Most retirees see their golden years as a way to relax and enjoy their post-work lifestyle, yet half feel unsettled about spending down retirement savings.
Findings from Corebridge Financial’s Decumulation Planning Gap Study shows 61% of respondents consider retirement as a “time to enjoy themselves,” but 50% are uncertain about expending savings. In fact, only 28% of survey respondents report feeling comfortable with the idea of their savings decreasing in order to afford living expenses in retirement. Another 70% of respondents say it is “very important” for their nest egg to not shrink in retirement.
“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, president of Retirement Services at Corebridge Financial. “Concerns about running out of money often shape spending habits that limit fulfillment later in life.”
Retirees were much more likely to rather have leftover savings when they die than to run out of money in retirement. While this mindset protects retirees from depleting savings, it also leads to severely cautious spending behaviors, which could further reduce feelings of satisfaction or wellbeing.
Fiedler notes how implementing a decumulation strategy could help retirees manage financial decisions and feel more secure about retirement. However, according to Corebridge’s findings, only 14% of retirees say they have a plan to manage required minimum distributions, and just 29% of pre-retirees ages 55 or older have organized a plan for retirement account withdrawals.
The findings show increased levels of financial certainty with those who have a decumulation plan. Fifty-seven percent of individuals ages 55 and older, and who have a decumulation plan, are highly confident they can manage spending throughout retirement. Another 55% of retirees with a spending plan would describe themselves as highly confident, compared to just 29% who haven’t formed a strategy.
The most common method to managing savings and spending funds is by using a consistent withdrawal percentage, found Corebridge. Others have considered implementing guaranteed income tools, like annuities.
Close to half (47%) of participants would rather have $60,000 per year, guaranteed for life, instead of a $1 million lump sum at the age of 65. Having this type of income would help future retirees feel more comfortable spending money on travel (69%), home improvements (29%), and dining out (25%).