Retirement is usually portrayed in magazine ads and on television as a carefree time when seniors, freed at long last from the shackles of the 9-to-5 grind, finally get to live it up. Those ads picture happy older people (in designer clothes) partying on cruise ships, biking along the Rhine, golfing in Maui, and generally enjoying one well-earned, expensive adventure after another.

The reality for most retirees, of course, is far different.  For seniors on severely limited income (often derived exclusively from Social Security) a retirement life of modest means is anything but glamorous. Still, however, there is strong evidence that some middle-class retirees may be living more frugally in retirement than they need to, which can not only bring harm to the economy but also cause these seniors to skip out on socializing and other beneficial activities because they fear they can’t afford it. That’s the conclusion from this recent article we just discovered on the website of US News. It’s called “Why Retirement Makes Seniors Frugal (and Why That May be a Problem).”

“Seniors tighten their belts in retirement, and that may not always be a good thing,” the article states.  One financial expert who has researched this phenomenon says that seniors with higher incomes are generally living much more frugally than they need to, trimming their spending an average of 2.5 percent every year even at a time when the average value of their estates continues to rise.  This expert, CEO Matt Fellowes of a company called United Income, says, “While it may seem as though there can be no harm in living frugally, both seniors and the economy can suffer when spending declines.”

The biggest reason many seniors grow anxious about spending their retirement funds is that retirement marks a huge psychological shift, says US News. “For workers who have earned a paycheck for decades,” the article states, “the shift to using income from retirement accounts can be difficult.”  That’s because, “After spending a lifetime saving money, it can feel unsettling to begin pulling cash from accounts that were previously off-limits.” The issue is often more psychological than financial. In essence, once retirees actually do cut the umbilical cord and retire, they’re essentially paying themselves out of their retirement savings, and “they get scared,” experts say. Even when these seniors can clearly afford an expense such as a new car or a modest vacation, retirees often grow very apprehensive and insist on scrimping – even those retirees who are relatively affluent, according to the US News report.

The article points out the twin concerns that can drive seniors to be tight-fisted in retirement. “Health care costs and the economy,” says US News, “rank high as motivation to cut spending. In particular, today’s longer lifespans breed uncertainty about if and when retirement money will run out.” Today’s seniors know that, once they reach 65, the odds are they’ll live at least two more decades, and the uncertainty over rising medical costs coupled with fear of another recession like the one ten years ago can cloud their thinking. Ironically, the higher rate of media consumption – especially television watching – by seniors might be partially to blame.  “While people 35 to 44 years old watched an average of two hours of TV programming each day in 2016,” says US News, “the number jumps to four hours for those 65 to 74 years old.” Because national news tends to sensationalize market fluctuations, some seniors may grow more fearful and hold onto their money more tightly than they need to.

So, you might be asking, what’s wrong with retirees being extra thrifty? “Being frugal may seem like a virtue, but it doesn’t come without faults,” says US News. For one thing, extreme thrift can become a quality of life issue: “It’s difficult for seniors to enjoy retirement if they refuse to spend any of their money and become obsessed with penny-pinching.”  But there’s a potentially deeper problem in than “seniors may delay preventive [medical] care or withdraw from social activities in order to save money. Both can have a negative effect on senior health and well-being,” the article states.  There’s also a significant economic impact. The research firm Nielsen has estimated that, by this year, baby boomers would hold 70 percent of disposable income in the U.S. Think of the impact if some of these saved dollars were injected into our economy instead of being hoarded unnecessarily.

One possible balanced solution suggested in the US News analysis is to divide retirement resources into two “buckets.” The first consists of guaranteed sources of income which might include Social Security payments, traditional pension plans and annuities. Ideally seniors might be able to adjust their lifestyle so their fixed expenses – basic living costs and medical expenses – can be covered by these sources.  Once those costs are covered, US News proposes, other “lifestyle expenses” including travel and dining out can be paid for from savings and funds withdrawn annually as part of required minimum distribution from retirement accounts.

We know this article raises a host of questions, and it does point to an underlying issue: in order to protect your assets and enjoy your retirement, you need a solid financial plan.  Here at AgingOptions we have several highly reputable and objective professional planners to whom we can refer you if you need to sit down with someone and prepare for your retirement future. However, we caution you that planning for finances alone is far from sufficient: you need a plan that properly covers all the facets of retirement and ensures that each one meshes seamlessly with all the others. These facets include finances, housing choices, medical coverage, legal protection, and family communication. The only plan we know about that accomplishes this is a LifePlan from AgingOptions.

We encourage you to spend a little time and join Rajiv Nagaich for a free LifePlanning Seminar in your area. You’ll find a complete listing of currently scheduled LifePlanning Seminars by clicking here for our Upcoming Events page. There you can register your attendance online, or contact us for assistance during the week. It will be our pleasure to meet you and to show you the power of an AgingOptions LifePlan to help you secure the retirement of your dreams.

(originally reported at www.money.usnews.com)