MarketWatch recently offered a Goldilocks approach to spending your hard-earned (and carefully saved) retirement in your golden years.
“You don’t want to be too free with your money in retirement, but you don’t want to be too conservative either. You should try to spend the amount that’s just right,” MarketWatch explained.
Although, that cliché is easier said than done, many experts caution.
Because of all the obvious and various unknowns in life, MarketWatch explained that “Americans are leaving increasingly larger sums of money behind, according to new research from Washington, D.C.-based advisory firm United Income. Estates grew 130% between 2002-2002 an 2010-2012, suggesting retirees are more concerned with saving their money and less optimistic about their financial futures.”
United Income, a startup that aims to apply big-data analysis to financial planning, contends that retirees may have become overly pessimistic about their future financial health and that may lead them to spend less than they could otherwise, CNBC explained.
The average adult 60 years or older will trim their spending by about 2.5 percent every year, or by about 20 percent over a 10-year period, according to United Income's analysis.
Meanwhile, retirees leave behind a similar amount of wealth regardless of what age they die. For example, the average retired adult who dies in their 60s leaves behind $296,000 in net wealth, $313,000 in their 70s, $315,000 in their 80s, and $238,000 in their 90s, researchers found.
The bottom line: "Retirees are not enjoying their retirement as much as they could," said Matt Fellowes, founder and CEO of United Income and former chief innovation officer at investment research company Morningstar.
Many financial advisors and investors tout a simple strategy when it comes to withdrawing from retirement accounts: the 4 percent rule.
Under the rule, you withdraw 4 percent each year from a diversified portfolio of stocks and bonds, adjust annually for inflation, and you will have enough to last for 30 years in retirement based on historical returns of the U.S. stock market. Yet based on the research by United Income and others, it doesn't seem many investors are actually following the formula, CNBC reported.
“It is more emotional than it is mathematical,” said Brett Hudson, president of advisory firm St. Croix Advisors in Hudson, Wisc.
“They’re just not enjoying their retirement,” he told MarketWatch.
However, there are very real threats to the retirement generation.
There is broad recognition that seniors are vulnerable to financial fraud that can devastate household balance sheets, Reuters warns.
Almost one in five Americans over the age of 65 has been taken advantage of through inappropriate investments, unreasonably high fees for financial services, or fraud, according to a study last year by the Investor Protection Trust, a nonprofit consumer advocacy group.
Thieves follow the money, and wealth accumulates as we age. But the aging brain is not always well-suited to financial decision-making - and that creates opportunity for financial fraud and abuse targeting the elderly.
“It’s a perfect storm,” said Elizabeth Loewy, general counsel for Eversafe, a technology firm that monitors customers’ bank and investment accounts, credit cards and credit reports for potential fraud and abuse.
(Newsmax wires services contributed to this report).
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