The Four Types of Retirees
Lead financial planner with ESL Investment Services discusses the emotional side of money and retirement
By Ernst Lamothe Jr.
Many experts prepare you for retirement by estimating retirement income and advising on when to take Social Security, but far fewer retirees prepare for the emotional sides of money.
“People don’t think about the emotional side of money. They don’t realize they have internal and sometimes ingrained beliefs,” said Barb Clemons, lead financial planner with ESL Investment Services in Rochester. “Some of those beliefs could actually be hindering their full enjoyment in life.”
She has found many retirees are afraid of judgment when working with a financial professional on both ends of the spectrum: embarrassment that they haven’t saved enough or concern that they’ve over-saved and missed opportunities. And others are just trapped with mindsets ingrained in their family upbringing.
“Let’s just say you grew up with your parents telling you that all rich people are snobbish. That could cause you to have the mentality of never wanting to be rich because why would you want to be snobbish,” said Clemons. “You still think that you don’t want to be wealthy because you don’t want to obtain that personality trait.”
She breaks down people into four different categories.
1 — Oversaver
It’s a similar concept to those who feel like if they lose five pounds then they will be OK. And once they lose five pounds, they say they need to lose another five pounds. The chronic saver has the mentality that they believe in the idea that it’s a waste to spend money. It’s something she calls financial anorexia.
“You can get so focused on saving money that you don’t ever enjoy life and spend the money. You start thinking when I make $100,000 in a job or when I save $100,000 then I will be OK. Then you reach that goal and you have the same mentality for when you reach $200,000 and 300,000 so you’re never satisfied. If you can afford to spend money, it is not a waste,” said Clemons.
2 — Overspender
There are both positive and negative attributes to this personality type. Clemons believes there are spectrums and often spending gets a bad rap.
“If you have the resources and it doesn’t hurt your budget then it’s OK to spend. Society applauds you for saving, but there’s often a negative connotation to spending,” she said. “I have a client who can afford to buy a new BMW every five years and it wouldn’t hurt his finances, but he was so focused on not spending money that he almost avoided spending anything. He even had a pager for a long time because he didn’t want to spend any money. Slowly, we worked together and he began to understand the balance of spending money and still needing to save. He even has a regular cell phone now and a Tesla.”
She knows people who have trouble in that area because obviously all spending is not good spending.
“I knew a woman who had tons of credit card debt that her husband didn’t know. People forget that spending can be an addiction,” she said. “She was just ashamed but didn’t know what to do. So he put together a plan for her to start understanding how to be financially responsible.”
3 — Overgiver
Typically this is a parent who’s taking care of a child who no longer is a child. They believe they have to be their safety net so they’re always helping.
“You have to watch this because there are also two sides to this as well. The overgiver personality trait is bad when you feel remorse or resentment after giving. Then it doesn’t become genuine. If you’re someone who enjoys giving to your church, charity or somebody else, and it doesn’t impact your finances and makes you feel good, then it’s no longer a negative trait,” said Clemons.
4 — Blinders
This is a person who doesn’t like to think about money at all.
“They pay their bills on time, but they don’t always know how much they are investing or how much they have in their savings account,” said Clemons. “This personality trait can be someone who has a lot of money or someone who doesn’t. It’s just something in their past that they have been taught you don’t talk about money.”
Overall, she wants everyone to think of essential questions. Clemons said you should ponder what was the message about money that you learned growing up. It may have come from a place of lacking; growing up working about whether you could afford things. It may have come from a place of abundance where you never had to worry about money at all. Then there is the path where it comes from a place of insecurity where you felt you had to keep up appearances at all costs because image is everything.
Clemons sees the first step is self-reflection.
“You need to think, what do you have? What do you owe? How do I feel about what I have?” she said. “Consulting with a professional can help and there are many good books available on the topics of money, emotions, and the tie between them. Also, talk to your partner. Partners often have different money personalities. Open conversation is a great place to start.
It’s good to save, it’s good to spend, it’s good to give, it’s good to not be obsessed so finding the balance between all of these is the key.”
In addition, she said consult with a financial adviser to discuss your financial situation and options on how to move forward.
“It can take time, reflection and advice of professionals to change behaviors and beliefs around money,” she added.