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“Spendaphobia”: The Reluctance to Spend

It is widely recognized that America’s economic growth since the 2008 recession has been slower than that of past recoveries. Some economists believe this is due in part to Americans putting more money into savings and spending less. The desire by a large percentage of the population – including baby boomers – to contribute to their savings has trimmed consumer spending, thus impeding higher economic growth.

There is even some concern among research analysts that as more baby boomers retire, money withdrawn from their 401(k) plans could put a drain on returns of remaining investment assets. Historically, balanced portfolios have yielded an average of 8 percent a year. However, more recent estimates project that returns between 2005 and 2050 will average 0.9 percentage points lower.

The reasons behind this potential decline are unclear. In fact, recent research reveals that retirement income withdrawals are probably less of a factor than previously thought. That’s because many retirees, in anticipation of living longer and concerned they might outlive their income, are spending less than the amount of retirement income they regularly receive. According to a Vanguard survey, retirees who hold at least $100,000 in savings actually reinvest about 40 percent of the money they withdraw from 401(k)s, IRAs and other retirement accounts. This means that while they may not be spending it, which influences economic growth, they’re likely not crippling the securities markets, either.

One notable observation is that many retirees find it difficult to make the transition from saving their hard-earned dollars to spending it in their retirement years. Some refer to this phenomenon as “spendaphobia.” Rather than traveling, buying a second home or indulging in other traditional retirement spending patterns, these retirees tend to be frugal.

It’s important to find a balance between wanting to preserve your nest egg and allowing yourself to enjoy some indulgences. One key is to develop a prudent but reasonable spending strategy, with separate contingency accounts and/or insurance products to help pay for large or unexpected expenses like a medical condition, assisted or long-term care, or even buying a new car or replacing the roof on your house. When retirees create a distribution strategy that helps prepare their nest egg for longevity, inflation and market volatility, spendaphobia may be reduced or eliminated. After all, it’s your retirement; you’ve worked hard to get there, so you should enjoy it. We can work with you to help you develop distribution strategies for your retirement income; just give us a call at (952) 460­-3260.


The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice. Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

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Ryan Keapproth

Ryan Keapproth

Retirement Planner

Ryan is dedicated to serving clients to achieve their retirement goals. Ryan’s holistic approach centers on wealth management strategies with a focus on income planning throughout retirement. As a Financial Advisor, Ryan is an Investment Adviser Representative (IAR), life and health insurance licensed and a Certified Tax Preparer. Ryan is a graduate of the University of Minnesota, with an Accounting and Finance major.

Ryan is a lifelong Minnesotan originally from Woodbury and currently residing in Bloomington with his wife, Riamae, and their rescue Terrier Beagle mix, Douglas. He and his family are avid travelers in their free time. Ryan enjoys playing golf and poker, and describes himself as a major foodie enjoying new restaurants around the cities whenever possible. He is a sports fan especially when the Vikings and Timberwolves are playing.