This original article was published in the January 6, 2025, print edition of The Wall Street Journal by Anne Tergesen.
A recent Wall Street Journal article highlights a surprising trend among wealthy retirees: even those with significant savings fear running out of money. This anxiety leads many to live well below their means, even when financial models show they could comfortably spend more.
An analysis of data from a long-running survey of approximately 20,000 people over age 50 indicates that retirees who spend more report higher levels of happiness, yet many remain overly cautious. In fact, a recent study found that retirees with at least $100,000 in assets withdraw only 2.1% annually. This is significantly below the recommended 4% spending rate many advisors recommend. It turns out that wealthier retirees, in particular, could afford to spend significantly more while still maintaining a comfortable financial cushion.
So why are wealthier retirees afraid to spend more in retirement? After all, isn’t that why they worked so hard throughout their career and lived a fiscally responsible lifestyle? Fear is making them miss out.
- Fear of Longevity Risk – With life expectancies stretching to 95 or even 100 years, many worry about depleting their resources too soon.
- Psychological Barriers – After decades of saving, shifting to a spending mindset can be difficult. Many view withdrawing money as financially reckless, even when it’s well within their means.
- Desire to Leave a Legacy – Some underspend to ensure they can pass wealth to the next generation.
After years of putting money into retirement accounts, it can be a struggle to transition to taking money out. Financial advisors can help by helping develop a balanced approach to spending. This can help reframe the mindset so instead of seeing spending as depleting wealth, view it as an investment in quality of life.
Wealth should be a source of freedom, not fear. If financial projections indicate a comfortable future, retirees should consider using their money to enhance their lives today, not just preserve it for tomorrow.
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