While many Americans have little to no retirement savings, some have amassed significant wealth. How do these retirees spend their money? The answer might surprise you!
For many Americans, saving something for retirement can be a challenge, reflected in an analysis from the Employee Benefit Research Institute showing that 49.5% of American families have no savings in tax-advantaged retirement accounts, and another 22% have less than $50,000 saved. But some individuals have managed to save significantly more, with the top 0.1% of savers having at least $5 million stashed in these accounts.
While those with less wealth might expect that such retirees are living lives of luxury, this often is not the case. For some of them, the frugal habits that helped them build such wealth are hard to shake, though many do end up splurging on priorities like travel and charitable giving. Others use this wealth to provide flexibility with their work — while some retired early, others leverage this savings to ‘semi-retire’ and work fewer hours, and still others continue to work (or even start in a new field) well past ‘traditional’ retirement age for the sense of purpose it can provide rather than the financial benefits. Having significant retirement savings also gives these individuals greater flexibility in terms of claiming Social Security benefits, with many electing to wait until age 70 to maximize their monthly benefit.
In the end, while having $5 million or more saved for retirement can provide a high level of financial security (particularly if it does not have to support an excessive level of spending!), there are many paths individuals with this level of wealth can take with their spending, giving, and legacy interests. Which suggests that advisors serving these clients can play an important role not only with planning issues such as maintaining an appropriate asset allocation and Social Security claiming strategies, but also in helping clients decide how they want to use their savings (and where they want it to go upon their deaths), whether that means retiring early (or not at all), years of world travel, or just spending more time with family!
