By Len Hayduchok
Some folks living in southern Delaware have been here for years while others moved to retire here and benefit from all the advantages the area offers. During their retirement years, they have the ability to do just about anything they want with their time and depending on how much retirement income they receive and what their expenses are, they may also have flexibility to spend their money as they want. For one, they don’t have to save for retirement since “it’s here”, but some still do. Why is that? Because they fit the Financial Personality profile of a Saver. Financial Personalities are part of an overall psychological profile and although people can change how they handle finances during retirement, they often don’t because how they’ve handled money their entire lives is part of who they are. Of the four Financial Personalities (Spenders, Savers, Investors and Planners) Savers are the least likely to change their financial behaviors when they are no longer working.
Let’s meet the Financial Personalities using fictitious, non-gender-specific names. Continuing the series, this week we have Pat, personality #2.
Meet Pat. Pat likes the security of money. Pat is cautious about both spending and investing. Pat likes to have a large bank account balance, often much larger than is needed. Pat shops for the best interest rates and may not be particularly savvy but handles money well. Pat is a meticulous budgeter. Pat pays for things in cash and doesn’t like to borrow money or perhaps even have credit cards. But if Pat were to have a credit card, it would be paid off every month. If Pat were to find $100 in a coat pocket, the question would be, “Where can I get the most interest for it?” The overall personality for Pat is being conservative. Pat is a Saver.
A main goal in retirement for Savers like Pat is to feel financially secure—not worrying about having money available any time it’s needed and certainly not to run out. Savers will forego spending in exchange for additional security, even during their retirement years when they can afford to spend money. Given how much they have saved, how much they spend (and Savers tend to be frugal) as well as their life expectancy, it is highly unlikely they would ever run out. The downside is that they don’t feel free to spend on discretionary items they don’t “need” and may not get as much pleasure from spending their money as much as the psychological comfort they feel from having it. They might worry about money, even when they have sufficient resources and can be somewhat pessimistic about finances in general. Their caution to spend can also reduce social connectedness, as they may choose to miss outings and group events based on financial cost.
Savers’ need for a planner is high, even though their limited view of financial planning tells them they are “okay” as long as they don’t spend “too much.” Often, they’re not particularly knowledgeable about finances beyond the basic understanding of budgeting and managing their accounts. The financial strategies that Savers are interested in most include Creating Wealth (slow and steady), Neutralizing Risk, and perhaps Transferring Wealth. They recognize that they want to have more wealth but their view of investments and building wealth is limited to safer vehicles. They do have an interest to Neutralize Risk, because by nature they’re conservative. Even in their retirement years when a death benefit is not particularly important, they might well have life insurance policies—perhaps even policies they have had for 40 years, with small amounts of benefit. They don’t want to take a lot of risk and have an interest in doing things that don’t get them into financial trouble. Also Transferring Wealth is an important aspect to Savers because they want their wealth to benefit the next generation.
Savers are often most interested in safe resources because of their risk tolerance. They have an interest in insurance to provide for their loved ones when they pass away. Since Savers also need growth, it’s important to weigh which of the safe resources provide higher growth. Safe instruments can include savings accounts, CD’s, and annuities. If they have stock, they are more likely to be blue chip dividend-paying stocks, that they may have had for many years and might even have inherited.
So, in a nutshell, Savers have strengths, and they have weaknesses, just like every other Financial Personality. They cannot change their view of money and their connectedness to it, but they can build their awareness. The guidance of a strong Financial Advisor can help them make the best choices given their personality and priorities and fill in the gaps in their knowledge and behavior patterns to get the best result.
NOTE: No one is just one financial personality. Actual behavioral pattern regarding finances often reflects a combination of characteristics from each personality.
Past articles in this series,
It’s important for retirees to work with a skilled Financial Advisor. When considering an advisor, it’s key to check their credentials. Working with a Certified Financial Planner™ practitioner working in a Fiduciary capacity can help retirees make better choices considering personality and priorities and fill in the gaps in a retiree’s knowledge and behavior patterns to strengthen their financial health.
Len, the Delaware Retiree Advisor, is a Fiduciary, Certified Financial Planner™ with over 30 years’ experience navigating the complexities of Financial Planning and Retirement Planning. As the founder of The Delaware Retiree Connection, and the director and owner of Dedicated Financial Services, Len offers his wealth of experience to guide others through the mire of Financial and Retirement Planning. As a Certified Life Coach, he pairs his financial expertise with a heart to help others who want to make the most of their retirement plan.
Investment Advisory Services are offered through SGL Financial, LLC, an SEC registered advisory firm. Insurance products and services are offered through individually licensed and appointed agents in appropriate jurisdictions. Leonard Hayduchok NJ License #9243813, Dedicated Financial Services LLC, NJ License #1663601, Leonard Hayduchok, DE License # 1331748; Dedicated Financial Services LLC, DE License # 3000323897.