I guess blind pessimism really is sexier than optimism that's based on facts. At least, that's my conclusion after perusing the comments of a piece I wrote last week on the average American retiree's budget. In it, I showed how a nest egg of $500,000 could easily cover the costs of retirement -- after factoring in Social Security.
But according to readers, this was absolute baloney. Two major themes permeated the complaints: My spending assumptions were ridiculously low, and no one could possibly be happy with such a meager existence.
Let's start with a sampling from those who didn't like how low the average budget was.
"I disagree with every item you mention."
"487 dollars a month for healthcare Insurance?!? What planet are these guys from?"
"This person lives in La-La Land...$455 for food!...What's this? Mac & cheese 5 days a week? Try $750."
"I spend $1,000 per month on groceries. Just me and my wife."
Commenters questioned every figure in the average budget of a retired household (food seemed to be of particular interest), but these figures came from the Bureau of Labor Statistics' 2014 Consumer Expenditure Survey.
While I won't argue the survey is perfect, it's by far the most reliable measure of spending in America that I'm aware of.
Take "food" as an example: There are 22 sub-categories offering up impressive granularity for such a huge topic. Average spending on beef for a retired household? $178 per year. Fresh fruits? $252 per year.
We can take it a step further, though. The USDA regularly publishes the costs for family food plans. At the end of 2014, the average male aged 71 and older needed $280 per month for a "Moderate-Cost Plan"; a female's costs for the same level were $252.
Since the average retired household only has 1.8 people living in it, that comes out to an average monthly food bill of $479...awfully close to the $455 figure so many have trouble believing.
But, it seems, even if I could convince the commenters these numbers were legitimate would still spell doom for the average retiree. Living on "just" $3,600 per month would be miserable, they contended. And this low spending is the result of their relative poverty, not a conscious choice.
"Incomes go down so you have less money available to spend so you HAVE TO CUT SPENDING'...The average retiree squeezes pennies [until] they scream."
"If you don't have $2M or $3M in retirement saving and your house paid off start picking your street corner and tin cup to pan handle now."
At first blush, parts of this may seem fair. After all, spending can't outstrip income forever. But here, too, the facts are decidedly clear: Most retirees aren't harmed at all by this reduced spending -- whether it is voluntary or involuntary.
Let's examine a 2014 T. Rowe Price survey of pre-retirees with at least $1,000 in a 401(k) and post-retirees with any 401(k) or Rollover IRA balances. According to the survey: "Nearly three years into retirement, retirees report living on 66% of their pre-retirement income on average."
Sounds awful, doesn't it?
Well...not so fast. The survey continues to say, "85% agree with the statement, 'I don't need to spend as much as I did before I retired to be satisfied.'" In fact, a full 65% believe it to be a "newfound freedom from 'keeping up with the Joneses.'"
But most critically, "89% are somewhat or very satisfied with retirement so far."
Read that again if you're losing sleep about retirement right now.
What this really teaches us
I'm left drawing three important conclusions I want to remember the next time I read (or consider writing) about the coming "retirement crisis."
- Some people are unaware that their tastes are particularly expensive compared to peers. These are the high-maintenance folks that will have the toughest time making ends meet in retirement; maybe they should be pessimistic.
- Humans are awful at predicting the future. Often times, we take our current circumstances -- in this case, our spending -- and project it endlessly into the future. We have a tough time accounting for changes like kids leaving home, paying off our mortgage, and completely redefining what life might look like post-retirement.
- Along those very same lines, we are just as bad at predicting what will make us happy. Numbers on a budget are clearly defined and easy for us to process, so we favor them when looking toward an uncertain future.
But we forget how quickly we can adapt to new situations, and we have trouble quantifying the things that really matter -- which, for retirees who have their basic needs met, seem to be physical health, engaging pursuits, and meaningful personal connections.
Does this mean that -- as one commenter put it -- I want to, "give people false hope that their over-consumption lifestyle will all turn out OK in the end."
Hardly. I've spent more than a little ink railing on those who complain about their plight while over-spending. But in the end, I believe the job of any financial journalist is to present the facts. I haven't retired, nor am I near doing so. Unlike some commenters, I'm trying not to divine what it'll be like for me. Instead, I'm relying on those who are already there.
And for the vast majority, it turns out, it's not nearly as bad as some believe it'll be.