Episode 388: Why Retirees with Guaranteed Income Spend More (and Are Happier!)

David McKnight explores a retirement planning phenomenon that almost nobody discusses, but that has been documented repeatedly in academic research. It's the idea that when retirees convert some of their savings into guaranteed lifetime income through an annuity, they actually spend more money and enjoy retirement more than those who rely on their liquid retirement savings alone. Even though many people assume that doing so would make retirees more conservative with their spending, research actually shows the opposite. According to academic studies, when retirees have reliable lifetime income, they actually feel more comfortable spending money. Moreover, when retirees rely purely on investment accounts for income, they often underspend even when they have more than enough money to support their lifestyle. One of the findings of David Blanchett's and Michael Finke's License to Spend research has found that retirees treat guaranteed income very differently than they treat investment port...