I am referring to this article by Ben Steverman. It has this vague you-have-to-spend-if-you-know-what’s-good-for-the-country feeling to it. I disagree. Here are some of my responses.
- “There’s a time in everyone’s life to save. There’s also a time when you’re supposed to spend. That time is commonly known as retirement.” The premise is established without proof. Yes, you spend, presumably net spending beyond income from Social Security, pension, IRA, etc. But now you are ‘supposed’ to spend.
- “Yet these retirees, or at least the affluent ones, aren’t spending it.” Overstated. More correctly, from how I read the rest of the article, “aren’t spending enough”. Which is an opinion.
- “Unsurprisingly, given the data, Americans are dying with more money than they used to, adding to the increasing inequality that flows from inherited wealth.” A new agenda. Not only is insufficient spending bad, but by the way you are making the USA a worse place by selfishly distributing money to the heir or heirs of your choice.
- “Other studies have found affluent older Americans hoarding money.” First it was saving, now it is hoarding, with connotations of selfishness.
- “Researchers looked at all the logical reasons why affluent retirees might be so tight-fisted, including the desire to leave an inheritance or worries about future medical needs.” Perjorative alert! First savings, then hoarding (with connotation of preserving), now tight-fisted (i.e., mean).
- ““We found that even in a worst-case scenario, they could have spent more,” said Texas Tech University Professor Christopher Browning, one of the study’s authors. “There have to be other explanations,” he said–reasons that aren’t rational.” The hidden assumption is a model that supposedly accurately describes what you need. Saving more than that model? “Aren’t rational”. Maybe the model is too optimistic?
- “One of those irrational reasons may be simple habit.” I will need an explanation how habit is now irrational. For wealthy retirees their money habits have served them well, ie, plenty saved for retirement. A good outcome. But now ‘irrational’? I disagree.
- ” Americans held $25.3 trillion as retirement assets,” and “If the bulk of that money never gets spent, that’s a big problem.” First retirees, or at least rich ones, are not spending fast enough. Now they may not be spending at all! Trust me, the money, or at least a good fraction of it, will be spent. I detect a whiff of “We have to coerce people to spend money at the velocity some planners, or model, dictates.” I reject this.
- “Even as retirees live longer, healthier lives, they’ve become more pessimistic about the economy, the stock market, and their own financial situation.” I find this a true Fox-Butterfield-is-that-you statement. Longer living means the accumulated assets have to last longer, so it is sensible, not contradictory, for retirees to become pessimistic, or at least less spend-worthy.
Final grade: C-.