While debt loads and plans for leaving an inheritance affect how quickly people spend their retirement savings, personality could also play a significant role, according to a new study published by the American Psychological Association.
The study, conducted by Sarah Asebedo and Christopher Browning at Texas Tech University, looked at the personality and psychological data of more than 3,600 Americans aged 50 and older in the National Institute on Aging’s 2012 and 2014 health and retirement studies. That data was paired with tax data on the same participants.
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The researchers scored participants on the big five personality traits — openness to experience, conscientiousness, extroversion, agreeableness and neuroticism — then looked at data on the amount of control participants felt they had over their financial situations and to what extent they’d felt positive and negative emotions in the previous 30 days.
“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 minimizing risk of financial shortfall or making spending adjustments based on perceived life expectancy,” said Asebedo in a press release.
The study found people who are more agreeable and open to new experiences, as well as those who are more neurotic and negative-thinking, might spend their retirement savings more quickly. People who are extroverted, conscientious and experienced more positive emotions and feelings of control over their finances were more likely to withdraw from their retirement portfolios at a lower rate.
Asebedo noted neither high or low withdrawal rates were necessarily negative. While a higher withdrawal rate could put the individual on track to run out of money, it might also be a sign of someone enjoying their life with the money they saved.
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“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,” she added. “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.”