Retirees should learn about their financial personality
Whether one is a lifelong Delawarean or a newly retired transplant to coastal life, the retirement stage opens up all types of lifestyle opportunities along with options for how to benefit from that saved-up nest egg. How money is used during retirement is closely linked with lifelong attitudes related to money, called financial personalities, each with a different set of strengths and weaknesses. The four most well-known types are called spenders, savers, investors and planners.
Usually giving in nature, spenders are often fun to be around. In general, they have loose budgets and may not be sure how much is in the bank account at any one time. If a spender found $100 in a coat pocket, the first thought would be “How can I enjoy this the most?” Perhaps that new book, a concert ticket, or a gift for a friend’s birthday. The spender’s top financial priority in retirement is to have money to enjoy, and they may work more to have enough money to spend. Because they don’t plan well, they have a high need for a financial planner. They should particularly consider a couple strategies – first, generating income to have a consistent flow of money to spend, and second, creating wealth to make sure they do not run out of money. While they may prefer the accessibility of money in a bank account, it’s important for spenders to have a plan including financial instruments that will provide the ability to spend in the short, medium and long terms.
Savers like the security of money, and they are cautious about both spending and investing. Savers like to have a large bank account balance, often larger than is needed. They are often meticulous budgeters. They don’t like to borrow money or perhaps even have credit cards, but if they did have a credit card, it would be paid off every month. A saver who found $100 in a coat pocket would ask, “Where can I get the most interest for it?” In retirement, their goal is to feel financially secure. Savers may forgo spending even when they have sufficient resources. Savers often need financial planners to provide expertise beyond their own basic knowledge about budgeting and managing accounts. They are often most interested in safe resources, but it’s important to weigh which options provide higher growth.
Investor types like having money; they get excited to see it grow and track it regularly. They are often optimistic about finances and especially knowledgeable regarding investments. An investor who found $100 in a coat pocket would consider, “How can I put it to work for me?” The investor's overall personality is success oriented. Their primary goal is to build wealth, and they want their money to be productive more than other financial personalities do. However, they could potentially take too much investment risk. Their view of finances can be too narrowly focused on their net worth, without a broader understanding of taxes and risk. While they focus on growing what they have, taxes may be chipping away at their wealth. Investors should also consider strategies to minimize risk, as they tend to be risk-takers by personality.
Planners are usually highly organized, having a wide array of financial instruments including both insurance products and investments. Legal documents are probably in place. They do a lot of independent research and often love spreadsheets. A planner who happens to find $100 in a coat pocket would ask, “How can I make the most use of it?” Their overall personality is structured, and their financial priorities in retirement are to have everything in order, to leave nothing to chance. This personality type’s advantages are that they know a lot about planning in general, and their full array of needs is largely met. However, they often seek perfection, which can cause them to procrastinate while continually looking for more information. While planners have less need for outside help than other personalities, they often have limited practical experience in taxes and legacy planning (transferring wealth). The guidance of a skilled advisor can be valuable to fill in this retiree’s knowledge gaps.
There is no single best financial personality; it’s all about who the individual retiree is! No person can change their innate characteristics; however, they should be aware of personal strengths and weaknesses. Most people combine aspects of more than one financial personality, and actual behavioral patterns regarding finances can be variable over time.
It’s important for retirees to work with a skilled financial advisor. Also, when considering an advisor, it’s key to check their credentials. A Certified Financial Planner practitioner working in a fiduciary capacity can help retirees make better choices to strengthen their financial health.
