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I don't know if any of you caught that article about 2 weeks ago in Businessweek about this phenomenon. According to some established financial planners with long track records who commonly manage retirees having followed all the standard advice find them dying with huge fortunes. If you retire at age 65 to 70 with a nest-egg of $1-2million or so, it is a common fact that most of these people (I forget the percentages cited, I believe it was something like 75-90%) die in their late 80s or 90s with a nest-egg in the $4-5million range. Sounds like good news but maybe not.
It seems to them that most retirees do spend about 80% of their pretirement income having a ball in their first 5 years or so of retirement - travel, golf, cruises, dining out well, gifting families and charities. But the joy of spending seems to die off after a few years, and once the retirees reach around age 80 or so, most of them (something like 80% of them), get "sick" and tired of the travel and high life, and spend most of their hours and days at home reading, watching TV, or other such free pursuits. Or their health prevents them from a lot of activity. He is finding the vast majority of retirees are actually spending about 10-30% of their pre-retirement income in their actual retirement after the initial burst of activity in their first couple of years of retirement. Based on such typical histories from tens of thousands of clients, a foremost financial planner is in the process of revising the standard advice to saving for retirement. He realizes that most Americans aren't saving a lick and any admonishments of saving too much is laughable, but he notes that the people who do listen to the standard advice (like most who frequent this forum), are indeed over-saving.
The down-sides to over-saving are: 1) you may tend toward putting off potential life-fulfilling activities which could be more enjoyed in youth than in old age 2) you may tend toward with-holding higher-level activities, rewards, education from yourselves or your kids in the hopes of saving more for retirement 3) you may tend to live the prime years of your life in either lower quality or less safe environments in the hopes of saving more for later (cars, homes, neighborhoods, schooling for kids, systems, etc.) 4) you may end up with a large pile of cash in your old age which may tend to complicate family relationships and attitudes among your heirs (remember the "outpatient economic care syndrome" which develops in the children of millionaires according to Stanley and Danko).
The cure according to them is for the frugal life-long savers is to restrict their programmed savings to the max allowed by their 401k/403b, IRA, SEPs and spend the rest on themselves and their families. He quoted a number like 10-15% of their pre-tax income toward savings as being adequate. He is apparently coming out with some new formulas which will get a lot of press and apparently planning to publish some books discussing this topic of "Savings over-achievers." I figured this would generate a lot of controversy given the pathetic rate of savings for the general American family.
It seems to them that most retirees do spend about 80% of their pretirement income having a ball in their first 5 years or so of retirement - travel, golf, cruises, dining out well, gifting families and charities. But the joy of spending seems to die off after a few years, and once the retirees reach around age 80 or so, most of them (something like 80% of them), get "sick" and tired of the travel and high life, and spend most of their hours and days at home reading, watching TV, or other such free pursuits. Or their health prevents them from a lot of activity. He is finding the vast majority of retirees are actually spending about 10-30% of their pre-retirement income in their actual retirement after the initial burst of activity in their first couple of years of retirement. Based on such typical histories from tens of thousands of clients, a foremost financial planner is in the process of revising the standard advice to saving for retirement. He realizes that most Americans aren't saving a lick and any admonishments of saving too much is laughable, but he notes that the people who do listen to the standard advice (like most who frequent this forum), are indeed over-saving.
The down-sides to over-saving are: 1) you may tend toward putting off potential life-fulfilling activities which could be more enjoyed in youth than in old age 2) you may tend toward with-holding higher-level activities, rewards, education from yourselves or your kids in the hopes of saving more for retirement 3) you may tend to live the prime years of your life in either lower quality or less safe environments in the hopes of saving more for later (cars, homes, neighborhoods, schooling for kids, systems, etc.) 4) you may end up with a large pile of cash in your old age which may tend to complicate family relationships and attitudes among your heirs (remember the "outpatient economic care syndrome" which develops in the children of millionaires according to Stanley and Danko).
The cure according to them is for the frugal life-long savers is to restrict their programmed savings to the max allowed by their 401k/403b, IRA, SEPs and spend the rest on themselves and their families. He quoted a number like 10-15% of their pre-tax income toward savings as being adequate. He is apparently coming out with some new formulas which will get a lot of press and apparently planning to publish some books discussing this topic of "Savings over-achievers." I figured this would generate a lot of controversy given the pathetic rate of savings for the general American family.
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