Page 47 - Kiplinger's Personal Finance - November 2018

AHEAD Commentary

YOUR MIND AND YOUR MONEY Anne Kates Smith
You’ve Got It. Why Not Spend It?

t’s no secret that many Americans Santa Clara, Calif. Successful savers plan,” says CFP Benjamin Rickey of
have not saved enough for retire- have prospered by living below their Yakima, Wash. “Occasionally, they’re
Iment. But here’s the flip side of the means, and over time, that frugality hoarding money. But most just have
coin: retirees who don’t spend enough becomes a matter of preference— a hard time rewiring themselves.”
of their savings. hardwired, sometimes to an excessive The first step is to find appealing
A recent study by the Employee degree. “Tightwads are usually disci- spending options. “I can afford a $300
Benefit Research Institute found plined in many other areas of their meal, but it makes me feel stupid—like
that the majority of retirees are life,” says certified financial planner the chef is in the back laughing up-
spending down their assets surpris- Ann Reilley Gugle of Charlotte, N.C. roariously,” says Statman. You may
ingly slowly during the first two “Spending can be associated with have zero interest in fancy restaurants
decades of retirement. People who weakness or recklessness.” Frugality or luxury cruises. But like Statman,
retired with $200,000 to $500,000 can also develop into a competitive you might discover that flying busi-
in savings, not including their homes, pastime, she says. Picture a million- ness class is worth every penny. Or
had spent a bit more than one-fourth aire many times over who obsessively you may gain the confidence to con-
of their assets, EBRI found. Those clips coupons. tinue driving by upgrading to a car
with more assets—$500,000 or more— Planners report that inherited with the latest safety features.
had parted with even less, spending money can pose a challenge if heirs People unaccustomed to and unin-
down less than 12% of savings over feel that they don’t deserve to spend terested in spending on themselves
a 20-year span. And about one-third money they didn’t earn. Those who often find it more palatable to help
of the retirees in the study increased have always lived modestly may fear children or grandchildren, or to do-
their savings over the period. that a more lavish lifestyle will change nate to charity. Gifford Lehman, a CFP
EBRI theorizes that retirees their relationships with in Monterey, Calif., has a client who
might spend at slow rates be- neighbors and friends. is a retired teacher, whose modest
cause they’re uncertain about appearance belies a hefty in-
how much money they’ll heritance. “Her passion is phi-
need, how long it will have SUCCESSFUL SAVERS lanthropy, which is a form of
to last or what a safe rate of consumption for her,” Lehman
spending might be. But con- HAVE PROSPERED BY says. A charitable remainder
versations with financial LIVING BELOW THEIR trust will eventually benefit a
planners and behavioral MEANS. FRUGALITY charity she has selected. It gen-
finance experts suggest erates income in the meantime,
that another of EBRI’s OFTEN BECOMES allowing her to make other do-
theories is more rele- A PREFERENCE— nations, mostly anonymously.
vant than you might SOMETIMES TO AN It helps to set up a spending
think: Some people EXCESSIVE DEGREE. strategy. See “Make Your
have a behavioral Money Last” (Oct.) for ways
roadblock that sim- to make your income last a life-
ply makes it hard to time. If you’re more than set but
spend their money. Some folks just spending still troubles you, consider
need to adjust the alternative, says Rickey: “Clients
Nature and nurture. to a new phase are acutely aware of the risk of run-
People are reluctant of life. “I work ning out of money. There’s also the
spenders due to both with a lot of risk of dying on a large pile of beans
personality and habit, people who have that never got put to good use.” POON WATCHARA-AMPHAIWAN
says Meir Statman, trouble turning
a professor at Santa their saving plan ANNE KATES SMITH IS EXECUTIVE EDITOR OF KIPLINGER’S
PERSONAL FINANCE MAGAZINE. YOU CAN CONTACT HER AT
Clara University, in into a spending ASMITH@KIPLINGER.COM.
16 KIPLINGER’S PERSONAL FINANCE

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