Why are India’s elderly spending less when they have more?

Research shows that in the last two decades, the size of bequests has increased and that senior citizen spending has dropped. This trend is expected to strengthen and continue over the years, they note. What this finding means is that the elderly now have more wealth than before but have gotten more frugal too. They have more, but spend less. Why would they do this? When I met my 87-year-old reader recently, I wasn’t prepared for the extreme frugality that had become his lifestyle. He wrote to me 20 years ago, when I had just begun my personal finance column. He asked me for advice about his retirement corpus, worried primarily that he may outlive it, or spend it recklessly. This is his story.The desire to spend dropped as I aged, he told me. He showed me around the house that was neat and clean, functioning quite efficiently. But there was just nothing new to buy, he told me. medium97937825Imagine a 30-year old who is able to say that they won’t replace their car, fridge, air conditioner or television for many years, he exclaimed. The 30 years in retirement is so different from the 30 years during employment. First, there is no urge to keep up with current technology and modern trends at the speed at which youngsters do. Seniors are happy to use a phone, a tab or a TV much longer, not because they don’t want to spend, but because they don’t really use many functions in these gadgets. Their lives have gotten simplified. “I don’t need so many apps; or so many channels; or that much sophisticated viewing pleasure. The car just needs to run well, and the gadget needs to turn on,” he laughed. Second, discretionary spending drops off every year, he told me. In the initial years of retirement, hobbies are taken seriously. Spending on books, music, art, travel and such fanciful stuff matters then. These expenses just drop year after year as one ages.One cares more for being with friends and relatives, meeting people and taking walks. These activities don’t cost money. Club membership seems excessive for a weekly game of bridge that can be played at home; there is no urge to read furiously; and so on. The zest for life is not lost, but the pace becomes slower. medium97937966Third, frugality and minimalism comes naturally when one loses the spouse and becomes lonely. There is the urge to earn, save and provide for the wife in early stages. When she is gone, she takes along many activities that one enjoyed as a couple. When I asked a few of my elderly widowed friends, they also agreed that spending dropped after the husband passed. They don’t live in penury or misery, it is just that expenses associated with the other — travel, eating out, movies, theatre and other such spending reduces. Fourth, children come in to take care of big ticket spends. While many seniors live independently, we live through times when the next generation is much better off. It is not uncommon for children to take care of major repairs and renovation of the properties, international travel, large medical expenses, and so on. The fear of outliving the corpus is mitigated by improved relationships with the children, who willingly provide support.Fifth, expenses that are inter-connected tend to reduce as one of the elements vanish. When travel comes down to once a year at the most, expenses on tickets, travel gear, clothes, shoes, bags, credit card spends and all these expenses associated with travel also come down. When food becomes simple and less frequent, expenses relating to eating out, driving out, formal clothing and accessorising and such come down. medium97938223 Sixth, the comfort associated with spending the income during the earning years is not seen while one draws out of the retirement corpus. Even if elders do not fear outliving their wealth as much as it was the case even 10 years ago, the preference is to leave the corpus mostly intact. That creates the dichotomy as pointed out at the start — higher bequest but lower spend. Some take this to the extreme and suffer lifestyle compromises; but many do observe a natural reduction in the desire to consume or to spend. Seventh, estimates for expenses in retirement tend to paint a gloomy picture about the perils of inflation. Many choose to save aggressively for retirement or continue to work for a few years after. The consumption basket shrinks as one ages, even if inflation is as feared. Instead of looking at retirement as one haul of 30 years, it might make sense to chunk it out into seven to 10 year blocks. Consumption and spending not only drops after 70, but shrinks naturally and considerably at 85 and beyond. Eighth, marketeers that see seniors as a potential target group that would spend on cruises, gifts, classic jewellery and watches, household gadgets and security equipment might have got it wrong. medium97938325 Making these decisions about buying high value goods does not interest today’s seniors, my friend remarked. There is just too much information, too much choice, complex literature and fine print, that the fear of being fooled into buying something fake, substandard or useless haunts them, he laughed. Gone are the days of the powerful dada ji. Today delegation to the next generation is the choice! As we spoke, he kept pointing out to me that there is no lifestyle compromise of the kind he imagined when he retired. He assured me that frugality is just a happy consequence of simplifying life and living as one ages. Things that seemed so important earlier on in life, become less so. It is just that one overestimates what one will do for everyday joys and entertainment at retirement. The elephant in the room was healthcare costs. We spoke about how these costs seem to be going out of hand. His view was that the focus these days seems to be about staying alive somehow with the aid of costly machines and hospitalisation, without attention to the quality of life lived thus. It is now possible to write a living will and restrict invasive treatments. If seniors choose palliative care and quieter living at home, the savings should extend to healthcare too, he said. At the end of the conversation, I wondered if there is some oversimplification here. Are we making a virtue of lifestyle compromises? My friend was clear that shrinkage of his spending was natural and organic, and had nothing to do with lifestyle or money. Sets one thinking.The author is chairperson, Centre for Investment Education and LearningMore articles by the author here