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The Boomer

Adults increasingly less optimistic over financial well-being, study says

By Casey Dowd The Boomer FOXBusiness

According to a recent study by United Income, a startup financial planning service, adults are becoming less optimistic about future economic growth and financial health as they age.

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In 2014, adults over the age of 64 were over 40 percent less optimistic about their future financial health, over 30 percent more skeptical about future economic growth and 40 percent less convinced of future stock market increases.

The study finds the average adult age 60 or older will trim their spending by about 2.5 percent every year, or by about 20 percent over a 10-year period. It also found spending drops faster for people in their 80s, compared to those in their 60s and 70s, falling by about 30 percent, on average, over a 10-year time-period. These trends may be attributable to the weakening confidence that households have about their financial wellbeing as they age.

Matt Fellowes, founder and CEO of United Income, discussed with Fox Business some additional findings from the study. 

Boomer: Why are adults becoming less optimistic about future economic growth and financial health as they age?

Fellowes: There are a lot of different reasons why this trend exists. For one, federal data indicate that older adults today watch more television than older adults did in the 1970s and watch much more than this generation of younger adults, which may mean they are more exposed to the more sensational news about markets. Another reason for this growing generation optimism gap could be a growing inability to relate to the primary drivers of economic growth as we age – since much of the marketing in the U.S. economy is geared toward younger audiences. Regardless, we know that these differences across age groups persist through bull and bear cycles in the economy, and even after controlling for other demographic variables, including educational attainment, race and wealth.

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Boomer: The study shows older adults are trimming their spending every year. What impact does this have on their retirement savings?

Fellowes: Rather than depleting their assets as they age, the average retiree is instead actually accumulating wealth. In fact, the average adult who dies in their 60s leaves behind $296,000 in net wealth, $313K in their 70s, $315K in their 80s, and $238K in their 90s. In short, retirees largely maintain the economic path they were on prior to retirement. That means that if someone struggled to save and build wealth during their working career, they are likely to see their modest savings stagnate or decline in value. But, if they have managed to build wealth through either savings or homeownership, then they will see that value continue to increase over time.

Boomer: Why does sentiment about future stock market growth become overly conservative as adults age?

Fellowes: Older adults are more likely than younger adults to have experienced market corrections that took months or years to recover, which may make them less confident in the prospect of future growth. Since older households spend much more time watching television compared to their younger counterparts, they also may be more exposed to negative news cycles, which could amplify those emotions.

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