Getting Past the ‘Fear Factor’ When Spending Your Savings in Retirement


We’ve all heard the same mantra over the course of our careers. Work hard, save diligently and enjoy a comfortable retirement at the end of the ride. 

But what does spending that money actually look like in practice?

For a lot of people it’s stressful. In fact, spending that hard-earned money is more difficult for many retirees than actually saving it was. After all, you don’t want to run out in the end and be worse off after all that planning and work.

A different mindset: “[The] reality is that many of us are accustomed to spending less than our income during our working years and then we get to retirement, and it feels a little bit odd spending down our savings. It can seem a little scary to spend down our savings.” — Michael Finke, an investments and retirement professor at The American College.

The truth is, in retirement just as in the rest of life, there are people who are savers and those who are spenders. The result is that some people don’t spend as much in their retirement years as they could, while others go nuts spending freely.

Part of this is due to the variability of retirement investments. When you don’t know what the future holds, you’re more inclined to hold on to what you have and play it safe. (Interesting, the data shows that people with pensions spend significantly more than those who have the same amount of wealth and investment assets. It’s guaranteed and feels safer to spend.

What does retirement really cost?

Not as much as you probably think. According to the Bureau of Labor Statistics:

  • Americans 65 and up spend an average of $4,000 per month on their living expenses, totaling just over $48,000 per year. 
  • Those aged 65-74 spend $52,928 annually, while those over 75 spend just $41,471 annually.
  • That’s not too far off from what Americans spend in general. As of 2019, the average yearly expenses of a U.S. consumer were $63,036 or $5,253 per month. 

A smart retirement spending plan

I get it. Spending down your retirement accounts is stressful. You worked hard for that money and there’s no way to get it back once it’s gone. But remember, you’re not the first person to retire in human history. Many people have made this transition and the path is well established. I’m talking about the 4% Rule. As a rough rule of thumb to determine how much a retiree should withdraw from a retirement account each year, this practice should provide you with a steady income stream in your golden years while also maintaining your account balance over time so you don’t run out too soon. That should help you sleep better at night.


Please enter your comment!
Please enter your name here