The
December 1, 2014 Wall Street Journal (Encore Section, pg R3) had an
interesting article about how people spend time in retirement. The implication
was that time spent in retirement was different than time spent when working.
That time utilization difference in retirement is intuitively obvious. What is
not so obvious, however, is the financial impact of the time difference.
When we
do a retirement plan, we assume that the individual/family spending needs will
increase on an inflation adjusted basis until the end of the projection period.
We do that knowing that, at some point, spending will start to decrease
(barring catastrophic medical needs) as people age. The ability or desire to
engage in expensive activities tends to decrease. Projections in such a plan
are basically over estimating expenses and trying to match income to those
expenses. This conservative planning is trying to ensure running out of “time”
before running out of “money.”
The Journal
article (from the Bureau of Labor Statistics data “How Retirees Spend Their
Time: Helping Clients Set Realistic Income Goals,” Charlene M. Kalenkoski and
Eakamon Oumtrakool) showed the following data: (Note-The original data measured
weekday activities in average minutes per day for full time workers vs.
retirees. We have converted the differences to a percent using the full time
worker number as the base; thus a “+” percent means more time spent by the
retiree than the full time worker in that activity).
Full Time Worker Retiree
Sleeping +13%
Television/Movies +130%
Socializing/Communicating
with others +42%
Reading
for Personal Interest +269%
The
study also found that retirees spent increased time in activities that were not
exceedingly expensive (lawn/garden care, house cleaning, eating out less and
preparing more meals at home). In
essence, although time spent may change dramatically in retirement, the change
may not necessarily be significantly more expensive—especially as one ages.
We,
at Paragon Financial Advisors, help our clients analyze the financial impact of
retirement decisions; we’ll leave the time utilization to their desires. Paragon Financial Advisors is a fee-only registered investment advisory company located in College Station, Texas. We offer financial planning and investment management.
