Half Empty or Half Full?

Glass half full

Is the average Baby Boomer retiree’s glass half empty or half full? After several years of nothing but gloom and doom scenarios and projections for boomer retirees, there is finally some good news to report…maybe.

recent survey conducted by Baltimore-based investment management firm T. Rowe Price concluded that many newly-minted retirees are finding that life in retirement is not as bad as they thought it might be. Really? Imagine that!

Since one of my personal goals for the next few years is to actively cultivate optimism in my world view, this news seemed to be a ray of hope to latch onto. The early retirees of the boomer generation who participated in this online survey were not experiencing the types of money angst that most experts predicted for them; in fact, 57% reported that they lived as well or better than when they were working.

A whopping 85% of them agreed with the statement, “I don’t need to spend as much as I did before I retired to be satisfied.” 65% said that they liked not spending as much and were relieved to have less pressure to “keep up with the Jones” now that they were no longer working. 74% felt that they were somewhat or much better off financially compared to how their parents lived when they were the same age.

What exactly did “spending less” mean to this group? The average person surveyed reported living on 66% of their pre-retirement income after nearly three years of retirement, utilizing a median retirement withdrawal rate of 4% of their investable assets to keep them afloat. Social Security accounted for the largest portion of their incomes, at 43%, followed by 19% from defined benefit plan payments and 18% from personal savings and investment accounts, including IRAs and defined contribution plans. There was no information about where the remaining 20% of their income was coming from. I had a lot of fun imagining what this group could be doing to generate this unaccounted-for portion of their income.

In the press release that summarized the survey findings, T. Rowe Price did a great job of putting a positive spin on the results. It’s not until you get to the final bullet point of their list that you see some negativity. It seems that those living in single households were not faring as well, either financially or emotionally. Hmm, so maybe there is some trouble in retiree paradise after all…

At this point, some alarms were going off in my blissed-out brain, because I knew exactly who made up the vast majority of those sad, single-member households. It was women. 48% of the women reporting resided in single households as compared with 26% of men. The singletons had a median of $248,000 in household assets while the married households had $731,000. They were more likely to be looking for paid work to help augment their retirement income stream.

Add to this the fact that, for the purposes of this survey, T. Rowe Price considered household assets to be “investable assets plus home equity minus debt.” The home equity portion of that definition specifically gave me a slight headache. This was an online survey where respondents were self-reporting information about their assets. When you’re at a party or gathering and the small talk turns to real estate, don’t you find that nearly everyone in the room feels that their house is worth more than you think it might be? That’s because most of us have an emotional attachment to our homes and are not totally rational when considering their charms. A piece of real estate is worth exactly nothing until you have a person with cash-in-hand, willing to turn it over to you in return for the key to the front door. So I, for one, remain somewhat skeptical about the true size of those reported nest eggs.

But I don’t want to be labeled a Debbie Downer, so let’s see that glass as half-full for the remainder of today’s blog. There really is some good news contained in this report. These recent retirees were finding that they could be happy with less. This is a huge news, considering it’s coming from members of the most acquisitive generation ever known to man. We boomers like our things. But as we age, perhaps all the toys and trinkets that seemed so important to buy and hold are becoming less relevant to our personal happiness. “I don’t need to spend as much as I did before I retired to be satisfied” replied 85% of the survey respondents. That’s a statistic to rejoice about!

Blog By Holly Deni