Why retirees cut back on spending: pessimism, it seems

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Why retirees cut back on spending: A growing pessimism, it seems
A new study has found that investors become skeptical about the stock market as they age, and this pessimism drives them to reduce their spending, according to this article from The Wall Street Journal. Investors are also more likely to invest less aggressively over the years, moving their assets to low-yielding bonds even if the decision does not make sense. “Our ability to reliably anticipate the future weakens as we age,” says study author Matt Fellowes, a former fellow at Brookings Institution and then CEO of HelloWallet, a Morningstar subsidiary. However, retirees who have saved consistently should avoid being too frugal, as “they are not enjoying retirement in the way they should.” Fellowes plans to launch an online financial advisory service aimed at people 50 and over this summer, according to the article.

A guide to saving for retirement for clients who started late
Pre-retirees who started building their nest egg later than they should can still catch up with their retirement saving goals by reducing their expenses, according to this article on Motley Fool. They may also want to sock away their salary raises, bonuses and other windfalls in their 401(k)s and IRAs, and take a part-time job to increase their earnings. They can also boost their savings by working past their retirement age and contributing to their tax-deferred accounts. It also helps to set a savings goal and priorities to achieve their retirement targets.

The one retirement number you need to know
Clients will know if they have enough retirement savings by applying the funded retirement ratio, a concept developed by Nobel Prize winner in Economics Robert Merton, according to this article on Forbes. The concept is based on the clients' saving rate, the rate of return and the age they intend to retire. For Merton, clients should aim for an "inflation-protected income for life to sustain a standard of living you enjoyed in the latter part of your work life."

For clients who can’t stand being in the red, there are investment options. There are also caveats to consider, such as relatively high costs and lower returns.
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Here's the new retirement goal: Love your job and keep it
A survey by Gallup has found that nearly 75% of Americans intend to continue working after they retire, at least on a part-time basis, with 40% of the respondents saying they want to retire after hitting 65, according to this article on CNBC. Clients who plan to work past their retirement age should prepare for it to enjoy their post-retirement career, says an expert. "If there's a kind of work that you want to move toward when you retire, it's important to give yourself time to try things out, get the skills and do the job first to see if it's something that will catch you on fire."

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