Just Asking Questions

Imagine for a moment that you have a magic browser plugin. When activated while viewing your portfolio, this mystical Chrome extension can scan your Wealth Planner and tell you which portion of your existing net worth you’ll never get to spend. 

Let’s say you learn that, of the money you’ve already squirreled away (and what it’ll grow into over the years to come), any additional funds you add will never be used. In that sense, saving is no different than tossing it into the garbage disposal.

What remains will get left behind to some stepson, who will fork it over to the monopolistic Ticketmaster cartel in order to attend every stop of the US leg of the somehow-still-going-strong 2060 Eras Tour. But you’ll never see it again.

Would it make you think differently about your accumulation phase—hell, about your life in general—if you knew this information?

Would you even want to know?

Normally, we think about our money’s relationship with time in the opposite direction: The present is the most valuable time to invest, because it gives our assets the longest runway to grow. Most of us—and by us, I mean the type of people who engage with financial content for fun—are really good at understanding that when it comes to accumulation, there’s no time like the present.

But in a 2018 white paper (from a firm that, to be fair, sells annuities) called “The Decumulation Paradox,” the authors investigate a strange behavioral pattern in “affluent” and “mass-affluent” retirees, defined as those with more than $200,000 in assets, not including their primary residence: A lot of retirees aren’t spending their money. 

“Actual retiree spending behavior appears to contradict [the 4% safe withdrawal rate research]. Greenwald & Associates (2017) shows that only 31% of retirees across all wealth levels withdraw from their portfolios on a regular, systematic basis; 17% do not withdraw any money from their accounts. Only 25% of the most affluent retirees—individuals with assets of $2.5 million or more—withdraw from their portfolios on a systematic basis.”

It would seem those who are best at systematically saving aren’t so good at systematically spending. 

You might assume these people are just irrationally devoted to leaving behind large nest eggs for the aforementioned stepson or other charitable causes, but the survey data indicates the opposite: Only 1% of retirees reported charitable giving as an important financial goal, and barely more (3%) stated “leaving an estate to heirs” as a major factor in their decisions. 

What did they care about? 48% said their number one priority was an assurance of a comfortable standard of living, while 28% said their number one goal was to protect their current level of wealth. Behaviorally, this manifested in a few ways:

1. Rather than creating “dynamic strategies” to fund the lifestyles they wanted to live using their investment gains, many appeared to fit their lifestyles within the confines of their “guaranteed and steady” incomes (their pensions, Social Security, and dividends), leaving much of their life savings intact. 

2. On average amongst this cohort, the researchers found that 40% of required minimum distribution withdrawals were reinvested. In other words, retirees were saving their retirement income.

Accumulation is the phase that should be challenging: It involves working and sacrificing. Boo! But decumulation? That’s the party you spend your whole life planning, baby! Why not take your bra off and stay a while?

Maybe it’s because to do so would be an acknowledgment of something far more existential and terrifying than running out of money. 

The other night, I was enjoying Season 3 of Hacks, a show that’s getting improbably better as its storyline progresses. In Episode 4, Deborah, a comedian in her seventies, contends with her age in a conversation with Ava, her mid-twenties writer: “You know, your whole life, you say ‘One day. One day, I’ll do this. One day, I’ll accomplish that.’ And the magic of ‘one day’ is that it’s all ahead of you. But for me, ‘one day’ is now. Anything I want to do, I have to do now, or else I’ll never do it. That’s the worst part of getting older.” 

Accumulation is the magic of “one day.” Decumulation is the pressure of “right now.”

To contend with your lifelong approach to money is to contend with your own mortality. The spreadsheets animating drawdown strategies and potential portfolio outcomes end, abruptly and anticlimactically, at the point in which you’re presumed to be no longer living, and holy Google Sheet, if that isn’t an uncomfortable and unwelcome elephant in the Excel file. To continue to accumulate is to reject the reality that the future you’ve saved for is already here.

And sure, we live in a late capitalist hellscape—so when I inevitably slip into this same, irrational trap someday, I’ll probably cite fears about astronomically expensive long-term care needs as justification for my decisions. But there are insurance products for that! (…as the white paper so generously reminds me in its concluding takeaway, buy an annuity.)  

Still, this would explain the tendency to fixate on financial minutiae (small spending decisions; whether our high-yield savings is earning 4% or 5%) in lieu of asking the bigger picture questions (Am I cultivating a life I want to retire to? Am I pursuing meaning and keeping things like money in perspective?). It’s not because we think an extra percentage point is the linchpin on which our future depends, but because those are the concerns that feel manageable. 

Maybe we only ask the questions we have the courage and capacity to answer. 

There’s probably something—some career shift, some family trip, some big move across the country—that lives in your proverbial “one day.” But you know what they (we) say: There’s no time like the present.