To spend or not to spend?

BlackRock |Sep 9, 2019

Identifying the motivations and biases—behavioral and financial—behind why some retirees are spending down asset balances while others are not.

In November 2017, BlackRock published the whitepaper “Spending retirement assets…or not?” based on research conducted by BlackRock in conjunction with the Employee Benefit Research Institute (EBRI). The paper reported something unexpected: retirees hardly touch 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).

In order to better understand why retirees are either spending down assets or not, BlackRock engaged Greenwald and Associates to conduct 19 in-depth interviews and survey 1,510 retirees in February 2018 to seek deeper insight into how retirees really think about spending and investing in retirement to better understand the motivations and biases driving the numbers.

We identified six key themes and drivers of retiree spending behavior that emerged from the findings and offer “lessons learned” to help advisors advance conversations at both the plan sponsor and plan participant levels.

1. Retirees prefer to keep their
assets untouched

Only one in four feels they will have to spend down principal at all to fund their desired lifestyle. For most, retirement is not a time to live it up, it is more important to feel financially secure.

Retirees prefer to keep their assets untouched

2. Retirees more often plan to spend consistently—increasing with age

At retirement, 43% planned to consistently spend throughout retirement, however one in six planned to spend more right after retirement when healthy and an equal amount planned to purposely curtail spending early in retirement fearful of higher health care costs. After several years into retirement, the desire to spend consistently increased to 61%.

Retirees more often plan to spend consistently—increasing with age

3. Retirees retain their
accumulation mindset

Very few plan to systematically spend down assets. If assets do decrease, there is a clear desire to keep assets above a certain, minimum level. For many, saving and accumulation habits die hard and spending is hampered by deep-seated fear that they may experience a critical financial or medical shock or otherwise outlive their money.

Retirees retain their accumulation mindset

4. Retirees with pension income less likely to spend down. Because they don't need to.

We found significant differences in spending and overall financial optimism between retirees with defined benefit pension income compared to those without such traditional pension benefits. Only 25% of retirees with pension income are likely to touch saved assets to cover expenses compared to 55% of non-pension retirees.

Retirees with pension income less likely to spend down. Because they don't need to.

5. Men and women approach finances in retirement differently, and mostly for good reason

Retired women report higher levels of financial worry and are more risk averse than retired men. For women, fears are well-founded, as they often live longer and typically enter retirement with lower asset balances.

Men and women approach finances in retirement differently, and mostly for good reason

6. Recent retirees are less optimistic

Recent retirees report higher anxiety and pessimism than those retired for more than 10 years, particularly around future health concerns. By some metrics, recent retirees are at a disadvantage, with more carrying debt than later retirees.

Recent retirees are less optimistic

Action plan for advisors:
Ensure you better understand retiree goals and behaviors to keep pace with aging populations

Goals for spending, income and asset retention often change throughout the course of retirement—and so does their appetite for risk. Plans should be mapped out at the beginning of retirement and updated several times over the course of a multi-decade retirement.

Be mindful of the potential gender differences of women and men as they relate to retirement planning. Women are more cautious—they also live longer. Keep these differences in mind as you engage with and guide couples, individuals and plan participants of either gender.

The lack of traditional pension income for the next generations of retirees will be a game-changer. Most retirees won’t be able to live off of Social Security alone in the absence of pension income and will need to maximize the value of their entire retirement savings—principal and all—unless they are willing/able to make dramatic cuts in their retirement lifestyle.

That’s why it’s important to help clients and plan participants focus on their future retirement income goals and spending needs before retiring and close potential gaps during their accumulation stage. When they reach retirement, most retirees will need to spend from their assets to fund their living expenses.

With this increased focus on retirement income and decumulation comes a much more complicated set of challenges—retirees will need help and advisors and employers will need to help people make the transition from saving to sustainable spending.


With the confluence of declining pension incomes and longer lifespans, the strong retirement asset retention seen in this last generation of retirees will not likely be repeated for much longer. Future retirees will need a greater percentage of overall income generated from retirement assets—meaning nest eggs will need to work harder for longer. This is not inherently a bad thing, but it will require a more proactive and focused effort all around: improved savings rates and consistent investing, sound guidance and innovative investment solutions to manage risk and income needs.

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