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Using Wealth Ain’t Easy

A quick question for you: Would it be easier to spend money if you had plenty of it? It seems logical to think that would be the case. But it’s clearly not.

How do I know? Just look at the actions of a significant number of retirees in this country.

The majority of retirees, research shows, spend far less than they could during retirement. In fact, most never even tap the principal amounts of their financial assets. Even more, a good number of retirees live on far less than the amount by which their financial assets grow each year, causing their wealth to pile up ever higher throughout their lifetime.

That begs another question: “Why are so many retirees so unnecessarily thrifty?”

I can think of three reasons.

The first is the unknown. Retirees don’t know how life will unfold. They don’t know how their health will hold up, or how long they will live, or whether some of their assets will crash in value and never recover. So spending far less than they could is a coping mechanism for retirees to recognize this ever-present uncertainty.

But that doesn’t fully explain it. Research has shown that even after setting aside 40% of financial assets – a very substantial amount – to cover things like living longer than expected, health care expenses, and even gifts to heirs, some retirees are still spending only half of what they mathematically could each year in retirement.

There is obviously something else going on – and it’s not financial or mathematical. I think it’s habit.

Look at it this way: The reason some retirees are able to accumulate substantial wealth is that they formed an unwavering habit of saving a large portion of their income every year.

These retirees have conditioned themselves over decades of earning and saving to steadfastly conserve their hard-earned dollars. And as they say, the chains of habit are too light to be felt until they are too heavy to be broken. By the time these retirees enter retirement, they are simply unable to kick their old habit of saving and switch to a new habit of spending. Almost like a game, they enjoy seeing their wealth build up over the years and are loathe to see it erode, even slowly and prudently.

So, habit is the second reason.

Even still, I don’t think uncertainty and habit cover everything. There is a third – rarely talked about – reason for why retirees spend far less than they could. I believe it comes down to guilt.

Even after working hard, saving a lot – doing all the right things – wealth doesn’t always feel earned. That can often be the case with inheritances, but even for those who are “self-made,” there can be a feeling of unfairness. Call it God-given talent or a knack for making money, sometimes retirees feel like they were built to be successful, but others in this world weren’t. That perspective can produce a powerful feeling of guilt. So to spend significant portions of their wealth on themselves, in a way, feels selfish or unjustified.

As a result, these retirees earmark their wealth for children or charities, someone or something other than themselves in order to avoid the anticipated guilt they might feel for “frivolously” using their wealth. While undoubtedly selfless, this approach, like a savings habit taken too far, can become unhealthy. Spending money on yourself isn’t always selfish. Wealth is meant to be enjoyed.

As with nearly all things in life, it comes down to balance. After all, too much of even a good thing can be bad. But finding and striking that balance can be more challenging than you think.

If you identify with any of those three reasons for unnecessary frugality in retirement, congratulations. You’ve done well.

Your next challenge is to figure out what to do with your wealth. And for some, that task can be just as difficult as building wealth in the first place.

Justin Lueger is President of Invisor Financial LLC, a registered investor adviser firm in the State of Kansas. All opinions expressed are his own and should not be viewed as individual advice. He can be reached at

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