Half of Retirees Afraid to Use Savings

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For most retirees, figuring out how much money to withdraw from savings every year is a difficult-to-impossible math problem. But the issue goes much deeper: fears about what the future might bring make this decision overwhelming.

Extreme caution is a popular solution. A 2009 study estimated that by the time middle-income retirees are in their 80s, they still had not touched about three-fourths of their savings, and 2016 research found that retirees with substantial assets are the most reluctant spenders. Vanguard recently reported that retirees with very modest savings turn around and reinvest a third of the money they’re required to withdraw under IRS rules after age 70½.

People saved all of their lives to make sure they will enjoy retirement. So why are they so reluctant to spend the money for the purpose it was intended?

A 2018 study in the Journal of Personal Finance surveyed retirees to get a sense of the psychology behind their caution. However, the main takeaway is that this reluctance to spend is pervasive.

Half of the survey respondents agreed with this statement:  “The thought of my retirement portfolio balance going down over time brings me discomfort, even if the decline in value is a result of me spending money on my retirement goals.”

And the people who agreed with this statement said they feel like they are not well prepared financially to retire – and this had nothing to do with how prepared they actually are.

Many of the study’s findings seem like common sense. For example, when older people look into the future, an enormous unknown is how much they will need for medical care – this includes the prospect of requiring care in an expensive long-term care facility. These concerns are heightened by large and rising medical expenses, which are taking a bigger and bigger bite out of retirees’ budgets.

In the survey, the people who are the most concerned about their medical costs are also more likely to be uncomfortable about spending their savings, regardless of how old they are.

Another group are people who are nervous about the inevitable ups and downs of the stock market.

I recently had dinner with a friend who is one of these reluctant spenders. On the theory that knowledge is power, I gave her this retirement calculator to help her get a handle on her financial outlook.

But the calculator can only estimate the probability that she will not outlast her money. There are no guarantees.

Retirees who want to enjoy their hard-earned savings have to learn to live with some uncertainty so they don’t shortchange themselves.

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Ken Pidcock

For this reason, one suspects (I think I’ve seen CRR surveys indicating this) that retirees with pensions are generally more satisfied, as they are receiving income that isn’t depleting their savings. Such findings might also recommend annuitizing part of one’s savings, such as by delaying a Social Security benefit. Of course, that too requires depleting savings but it feels different from trying to decide on distributions.

patti f

Uncertainty about the costs of long-term care (LTC) prompts many retirees to underspend. The financial and insurance services industry should devote more effort to developing LOW-COST, effective ways to insure against LTC costs.


“Extreme caution” for most people should be replaced with “fiscally responsible spending.” If they’re confident in their financial plan, they need not fear or be overwhelmed by what the future might bring.

By the time my mother was in her 80s, she knew that her wealth was allocated in a way that her income stream could weather any storm. She passed away in August 2016 at the age of 96y, never having to concern herself about her spending. “Whatever you want, Mom” we would tell her. She would make her RMD in the first days of December each year, and use those proceeds for Christmas shopping.

I think the psychological problem is just that —> purely psychological. No one has ever shown them their retirement portfolio balance going down. In some of our portfolio forecasts, we actually show it going down; it can go down; that’s ok. So, as long as we stay above that curve, we’ll be fine. The psychology behind the reluctance to spend the money on “stuff” goes away.

If older people are concerned about future medical expenses or long term care, there are financial vehicles available to allay those fears. (So far we see Medicare+Medigap+Part D+VA coverage getting us through the medical expense bites to our budget. And we’ve decided to partially self-insure against LTC, with the rest covered by a 3-1/2 year each, shared, partnership LTCi policy.)

As for the stock market, if retirees have their portfolios allocated in a way that meets their risk tolerance, time horizon, portfolio balance, spending needs, and other factors, they need not worry about the inevitable ups and downs of the stock market.

There are no guarantees in life (except for death and taxes).

Enjoy retirement.

Paul Brustowicz

Retirees in their 80’s had their financial habits shaped in the 1940’s by parents who had lived through the depression. Not hard to see why they are reluctant to dig in to a nest egg. As for the retirees in their 70’s, they too were shaped by parents with depression mentality and by the circumstances of their household finances. I’ll be 80 in fours years and have no problem taking from savings since I have solid pension, SS and annuity income. On the other hand, my wife watches every penny and is reluctant to dip into savings. If the RMD was not required, she would just as soon leave it in the account.


    I agree with your wife. Where do you ‘invest’ your RMD? In a LTC State Partnership? An annuity? QLAC?

    Thank you.

Mike Mas.

“The times they are a changin” sang Bob Dylan, and I agree.

Pensions have practically gone away. I’m lucky enough to have one, but it’s projected to run out of funds in 5 years.

People are living longer, which is great. Consider, though, that means more years of living expenses needed, and increased medical bills to cover conditions like Alzheimers/dementia. LTCI underwriters are hardly underwriting new policies, and existing carriers are raising rates through the roof.

The rich self-insure, the poor have Medicaid. The middle class…well, good luck.

There’s a “new normal” expecting medical costs continuing to outpace inflation, lower market returns, and a political climate of divisiveness unlike any before with tariffs and trade wars as well.

These factors give me little confidence in “retirement calculators”. I have fulfilling part-time work, the pension, and spouse and I will soon claim SS benefits.

But after that I plan to take no more than 2% out of the retirement funds every year. I hate the thought of dying with assets I could have enjoyed but it is worth it to sleep at night.

W. Paul McCrossan

I’ve been an actuary for over 50 years starting my career pricing annuities. I know how finely they are priced. I also know how strict the dynamic capital regimes are for insurers.

So, when I retired in 2006, I wanted to take the life long DB pension I had accrued from my actuarial consulting firm. I had a “ding dong” battle with the CFO of my firm arguing the I was not thinking straight by locking in so much of my retirement assets into a pension that would not earn more than 4 1/2% over my remaining lifetime.

My rejoinder was than I valued the security of knowing that my wife and I would always have the money to live the retirement lifestyle we hoped for. So, I insisted on receiving the DB pension rather than taking the commuted value.

Now, after 13 1/2 years of retirement, we have no difficulty drawing down our remaining non pension savings year by year. Income security can create a mind set where one needn’t hoard money against unforeseen adverse events.

My wife and I have observed that there are many retired couples in their 70s at our retirement condo but few in their 80s. Something happens to one or the other. So, we continue to draw down our savings to spend our non pension assets on enjoying life together while we are still both healthy.

The secure DB pension income allows us that luxury. Having to manage our own money as we move further into dotage would, of course, have prompted us to squirrel money away “just in case”.

To bad for most others that the DB pension market has almost withered and died.

Frank Holler

I retired under the newer Federal FERS system. I was told don’t switch from the older CSRS, it’s the gold standard. I switched because it was transferable to outside the Feds.

FERS is described as a 3 legged stool – one leg pension, one leg Social security and the 401k-like TSP. Throughout my 35 year career I invested in my TSP at well above the matching. And, now that I’m in retirement, I love it.

The first 2 legs provide a guaranteed income, somewhat inflation protected, for life. I’ve thrived for the last 5 years on the first two legs – traveling, home improvements. When it was time to finally replace my beloved 4runner, I bought a new car cash using TSP funds.

The first two legs provide peace of mind. This could go on forever or until I die, LOL.

Howard Groopman

Although I was basically broke for decades with a stay-at-home wife and 5 kids, I invested well and had an employer 5% match. We never had any spare money. Now I’m turning 69, alone, with no debt and decent health. I could live the high life but instead live quietly and frugally. I tell people I’m self-insured for LTC. Otherwise my heirs are going to receive a LOT of money. No one but I knows how much I have. When I take SS at 70 and RMDs after that, I’ll be reinvesting every penny. Even now, with a modest pension and widower’s SS, I have more income than I need. I’ve resisted every attempt to sell me an annuity. I’m looking into a QLAC to defer some of my RMDs.

Anupam M

This comment is from India. I observe the financial aspects that are controlling the lifestyle of commoners.
Recently its a trend in India to cut down interest rates on savings accounts and fixed deposit accounts. Retired people are in great trouble as its the only income for many of them.


When you’ve been socking away money for 30+years, its hard to suddenly switch to spending it. I’m 65 and struggle with this as I retire soon.



I never thought that I’d get to read such an informative article,
feels good to come across such articles.
Keep up this fabulous work!!



I never thought that I’d get to read such an informative article,
feels good to come across such articles.
Keep up this fabulous work!!

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