Many Retirees Aren’t Spending as Much as They Safely Could

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Well, there’s good research that says, like, people are reluctant to spend from their own savings. And, uh, you know, David Blanchett in the US said, um, you know, one was that retirees are twice as likely to spend from guaranteed sources like a pension or their government benefits than they would be to withdraw the equivalent amount from their own savings, which just makes sense.

We like watching the pile grow up. We do not like to withdraw and see that balance go down. But then the other part that I thought was interesting was that we focus so much on the four percent rule, and retirees in the state, sixty-five-year-olds, are withdrawing two point one percent.

They’re not touching even close to the four percent rule. They’re withdrawing two b– two point one percent collectively, um, so we’re vastly underspending. The, the research kinda shows, like, we’re reluctant to spend from our savings. And really good savers, I mean, the spending muscle can atrophy really over, over many years. I mean, you taught a generation to pay yourself first, and I don’t think they can stop, right? Which, you know, it’s a good habit to keep saving and keep maybe keep tucking away money in your TFSA.

But I’m telling people in their sixties and seventies, like, if you are plowing money into a non-registered account, it is a sign, like, flashing from the rooftops that you should probably be spending some more money.

Right. And so you see this with your clients quite frequently, and any common denominators? Is it more likely to be a male or a female? Is there a certain age where they finally go, “Okay, I can spend now because I don’t have that long to go?” Like, are you seeing any kind of patterns at all?

No, it’s all over the map, male, female, couples, singles. Um, I think it’s more speaks to your mentality growing up of, uh, whether you have a bit of a scarcity mindset. Maybe you went through something traumatic, you know, uh, you know, whether that was your parents losing a business or their job or, you know, it can go all the way back to childhood is why we become, you know, really good savers.

And then, you know, again, that, that spending muscle just tends to atrophy. You become known. It’s your identity that I am a saver, right? And I save twenty-five or thirty or thirty-five percent of my income. Even by nature of, like, maxing out your RRSP and your TFSA, you’re already over twenty percent, right?

So, like, you know, if you’re saving on top of that, like, you are a really good saver. When do you get to turn that into your lifetime of memories and enjoyment, et cetera? And I think by going through the exercise that we go through with, with my clients to build out, um, you know, a stress-tested roadmap of their finances and say, “Look, even with some reasonably conservative numbers, you’re spending sixty thousand.

You have the capacity to spend one twenty.” I’m not telling you to spend one twenty, but, like, you can come out of the basement and up into the main floor now, right? And so, you know, that’s what I’m trying to sort of nudge people into saying is like, “Look at this capacity. We’ve stress-tested the heck out of this, and you’re gonna be okay.”