7 Reasons Americans Seniors Stay Frugal in Retirement

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Retirement is supposed to be the time to spend down all that you have saved over a lifetime. But it appears that someone forgot to let today’s seniors in on the secret.

Among retirees, 55% say they plan to spend down only a small portion of their assets (33%) or none of their assets (22%) during their golden years.

But there is a method to what some might characterize as their “madness.” Recently, the Employee Benefit Research Institute’s 2022 Spending in Retirement Survey asked nearly 2,000 individuals ages 62 to 75 about their spending habits during retirement.

Following are the top reasons retirees cited for staying frugal in retirement.

7. Feeling that spending down assets is unnecessary

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Retirees who cited this as a:

  • Major reason for not spending savings: 36%
  • Minor reason for not spending savings: 42%

We often hear about a retirement “crisis” in America. But surveys of retirees themselves don’t appear to support a picture of panic.

In fact, in 2021, the Federal Reserve noted that retirees report a “high level of financial well-being and life satisfaction,” with 81% saying they were doing at least OK when it comes to money.

So, if you don’t need to spend the money, you save it.

6. Wanting to leave as much as possible to heirs

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Retirees who cited this as a:

  • Major reason for not spending savings: 36%
  • Minor reason for not spending savings: 30%

A sure sign of wisdom and maturity is the decision to stop living for yourself and instead start planning to leave a legacy for others. Many of today’s frugal seniors forgo spending so they can give more to loved ones.

If taking care of heirs is your goal, check out “6 Estate Planning Mistakes to Avoid.”

5. Fear of running out of money

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Retirees who cited this as a:

  • Major reason for not spending savings: 43%
  • Minor reason for not spending savings: 24%

Although the majority of retirees expect they will have plenty of money to get through retirement, 44% plan to spend down all or a significant portion of what they have, according to the EBRI survey.

Many of these folks likely worry about having enough cash to get to the finish line, causing them to be extra cautious with their spending.

4. Saving assets for an unforeseen cost later in retirement

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Retirees who cited this as a:

  • Major reason for not spending savings: 44%
  • Minor reason for not spending savings: 40%

By the time you reach retirement, you have few illusions about life’s tendency to throw you curveballs. Sure, things are fine now. But how long will they stay that way?

Many seniors draw the purse strings tight because they believe a rainy day is out there somewhere. If you need to be persuaded that they are right, read “6 Reasons Retirees Still Need an Emergency Fund.”

3. Concern about inflation

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Retirees who cited this as a:

  • Major reason for not spending savings: 49%
  • Minor reason for not spending savings: 36%

The recent spate of inflation has shaken the confidence of millions of Americans, and the situation is even scarier when you no longer have a paycheck to depend on.

Retirees are not the only ones spending less in hopes of keeping rising prices at bay. For tips, check out “10 Sure-Fire Ways to Beat Inflation.”

2. Knowing that once assets are spent, they can’t be recovered

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Retirees who cited this as a:

  • Major reason for not spending savings: 55%
  • Minor reason for not spending savings: 27%

Those who spend all their money in retirement are unlikely to get a “do-over.” Landing a new job in hopes of generating additional income can be difficult, especially for older retirees who have health problems.

For that reason, a little extra caution about spending is warranted during your golden years.

1. Feeling better when account balances remain high

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Retirees who cited this as a:

  • Major reason for not spending savings: 58%
  • Minor reason for not spending savings: 32%

After a lifetime of saving, maybe you have a few hundred thousand dollars saved. Or even $1 million or more.

That is no small accomplishment.

A whopping 90% of those who are frugal during retirement say they simply feel good about knowing they have a fat nest egg. They would rather bask in the glow of all that cash than spend it. And who can blame them?

Saving for a great retirement

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