Nav: Home

Personality traits affect retirement spending

November 18, 2019

How quickly you spend your savings in retirement may have as much or more to do with your personality than whether you have a lot of debt or want to leave an 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 minimizing risk of financial shortfall or making spending adjustments based on perceived life expectancy," said Sarah Asebedo, PhD, of Texas Tech University and lead author on the study. "The purpose of this study was to investigate how personality traits are related to portfolio withdrawal decisions of retirees."

The research was published in the journal Psychology and Aging.

Asebedo and her coauthor, Christopher Browning, PhD, also of Texas Tech, analyzed personality and psychological data from more than 3,600 people in the United States age 50 or older (the average age was 70) in the 2012 and 2014 waves of the Health and Retirement Study. This is a nationally representative survey sponsored by the National Institute on Aging and conducted by the University of Michigan. The data were paired with tax data from the same participants to account for withdrawals from individual retirement accounts. The researchers only used participants who made withdrawals from their retirement accounts and other saving accounts.

Participants were scored on what psychologists call the big five personality traits: Openness to experience (i.e., they are creative, imaginative, adventurous and curious), conscientiousness (i.e., they are organized, thorough, hardworking and cautious), extroversion, agreeableness (i.e., they are sympathetic, caring, warm and helpful) and neuroticism (i.e., they are nervous, worrying, moody and not calm). The researchers also looked at data about the amount of control participants perceived they had over their financial situation and to what extent they felt a variety of positive and negative emotions over the previous 30 days.

"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."
-end-
Article: "The Psychology of Portfolio Withdrawal Rates," by Sarah Asebedo, PhD, and Christopher Browning, PhD, Texas Tech University. Psychology and Aging, published online Nov. 18, 2019.

Full text of the article is available online at

https://www.apa.org/pubs/journals/releases/pag-pag0000424.pdf

CONTACT: Sarah Asebedo can be reached by email at sarah.asebedo@ttu.edu or by phone at (806) 834-5217)

The American Psychological Association, in Washington, D.C., is the largest scientific and professional organization representing psychology in the United States. APA's membership includes nearly 118,400 researchers, educators, clinicians, consultants and students. Through its divisions in 54 subfields of psychology and affiliations with 60 state, territorial and Canadian provincial associations, APA works to advance the creation, communication and application of psychological knowledge to benefit society and improve lives.

American Psychological Association

Related Personality Articles:

Infant temperament predicts personality more than 20 years later
Researchers investigating how temperament shapes adult life-course outcomes have found that behavioral inhibition in infancy predicts a reserved, introverted personality at age 26.
State of mind: The end of personality as we know it
In a study published today researchers propose that changing states of mind are holistic in that they exert all-encompassing and coordinated effects simultaneously on our perception, attention, thought, affect, and behavior.
Want to change your personality? It may not be easy to do alone
Most people want to change an aspect of their personality, but left to their own devices, they may not be successful in changing, research shows.
How personality predicts seeing others as sex objects
Several personality traits related to psychopathy -- especially being openly antagonistic -- predict a tendency to view others as merely sex objects, finds a study by psychologists at Emory University.
Scientists say you can change your personality
A review of recent research in personality science points to the possibility that personality traits can change through persistent intervention and major life events.
Personality traits affect retirement spending
How quickly you spend your savings in retirement may have as much or more to do with your personality than whether you have a lot of debt or want to leave an inheritance.
For the first time: A method for measuring animal personality
A study on mice shows animal research may need to take into account the connection between genes, behavior and personality.
Your spending data may reveal aspects of your personality
How you spend your money can signal aspects of your personality, according to research published in Psychological Science, a journal of the Association for Psychological Science.
The sun may have a dual personality, simulations suggest
A deep dive into the sun's interior provides new clues to the forces that govern that star's internal clock.
A personality test for ads
People leave digital footprints online, and this information could helps marketers personalize ads based on individual personality types.
More Personality News and Personality Current Events

Trending Science News

Current Coronavirus (COVID-19) News

Top Science Podcasts

We have hand picked the top science podcasts of 2020.
Now Playing: TED Radio Hour

Climate Mindset
In the past few months, human beings have come together to fight a global threat. This hour, TED speakers explore how our response can be the catalyst to fight another global crisis: climate change. Guests include political strategist Tom Rivett-Carnac, diplomat Christiana Figueres, climate justice activist Xiye Bastida, and writer, illustrator, and artist Oliver Jeffers.
Now Playing: Science for the People

#562 Superbug to Bedside
By now we're all good and scared about antibiotic resistance, one of the many things coming to get us all. But there's good news, sort of. News antibiotics are coming out! How do they get tested? What does that kind of a trial look like and how does it happen? Host Bethany Brookeshire talks with Matt McCarthy, author of "Superbugs: The Race to Stop an Epidemic", about the ins and outs of testing a new antibiotic in the hospital.
Now Playing: Radiolab

Speedy Beet
There are few musical moments more well-worn than the first four notes of Beethoven's Fifth Symphony. But in this short, we find out that Beethoven might have made a last-ditch effort to keep his music from ever feeling familiar, to keep pushing his listeners to a kind of psychological limit. Big thanks to our Brooklyn Philharmonic musicians: Deborah Buck and Suzy Perelman on violin, Arash Amini on cello, and Ah Ling Neu on viola. And check out The First Four Notes, Matthew Guerrieri's book on Beethoven's Fifth. Support Radiolab today at Radiolab.org/donate.