To Spend or Not to Spend?

Key points:

1. Assets untouched

Retired participants may leave assets untouched well into retirement due to deep-seated fears that they may outlive their money.

2. Retirement realities

Future retirees may need to take a different approach that includes spending more than previous generations.

3. Accumulation and decumulation mindset

A saving and decumulation action plan can help prepare participants financially–and emotionally–for retirement spending.

BlackRock research in conjunction with the Employee Benefit Research Institute (EBRI) reported something unexpected: retirees hardly touched their retirement savings. On average across all wealth levels, most current retirees still had 80% of their pre-retirement savings remaining after almost two decades of retirement. However, looking beneath the averages, some retirees did spend down assets to critically low levels while on the other hand one third grew their assets over the course of retirement.

Figure one: Percent of assets remaining after 17-to-18 years of retirement

Percent of assets remaining after 17-to-18 years of retirement

Source: Employee Benefit Research Institute estimates based on Health & Retirement Study (HRS, 1992-2014) Consumption and Activities Mail Survey (CAMS, 2005-2015). Retirees were segmented into three groups based on pre-retirement non-housing retirement assets — $0 to less than $200,000 (lowest wealth), $200,000 to less than $500,000 (medium wealth) and $500,000 and above (highest wealth).