Blanchett and Finke write. The mental accounting changes when they think of their money as income, not wealth.
In fact, the authors find“ a puzzling tendency to avoid decumulating investment assets after retirement.” Clients are far more likely to spend Social Security, pensions, private annuities and, according to at least one paper cited by Blanchett and Finke, their required minimum distributions. Among their findings is that retirees also spend more from qualified accounts“ after RMDs commence.”
BlackRock also addressed retirees’ reluctance to spend in 2018 research. The giant asset manager found that two decades after retirement, many participants in the company’ s defined contribution plans had higher balances than when they first retired. A powerful bull market likely played a role in that, as did the likelihood retirees were scarred by memories of the 2008-2009 financial crisis for most of the decade that followed.
People close to the firm say this spending reticence is one reason BlackRock made a push into annuities amid the pandemic years. Annuity sales have surged since 2022 on the back of rising interest rates and perhaps disappointment with the miserable returns of bonds that year. Other innovative insurance and annuity products, like qualified longevity insurance annuities( QLACs), haven’ t taken off, but the industry hasn’ t pushed them.
What are financial advisors seeing with clients in the real world? One thing is that Americans retiring with between $ 500,000 and $ 3 million may be far better off than average but they have good reason to worry about running out of money. That is especially true for clients who were either forced into early retirement or who decided to leave the workforce early for various personal reasons.
Cheryl Holland, founder of Abacus Planning Group in Columbia, S. C., says her clients aren’ t having trouble spending. A three-year bull market has helped, she says, and most of her client conversations these days start out on an upbeat note.
But she also acknowledges that advisors tend to attract frugal people who seek out advisors to find out“ how much they can spend.” She also notes that clients with less than $ 3 million in assets almost“ always live within their means.”
Another factor prompting caution among advisory clients is the prospect of soaring healthcare costs later in their lives. Although the increase in U. S. life expectancies has recently stalled, affluent Americans with access to better healthcare are still seeing increased longevity.
Holland says her clients are“ incredibly aware” of out-of-pocket health costs— they’ ve seen its effect on other people and receive constant reminders from the media and financial services industry.“ They know if they live a long life it’ s going to
“ Way more people want to leave money to their children.”
— Cheryl Holland, founder of Abacus Planning Group
cost you.”
Their fears are exacerbated by worries that Social Security and Medicare won’ t remain solvent. While Social Security shortfalls garner most of the headlines, it is Medicare where the greater potential problems lurk— and where the greater healthcare inflation resides.
Holland notes another major shift in retirees’ goals.“ Way more people want to leave money to their children,” she says.
The reasons vary. The recent round of inflation has put more stress on young families, and there’ s a widespread perception that the next generation may not enjoy the same opportunities their parents did. These days it’ s rare to see the 1990s joke bumper sticker that reads,“ I’ m having a great time spending my children’ s inheritance.”
Jamie Hopkins, the CEO of Bryn Mawr Trust, says he’ s seen a change in the way people retiree— that they are less likely to leave their jobs cold turkey and want to stay involved in work to some degree.
A shrinking labor force and a relatively strong post-pandemic economy may be contributing to this trend.“ Companies are struggling to keep institutional knowledge around,” he says.
Hopkins, of course, took on his new role two years ago after working as director of retirement research at Carson Group, and his clientele has become more upscale. Wealthy clients near retirement typically have paid off the mortgage on their primary residence and can leverage the loans on their secondary properties, he says. When problems arise, it’ s easier for them“ to move trips around” and range other things in their lives. rear-
That said, even the wealthy“ don’ t feel that secure,” he
adds. A big chunk of his clients’ so-called“ non-spending” goes to various forms of self-insurance for areas like long-term care and other potential emergencies. Clients halfway or all the way into retirement naturally need bigger rainy-day funds.
Like Holland, Hopkins says his retired clients are spending a very healthy amount of income in recent years. What could derail that, in his view, would be a sustained bear market lasting two or three years like the 2000-2002 bear market.
It’ s important not to ignore the effect that baby boomers are having on the overall economy. Economists like Ed Yardeni have repeatedly said GDP growth in the 2020s has outpaced the previous decade because retired baby boomers are spending appreciated assets from their retirement savings.
This raises another issue. There may be a retirement spending problem, but it centers largely on those retirees with savings too meager to spend on anything beyond bare necessities.
MARCH / APRIL 2026 | FINANCIAL ADVISOR MAGAZINE | 13