Why do people invest their money? They invest in hopes the funds they invest will grow.
But what is their end-goal? One of their ultimate desires is to have money to live on and to spend when they want to stop working for a living and retire.
Much of the research that goes into understanding the attitudes and behaviors of investors centers on their retirement preparations. Much of the attention advisors give to investors relates to how much money the investors feel they need to be able to retire.
But once investors enter retirement, the attention shifts away from the needs of the investor to the needs of the investor’s family or progeny. The investor, who often is in his or her 50s and has a great many years of life ahead, can feel marginalized.
Spectrem’s research into investor portfolios can stem that disregard for retirees by noting just how investors out of the workforce invest their money. It also offers an explanation of how retirees spend their money.
In Asset Allocation, Portfolios and Primary Providers, investors with varying levels of wealth were asked to explain how they spend their discretionary funds. A variety of choices were offered, from home repair to symphony tickets, and every segment provided a variance of answers, from the young to the old, male to female, teacher to dentist.
In some cases, the expenditures of retired investors make sense. What also makes sense is the ways retired investors DO NOT spend their money.
For example, retired investors spend less money than working investors on clothing. Retired investors do not need to get dressed up as often as others, don’t have to dress for work, and are more likely to dress in a manner befitting their new lifestyle – namely, in a relaxed fashion.
Where they do spend more money than others is on vacations. Twenty-nine percent of all retirees spend at least $10,000 annually to see the world, and 15 percent spend at least $15,000 on travel costs.
Retired investors are slightly more likely than working investors to spend large sums on automobiles. Twenty-seven percent of retired investors are spending at least $10,000 on upkeep or purchases on automobiles, and 15 percent are spending at least $25,000 annually on cars.
One other place retired investors place their disposable income is by giving it to organizations that request charitable contributions. Thirty percent of retired investors donate at least $5,000 annually to charitable organizations.
Top Takeaways for Advisors
Keep in mind that retired investors usually have a higher percentage of investable assets than do working investors, who usually have more liabilities and required expenditures related to work and family. On average, 70 percent of a retired investor’s assets are investable, compared to 57 percent for working investors.
©2018 Spectrem Group