Retirement spending depends on person's traits

Washington: One's personality trait is more likely to affect how quickly a person will spend his or her savings in retirement instead of debt or wish to leave any inheritance.

A new study published by the -- American Psychological Association -- found that people who are more agreeable or more open to new experiences - or those who are more neurotic or negative -- might spend their retirement savings at a faster rate than those who are more extroverted or have a positive attitude.

"Little is known about what personally motivates retirees to withdraw money from their investment portfolios as most studies on portfolio withdrawal rates address technical issues, such as minimising the risk of financial shortfall or making spending adjustments based on perceived life expectancy," said Sarah Asebedo, PhD, of Texas Tech University and lead author.

"The purpose of this study was to investigate how personality traits are related to portfolio withdrawal decisions of retirees," added Asebedo.

The research was published in the journal -- Psychology and Aging.

During the study "we found that those with greater conscientiousness, extroversion, positive emotions and feelings of control over their finances withdrew from their retirement portfolios at a lower rate than those with greater openness, agreeableness, neuroticism, and negative emotions," Asebedo said.

The results remained even after accounting for many of the technical factors that are known to affect portfolio withdrawal decisions, such as the expectation of leaving an inheritance, age, marital status, and mortgage debt.

Asebedo believes this may be the first study to look at the role personality traits play in how quickly individuals spend their retirement portfolio and is an important contribution to a field of study that has historically focused on technical rather than human factors.

The findings suggest that financial professionals should take the personality traits of their clients into account when developing retirement strategies instead of focusing entirely on their clients' financial situations, according to Asebedo.

A higher withdrawal rate is not necessarily a bad thing nor is a lower withdrawal rate always good, she warned.

"A higher portfolio withdrawal rate is concerning if it places the individual on a path to run out of money too early. However, if the higher portfolio withdrawal rate does not run the risk of running out of money, then it may very well be facilitating a life well-lived," Asebedo said.

"Similarly, a lower withdrawal rate is a good thing if it facilitates controlled spending from the portfolio at a level that protects it from early depletion. If the individual is under-spending and forgoing experiences that they would enjoy because of a saving habit they are unable to break, then the low withdrawal rate is a missed opportunity to maximize the life that they have saved for," concluded Asebedo.