Why Some Retirees Save, and Others Spend

Note: the following is not intended to be financial advice.
 
If you’re stepping back from your working years, or are about to, you’ll no doubt be familiar with conversations among friends about spending and saving after retirement. In which case, you’ll have realised there are vast differences in just what this can look like. Why some people go through their retirement savings more quickly than others, and some retirees actually accumulate savings, is down to many reasons. Some of them are personal, and even predictable, but others are universal – and can’t be avoided. Check below to see if they apply to you.

Bequests

Research suggests, in the big scheme of things, single retirees deplete their savings slowly, while retired couples tend to accumulate wealth. This is due to a number of factors. Single retirees without children are less likely to feel the need to leave a bequest for loved ones, and so are more willing to use their savings more generously to treat themselves. Couples, on the other hand, generally like to know there will be something left for their children to inherit. Couples are also aware they need to provide for whichever partner outlives the other

Health

When it comes to health-related matters, couples are more likely to depend on each other for expenses such as getting to and from appointments, and daily care. Single retirees, on the other hand, may look to private agencies for transport to doctors and hospitals, and may choose professional respite care as they recover from operations or illnesses. Middle and upper-income retirement couples and singles may have been in a position to afford medical insurance throughout their working lives – something which means they spend less on health than other retirees – and at a time when medical expenses often increase.

Surviving partners

Research suggests in the 10 years following the death of a partner, the surviving spouse spends significantly more than they did when their partner was alive. Some studies indicate the death of a partner results in a 50% decrease in income but only a 20% reduction in expenses. An increase in tax rates can also come into the equation when a spouse dies, as the surviving partner bears all the taxation burden of an income which was previously divided between two people. So, although you and your partner may actually have accumulated savings in retirement initially, these could well decrease after the loss of your significant other

Family home

While middle and upper income couples have usually had the advantage of two good incomes to pay off a mortgage, lower-income couples and singles, may still be paying off home loans as they enter retirement – something that is a draw on their retirement income. While downsizing may seem like an obvious way to cope with this, socially it may not be possible (retirees may prefer – or need – to stay in their family home in order to be close to supportive family – something which could be a saving in itself).

Family commitments

Depending on when couples had children, family expenses can be a big draw on retirement savings. If you had children later in life (in your late 30s, for instance), and want to be responsible for assisting with the expense of weddings, your retirement savings will take a hit. If your grandchildren are school age when you retire, and you want to assume some responsibility for them, that will also be a call on your savings – not something a single retiree need be concerned about.

While there are many reasons why some people save and others spend in retirement, there are some factors which are beyond our control. But being aware of them is one of the best ways to prepare.