38% of retirees underspend — not from need but from fear of shrinking their nest egg, survey finds
38% of retirees underspend — not from need but from fear of shrinking their nest egg, survey finds.
You've spent your entire working life saving money for retirement. Then, when you retire, you'll take that trip, or start that hobby. But when the day comes, you're afraid to touch your nest egg.
"The reason has almost nothing to do with money," writes Kurt Supe, a CPA and retirement planner with CFD Investments Inc. and Creative Financial Designs Inc., for (1)MarketWatch (1) .
Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — 6 ways to build wealth like a landlord without actually being one
Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here's what it is and 3 simple steps to fix it ASAP
Millionaires under 43 hold only 25% of their wealth in stocks. Here's where their money is actually going
He compares retirement to climbing a mountain. Climbers train to scale a mountain, but they rarely train for the descent.
"It's not the climb up. It's the way down," says Supe. You spend your working life climbing that mountain: saving, maxing the match, buying and holding.
"The day you retire is the summit. And the money you've saved has to last you the rest of your life," he says. "This is the most dangerous stretch — and the one almost nobody trained you for."
Many retirees never make that descent. It's the retirement paradox: they finally have money to spend, but they protect the balance instead.
They follow the same plan as they did on the ascent: never touching the principal and living below their means. But there are ways to safely enjoy the fruits of your labor with confidence.
For many retirees, making the shift from saving to spending is one of the biggest challenges in retirement — and one they're unprepared for. They train to save; they don't train to spend.
Decumulation is the term for this descent: It means you convert your savings into income to support your lifestyle in retirement.
But more than two-thirds (70%) of American retirees believe it's "very important" their nest egg doesn't shrink in retirement, according to Corebridge Financial's decumulation survey. And 38% say they've spent less than they wanted — not because they don't have the money, but because they want to preserve the size of their nest egg (2).
This anxiety could be explained by what Corebridge describes as a "planning gap between the accumulation and decumulation phases of retirement."
For example, only 29% of respondents aged 55+ have a plan for how they'll withdraw money in retirement, and just 14% have a strategy for required minimum distribution (RMD) withdrawals.
And while one-third of respondents say they have a consistent withdrawal strategy, oftentimes they don't have a broader retirement income plan. Almost half (46%) of those surveyed had never even heard of the term decumulation.
Spending hesitation appears to be largely due to concerns about inflation, market volatility and healthcare costs — rather than a desire to leave money to beneficiaries — according to the survey.
"Concerns about running out of money often shape spending habits that limit fulfillment later in life," said Terri Fiedler, president of retirement services at Corebridge Financial, in a press release. "Having a thoughtful decumulation strategy can help individuals manage complex financial decisions and feel more secure about the future (3)."
