Why aren’t retirees spending their money?
A study by the University of Michigan says that older Americans are living too frugally. They are afraid of spending their money, and instead are dying with money left over.
The phenomenon has become so severe, retirees in their 80s have more money than they did in their 60s or 70s.
But is it any surprise Americans have begun hoarding their wealth? Every day the world seems to become more uncertain. Older Americans are preparing for a rainy day that came in 2008, and they fear could come again soon.
It’s not just the UofM study that notes the change in behavior. Bloomberg’s Ben Steverman reports:
Other studies have found affluent older Americans hoarding money. Last year, a studyin the Journal of Financial Planning found that the wealthiest fifth of U.S. retirees were spending 53 percent less than they could have. Meanwhile, the poorest 40 percent generally spend more than they safely should; the median retiree spent about 8 percent less than the safe amount.
Researchers looked at all the logical reasons why affluent retirees might be so tight-fisted, including the desire to leave an inheritance or worries about future medical needs. The big motivator turned out to be some version of fear they would run out of cash too early.
Fear is driving older Americans to hoard their wealth. Until those fears are abated, expect the trend to continue.
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