Reno Gazette-Journal Sunday, June 7, 2020
You have saved and saved and saved. Now you’re retired, and it’s time to enjoy your newfound freedom, right? So why does spending seem so hard to do?
According to a Texas Tech University study, most retirees – those of moderate means, as well as those who are affluent – don’t even spend all of their income from Social Security, pensions and investment earnings, much less draw down the principal in their nest egg.
What is the psychology behind continued saving instead of spending to improve the quality of life as we age?
“We have found that there are many seniors who have formed certain habits around money over their lifetime, and in many cases these habits no longer serve them best in retirement,” said Annette Junell, a leading authority on issues related to senior living solutions.
Whether it’s from what psychologists call the “confirmation bias” – focusing only on what information suits us, reinforcing our initial thoughts and/or long standing beliefs – or some other dynamic, making the switch from saving to spending is a huge hurdle for many retirees.
“That’s why we are hosting a webinar with area specialists to address the psychological and practical influences on senior adults and their approach to saving versus spending,” said Junell, co-host of the upcoming “The Truth about Flipping the Money Switch” seminar.
Why do retirees resist spending their hard-earned (and hard-saved) money? Wanting to leave an inheritance for their children is a prime reason cited by the Texas Tech University study and borne out by conversations with retirees.
However, a bigger concern may be uncertainty. You can’t predict how long you’ll live, how well your investments will perform over 10 or 20 years, or whether you’ll be hit by big medical or long-term-care costs, so you keep a cushion.
So, how can seniors sort through these considerations and come away with a proper balance for spending versus saving. How do they confront the many myths about saving versus spending as they age?
That’s the focus of an upcoming seminar scheduled for June 18, “The Truth about Flipping the Money Switch,” which include panelists who can address many of these myths.
One of the myths driving seniors is the maxim, “He who has the most money [in the end] wins.” The truth is that you can’t take it with you, so is a large savings really a win if you’re not wisely utilizing your financial resources to maximize and enjoy your retirement?
Financial advisors recognize that the psychology of not working – not saving – is hard for most seniors who have had the “accumulate wealth” mentality all their life. These “prodigious accumulators” are often from the depression era or children of depression era parents and have the same mentality.
So, how much is enough? Not everyone has the same retirement saving/spending goals. You need a plan to understand how to balance spending versus saving. Without a plan, seniors may rely on “rules of thumb” for saving that don’t really relate to their current situations.
Seminar speakers will address some of the myths about financial planning after retirement and the best ways to create wealth after your working years have ended. A plan is relevant at any age. Find out what you can change to make spending less “painful.” You may need to adjust your plan as your retirement situation changes. You need a road map and a trusted advisor to help navigate the financial road.
The other Big Myth: I can’t spend my money if I plan to leave an inheritance. The truth is that leaving money to our heirs may be less important to them than you living a good, fulfilling life in later years. Leaving a legacy of money may not be all that is important to your heirs. There are other important legacies. Ask your family. Don’t wait; give things to them now.
And, give yourself permission to spend some of your hard-earned money.
Brett Junell shared a personal story about family members who could not “flip the switch” after retirement and died millionaires without living out their retirement dreams.
“I speak from the experience of having two uncles who passed away millionaires. They had both been extremely hard workers all their lives, were always very frugal and went without. I grew up listening to them say that once they retired, they were going to go on all these trips and enjoy life!”
“After retirement, both were unable to change their mindset about the money they had worked hard to accumulate. They didn’t go on those vacations they had talked about with their spouses, and as they aged wouldn’t make changes to have a better quality of life, as this would have required them to spend their money on themselves.”
“In the end, their wealth was left to their families, and of course that was their decision to make. I do believe their habits, beliefs about money and mindset over a working life prevented them from doing what they had in mind when they were much younger with far less financial means.”
The Texas Tech University study summarized the situation many retirees put themselves into this way:
“Underspending in retirement certainly isn’t as bad as running out of money. Still, scrimping needlessly cheats you of the enjoyment you deserve after a lifetime of saving. You’re not only leaving satisfaction on the table, but you’re forgetting about all the satisfaction you left on the table during your working years.”
For those interested in learning more, the seminar titled The Truth about Flipping the Money Switch, will be held June 18 from 10 a.m. to 11:30 a.m. via Zoom or call in.
The seminar is free to seniors and their guests. Registration can be made online at www.RetiredLivingTruthSeries.com or by calling (775) 432-6398 to receive Zoom Webinar access & instructions.
This article is sponsored by Annette & Brett Junell.