A number of financial advisors have a complaint about their clients that isn’t in line with widely-held beliefs. These advisors believe their clients aren’t spending enough. The clients have saved and invested well, yet they spend as though they were starting out in life. The advisors believe these seniors are depriving themselves. BlackRock recently completed a study on that topic. It found that most current retirees still have at least 80% of their pre-retirement savings after two decades of retirement. It explores how that happened and whether financial advisors should try to get retirees to spend more.
Has the confluence of these factors created a situation whereby retirees may not have felt the pressure to draw down principal from retirement savings in order to maintain a reasonable standard of living? Perhaps retirees had other plans for their assets beyond themselves—bequests or charitable donations come to mind. Possibly they would have preferred to spend more freely but lacked the financial confidence or tools to efficiently decumulate their assets or were worried about end-of-life healthcare expenses? Looking further, perhaps there were strong emotional biases at play—with fear of outliving retirement assets at the top of the list.