Many retirees could be losing out on building their savings because of excessive concern for liquidity, according to a new study by MetLife Inc.
MetLife found 37% of retirees keep most of their assets in “liquid” accounts such as certificates of deposit, savings accounts and money market funds, in order to have ready access to their assets.
At the same time, MetLife, New York, found that some retirees have benefitted from this liquidity bias. Only 49% of those with more than half of their funds in liquid accounts said they suffered market losses in recent months, compared to 65% with half or less of their assets in liquid accounts who experienced market losses because of the current financial and economic environment.
Nevertheless, MetLife cautions that retirees may pay a price for keeping so much of their money on the sidelines, especially if they have no present intention of withdrawing those assets.
In fact, 83% of more than 1,000 retirees surveyed said the interest income from their liquid holdings does not serve as a major source of funding for their basic needs. Moreover, 96% said “achieving consistent returns of 6% or more” was at least somewhat important as a financial goal for their assets.
“If they stay in these liquid assets, over time, many retirees are paying unnecessarily for a ‘liquidity benefit’ that they may never use,” commented Julia Lennox, vice president in the retirement and wealth management group at MetLife.