Many Americans who spent decades accumulating funds now are hesitant to spend it in retirement. Fewer than 30% are comfortable with the idea of their retirement savings declining to cover living expenses in retirement, and 7 in 10 say it is very important that their nest egg does not shrink, new research from Corebridge Financial found.
"Retirement is meant to be enjoyed, but many find it difficult to give themselves permission to spend the savings they've worked so hard to build," said Terri Fiedler, the company's president of retirement services. "Concerns about running out of money often shape spending habits that limit fulfillment later in life. Having a thoughtful decumulation strategy can help individuals manage complex financial decisions and feel more secure about the future."
Just 14% of retirees say they have a detailed strategy to manage their required minimum distributions, and only 29% of pre-retirees aged 55 or older have a plan for retirement account withdrawals. Far more say they would regret running out of money while still alive (56%) than dying with money left over (6%). Feeling financially secure is the top retirement goal for both pre-retirees (85%) and retirees (82%).
As a result, 38% of retirees say they have spent less than they wanted so they can maintain the size of their nest egg. Retirees' hesitation to spend is rarely driven by a desire to leave an inheritance. Eighty-three percent do not have a specific inheritance goal and instead plan to leave behind whatever money is left over.
Those who are highly confident they can manage their retirement spending are five times more likely to say spending in retirement is "empowering" (16% vs. 3%) and three times more likely to find it "rewarding" (20% vs. 6%) compared to those who lack confidence.
Nearly three-quarters of people believe that having guaranteed lifetime income beyond Social Security would positively affect their ability to spend on things that make them happy. More respondents (47%) would prefer $60,000 per year guaranteed for life instead of a $1 million lump sum at age 65 (41%). Retirees say guaranteed lifetime income would enable them to spend more on personal fulfillment, including travel (69%), home improvements (29%) and dining out (25%).
"For decades, retirement conversations have been focused on a singular financial challenge: Saving enough," said Jean Chatzky, founder of HerMoney. "But what's become evident as these folks start retiring is that without a plan of how to actually use that money, they face a retirement of uncertainty. Questions about how much you can spend, how well you can live, how much you can enjoy yourself and how long that money will last inevitably arise. Turning some of those hard-earned savings into a stream of income that lasts as long as you do can be a route to a more grounded, happier retirement all around."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.