Retirees’ Difficult Emotional Shift from Saving to Spending

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Nearly 40 years of financial planning experience has taught me that retirement is one of the most impactful emotional transitions in life. As you face the shift from earning a paycheck to relying on sources other than work for your income, it is normal for difficult emotions and deeply buried money scripts to surface.

Here are some common retirement money scripts I see.

"I need to start drawing Social Security as soon as I stop working." Typically, the emotion behind this money script is fear of overspending savings. Yet for many retirees, the best financial strategy is to wait until age 70 to begin receiving Social Security. This often means drawing from retirement savings to span the income gap between retirement and turning 70. Once Social Security benefits start, it’s not unusual that retirees can halt spending from retirement accounts, giving those accounts a decade or more to rebuild and grow before future withdrawals are needed.

"My expenses will decrease significantly." Several years ago, a survey on retirement spending by Fidelity Research Institute found that many Americans don’t have a good grasp on how much money it will take to enjoy their golden years. Participants, surveyed both prior to and after retirement, were asked to estimate how much they expected to spend in retirement. Before retiring, 48% expected their expenses to decline from pre-retirement levels. Another third expected expenses to remain about the same. Only 18% expected any increase whatsoever in expenses.

The reality was a bit different. After retirement, expenses actually increased for 39% of retirees, double the number who expected an increase. While 48% expected expenses to decrease, only 33% found that they did.

"I need to protect my investment portfolio from ever declining in value." The primary emotion accompanying this money script is usually anxiety. Other money scripts that feed the anxiety are, "At this age, my portfolio won’t have time to recover from a market decline so I need to be very conservative," or "Retirement is no time to take risks with your nest egg."