional economic rules of thumb.

[maizefolk]

The first chart show that the average person die with ~$300,000 left over. I thought that was pretty good? Cutting it close enough for my taste. Most people aren't mustiacian, and even here many want ~$1Mill to retire on. On the 4% rule that is also likely to increase. So being down to 1/3 by the time they lie down in the soil don't seem half bad? :S Personally, if I was 70 and only had $300k to my name, to live maybe 20 more years on, I'd be a bit nervous to be honest..

Also amusing that the article ends with talk of annuities and financial planners. Sure is a good way to get rid of that pesky money problem by giving 1-2% away every year...

Many people may want to retire with a million dollars, but very few people (outside these forums) seem to manage to do so.

Given that the average person going into retirement has something like $100k in total retirement savings, I'd say the average person dying is $300k is pretty darn impressive. (Of course I'm committing the sin on comparing numbers from completely different studies which may have different underlying assumptions and surveying different populations.)

[dude]

Just came here to post the same article!  Interesting for FIREe's, I think, since it's a common psychological barrier we face, going from saving (at a high rate) to spending.

[scantee]

The first chart show that the average person die with ~$300,000 left over. I thought that was pretty good? Cutting it close enough for my taste. Most people aren't mustiacian, and even here many want ~$1Mill to retire on. On the 4% rule that is also likely to increase. So being down to 1/3 by the time they lie down in the soil don't seem half bad? :S Personally, if I was 70 and only had $300k to my name, to live maybe 20 more years on, I'd be a bit nervous to be honest..

Also amusing that the article ends with talk of annuities and financial planners. Sure is a good way to get rid of that pesky money problem by giving 1-2% away every year...

This is an instance when knowing the median would be illuminating. I'm guessing it is way less than $300k.

I'm with Maizeman: having $300k at death is pretty damn good. Only a limited number of retired Americans ever have that much, and if they do it's usually in home equity, so having that amount left over is an indication of someone who has done quite well with both retirement saving and spending.

[aceyou]

Interesting read, but misleading title.  I'd title it:

Many Americans are spending an incorrect amount in Retirement. 

They said that the bottom 40% are spending too much...so almost half.  Can't accuse them of hoarding:)

They said that the medium person is spending 8% too little.  Well, first off, that's 8% is pretty close to correct, and if you are a medium net worth then erring slightly on the side of caution is probably smart if you are going to lean one way or the other, so the medium person is probably doing the right thing. 

It's really just the top quintile that's underspending.  And even then, many of them probably just aren't trying to maximize for dollars spent, but happiness.  I mean, this survey would characterize MMM in the top quintile but underspending category, but he seems like a happy enough fellow.  So, I'd title this article:

"Some of the Top Quintile of Americans are Hoarding Cash in Retirement"

...I probably wouldn't make a very good title picker-outer

[wenchsenior]

I think this is a case where the gulf between average and median is really confusing the issue.

According to recent article by Kiplinger's, the median net worth including home equity of Americans age 65-69 is just under 200K. 

If you remove home equity, their median net worth is frighteningly low... 44K. 

So I doubt the typical American retiree is under-spending in retirement, unless most of them are inheriting several hundred grand after retiring.

But it seems logical to me that many wealthy retirees sit on their cash.  I suspect most people get more cautious with age. Anecdotally, every aging person of means in my family has gotten more and more paranoid about the world and losing their nest egg, even if it is substantial.  Ironically, the less well off members of my  family have less anxiety because they don't have any cash to worry about.

Also, I think people of means might be more inclined to try to manage their money to create a legacy or inheritance.

[ducky19]

My father-in-law has built his nest egg up through rental properties and now has around $4M in the bank (wife is his executor). He and his wife lead a pretty simple existence, taking 4-6 cruises a year for their entertainment. I said to my wife that I wished he would spend more of his money vs. leaving it for the kids. Her reply was, "What would he spend it on? He doesn't want to travel the world anymore (already did that), they both have new vehicles (first new vehicles I've ever seen him drive). There's really nothing that he needs that would make him any happier than he already is". Having known the man almost 17 years, I can honestly say she's right - he will spend money on something if he truly wants it, but what makes him happy is having the freedom to do what he wants, when he wants - which most of the time is still work as a nurse whenever they need him (he's at the top of their call list if they need someone). I totally understand!

[SwordGuy]

Moronic author is talking about average holdings, not median holdings.      Idiot.

[HipGnosis]

Note to the authors kids:  You better save as much as you can, because your daddy isn't leaving any of his money to you.

[Gibbelstein]

My first thought was that every retirement professional/planner encourages you to plan for the worst when saving (high spending, poor health, skyrocketing costs, inflation etc), which is understandable for a lot of people.  But to then turn this around and use it as a 'plan' or benchmark is wrongheaded.  If you saved with the worst in mind, your earliest years of retirement might look like "underspending" when really you intentionally "over-saved".

There's really nothing that he needs that would make him any happier than he already is"

Ducky hit on my other thought from the article:  People finally retire and have time to recalibrate what they think of as important/necessary.  It's very possible that a (bored, miserable) working person might fantasize about the amazing things they'll do in retirement, and then reevaluate their priorities when their time is their own.

And of course, because the article is in Bloomberg, the real point to the article is right there in plain English: "The idea, he said, is 'training people to spend.'"  Nobody makes any money off a person living a simple, sustainable life.

[Optimiser]

It makes sense. The reason people end up with lots of money is because they spend less than they made over the course of their life. It's not surprising that they reach retirement age and continue the pattern. Only difference is, now it is passive income they aren't spending instead of earned income.

https://forum.mrmoneymustache.com/welcome-to-the-forum/americans-are-living-too-frugally

[aceyou]

It makes sense. The reason people end up with lots of money is because they spend less than they made over the course of their life. It's not surprising that they reach retirement age and continue the pattern. Only difference is, now it is passive income they aren't spending instead of earned income.

https://forum.mrmoneymustache.com/welcome-to-the-forum/americans-are-living-too-frugally

Exactly, The Millionaire Next Door gives example after example of this.  Like the husband who goes to the kitchen table as his wife is clipping coupons to tell her he's transferring a couple million to her (or something like that), and she's like "that's nice honey", and just keeps on clipping coupons.  Efficiency itself is beauty for many of us...prettier than fancy cars and gold watches.  If you go spending to spend, it just feels ugly. 

[munch]

i think some of the figures thrown out in this article are misleading once again cause they are using averages.  The truer picture would be conveyed if they used median calculations instead.  This article doesnt jive with the numerous other articles listing the savings figures for most americans at retirment age.