Under the Hood

Study: Having These Personality Traits Would Make You Broke In Retirement

Retirement is an important part of life. You become free of all the stress at work, you can have more time with your family and focus on things that you like.

However, it may not always be a positive experience for people. Despite their age, some people avoid retirement due to financial issues and getting that dream vacation may not be the best option for them. 

It is important to retire with financial security. But that may be a problem for some people, especially those with certain personality traits. 

A new study, published in the journal Psychology and Aging, shows that personality plays an important role in how people spend their money. Researchers found that conscientiousness, financial self-efficacy, being adventurous or more neurotic have impacts on one’s spending before and after retirement. 

The study analyzed data from over 3,600 people in the U.S., ages 50 and older. Researchers looked at their personality and tax data. 

They found that conscientiousness and financial self-efficacy led people to spending their retirement savings slower than other participants. These people are either organized, hardworking and cautious or with a strong sense of resilience and control over financial situations.

Meanwhile, the participants who were open to new experiences, more agreeable or sympathetic and more neurotic or moody appeared more likely to retire with less money. People who also experienced negative emotions, such as fear, frustration and boredom, may also spend more than others. 

“Research suggests that those higher in openness tend to place less value on material goods and more on experiences, but also demonstrate impulsiveness and less prudent money management behaviors, which again may result in higher withdrawal rates,” Sarah Asebedo, study author and a financial planning professor at Texas Tech University, told MarketWatch.

She explained that people who are also caring tend to give more financial support to others, like their family and friends. However, her team noted a higher withdrawal rate is not always a bad thing. 

“A higher portfolio withdrawal rate is concerning if it places the individual on a path to run out of money too early,” Asebedo added. “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.” 

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