There is an insidious contagion spreading itself across America. It seems to only affect adults, mainly those nearing retirement or already retired. Unchecked, this virus could sabotage the lives of countless Americans. What is it? Oversaving.
It may sound crazy, but the trend of oversaving is very real. According to a study by Sudipto Banerjee of the Employee Benefit Research Institute, 1/3 of retirees die with more money than ever. It also found that, on average, retirees only spend 25% of their savings during their retired years.
Of course, about half of the country does not need to worry about oversaving. In fact, if anything, they should start to worry about saving more. I’m talking to people who have saved at least $200,000 for retirement. You don’t need to be a multi-millionaire to responsibly enjoy some of your hard earned savings.
Let’s look with a very personal example.
My grandfather, Papa, was a depression era baby (and an absolutely amazing guy). Papa was a school teacher in a small rural district and never made much money. My grandmother raised the kids and never worked. When Papa passed away at age 89 we were utterly shocked to discover that $900,000 remained in his bank account.
As we reviewed his bank statements, we realized he had saved money each an every month up until the month that he died.
When Papa was in his 60’s he desperately needed hearing aids. His hearing was getting so bad that he became embarrassed because he couldn’t understand anyone on the phone. After going to the hearing specialist, he was given two options. He could buy the clunky, old-fashioned hearing aids which Medicare covers. Or he could buy the cutting-edge version which allowed for better hearing. The cost difference was significant; thousands of dollars.
I’m sure you already guessed which pair he chose. The cheap ones. Papa literally chose his own hearing over spending some of his savings.
There is no way I am going to let you make the same mistake. We don’t want you to be irresponsible with our spending. We just want to find the perfect balance between spending too little and too much.
We need to start thinking about what money is for.
Why do people oversave?
There are a lot of reasons people give for continuing to save during retirement, but they all really boil down to fear and misinformation. If you feel like you have to hoard every penny, you’re not alone and it’s not your fault. Your parents survived the Great Depression. You’ve watched pensions disappear, mortgages rates skyrocket, and banks fail. It’s no wonder you feel safer saving every last dollar until you die.
But you don’t have to. You can spend money during your retirement.
Listening to the mainstream financial news on TV, you might think that most retirees are dying destitute, but that is not the reality. Only 12% (source: 2015 Kaiser Health News) of Americans die with no savings remaining (only social security to live on).
What are the signs of oversaving?
Oversaving has a few tell-tale symptoms to watch out for. If you are experiencing any of these, I advise you to read more Retirement Revolution articles and call me in the morning.
Symptoms of Oversaving
- You continue to work even though you have enough assets to retire comfortably.
- You worry about outliving your money, even though you have plenty of financial resources to live a long and fulfilling retirement.
- Once retired, you refuse to spend any of your savings because, well……you “just never know.”
- You feel like you’re broke, even though you may have hundreds of thousands of dollars in the bank. That money isn’t yours; it belongs to “retirement.”
- When your spouse suggests you splurge on an African safari, you spit out the water you were sipping on.
A new way to think about retirement.
Think about it. Many retirees and those preparing to retire are so preoccupied with saving, so worried about not losing any money, so afraid of running out of money during retirement, that they forget what the money is FOR. Your financial statements are not just made up of ink and paper. They represent much more: experiences, freedom, opportunity.
Imagine, millions of Americans who have worked hard all their lives, saved their whole lives, only to waste what should be the best years of their lives during retirement by never spending any of the money they’ve so carefully socked away!
You deserve an awesome retirement. But, you’re going to have to take it back.
You’ll have to take it back from the financial news that wants you to stay afraid, and the financial planners that want you to keep saving because their compensation is based on your account value. You have to take it back from yourself, changing your mentality and embracing the idea that you can spend money during your retirement without fear.
That’s why I started The Retirement Revolution. I want to empower you to live the retirement you deserve.
Don’t believe the fear-mongers. Retiring is not as scary or uncertain as you may believe.
Instead of anxiously looking to the future, focus and prepare for the new life coming your way. Allow yourself to enjoy the fruits of your labor. Allow yourself to live the life you deserve.