Hearing the words, "You should spend more," is basically every young person's dream — specifically while shopping in Bergdorf Goodman (what, just me?) — but for some retirees, it's easier said than done.
It turns out, millions of American retirees are actually living too frugally, continuing to save when they should be spending, according to a new study by United Income, using data from the University of Michigan.
As a result, retirees are entering their 80s with more money, on average and adjusted for inflation, than they had in their 60s and 70s.
Even more shocking: People who died between 2010 and 2012 — meaning they endured retirement through the recession — had 130% higher estate values than people who died between 2000 and 2002.
The study found that the average adult over the age of 60 trims his or her spending by about 2.5% every year, or by about 20% over 10 years. Spending drops even faster once they hit 80.
So what's causing retirees to continue pinching their pennies even when they have the savings to enjoy their golden years? They're pessimistic about future economic growth and their own finances, and afraid of what could come.
In 2014, adults over 64 were more than 40% less optimistic about their future financial health than adults under 35. They were also over 30% more skeptical about future economic growth and 40% less convinced of future stock market increases.
The study’s findings are a far cry from what people usually stress about when it comes to retirement: having enough. Because it’s hard to predict what your retirement will look like when the time comes, the best way to approach it confidently is by saving now, so you can be prepared no matter what the economic climate. Here are some quick tips to pump up your retirement fund:
1. Automatically increase your contributions. If you're still putting away the same amount into your 401(k) as when you first set it up, it may be time to do more. If it fits in your budget and your company offers it, think about enabling an auto-escalation feature to periodically bump up your contributions.
2. Direct any windfalls to retirement. Received a nice tax refund this year? Expecting a bonus? Direct these extra incomes toward your retirement saving for an added boost.
3. Redirect old debt payments. When you make that last credit card or student loan payment, you may be tempted to spend that extra cash you suddenly have each month. The smarter option: Place those monthly sums in your retirement account.