A new survey released
by the Employee Benefit Research Research Institute (EBRI) last month showed
some encouraging results for retirees. After tracking the non-housing assets,
which included non-primary residences, IRAs, stocks, cash, etc., for retirees,
EBRI found that "retirees generally exhibit very slow decumulation of
assets" (or the spending down of assets to fund retirement) during their
first 20 years of retirement.
In fact, the survey found
that retirees who started their retirement with less than $200,000 had spent,
at the median, about 25% of their assets after 18 years of retirement. Those
who started with between $200,000 and $500,000 spent 27.2%, and retirees who
began with at least $500,000 before retirement had spent just 11.8% after 20
years of retirement.
Of course, it's very likely
these retirees were not living the high life in their retirement, particularly
the ones that began with less than $200,000 in retirement assets. So, how did
the retirees in this survey manage to hold onto a large percentage of their
assets for so long? Much of it had to do with their spending habits.
How some retirees are making
their money last
Many retirees in this study
were able to hold on to most of their assets by mainly spending their Social
Security and pension money, and only very conservatively tapping into their
The survey explained why
some people may be cautious to tap into their assets, including the fact that
people don't know how long they're going to live, so they cut their spending
down to ensure that money in their retirement accounts last longer. EBRI said
other people might not have known a safe rate for spending down
their assets, and so they held onto most of them. Still, others in
the survey have built up a "saving habit throughout their working
lives" and found it hard to start spending in retirement.
Whatever the reason, there
was one group of retirees that were able to hold onto the greatest amount of
their retirement savings: pensioners. Unsurprisingly, people with a pension had
spent just 4% of their non-housing assets after 20 years of retirement,
compared to 34% for those without a pension.
The research said that the
"majority of retirees had limited their spending to their regular flow of
income and had avoided drawing down assets, which explains why pensioners, who
had higher levels of regular income, were able to avoid asset drawdowns better
What this means for retirees
Some of the findings from
this survey won't apply to all retirees, especially since about 39% of
Americans say that they don't have any money set aside for retirement, according
to the Social Security Administration.
should keep in mind that as they age, beyond the 18 to 20 years this survey
tracked, there likely will be unexpected bills that will pop up. The life
expectancy in the U.S. is 76 years for men and 81 years for women, so even if
your retirement funds last longer than you expected, you could have a
significant amount of retirement years where expensive
medical assistance may be needed.
If you're unsure how you can make your own
retirement savings last, first make sure that you're working as long
as possible (and delaying taking Social Security) and you may want to even
consider working part-time after you've retired to keep some income coming in.
Finally, remember that it's always a wise decision to revisit your retirement
planning strategy and make sure that you're on track. If you don't have a
strategy yet, then start here.
for the original article from The Motley Fool.