The financial advice for retirement planning you need, and how to actually spend the money you worked decades to save.
You’ve maxed out your 401(k). You’ve invested wisely. You’ve done everything right. You’ve hired someone to give you financial advice for retirement planning. And now, retirement is here, and you’re terrified to spend a dime.
A new study from Corebridge Financial found that 60% of retirees said their assets had actually grown since they stopped working. And yet the words they used to describe how they feel about drawing down those savings are uncertain, anxious, and vulnerable. Only about one in four said they felt comfortable spending their own money.
On this week’s episode of the HerMoney Podcast, Jean Chatzky sat down with Terri Fiedler, President of Retirement Services at Corebridge Financial, to dig into why this transition is so hard, and what you can do about it.
What Is Decumulation, Exactly?
Decumulation is simply the flip side of everything you’ve been doing financially your whole working life. You’ve been accumulating, saving, investing, and building a nest egg. Decumulation is what happens when you retire and start spending it down.
It sounds simple, but it turns out to be one of the trickiest and most emotionally loaded transitions in personal finance.
“We’ve become pretty good at teaching people how to save for retirement,” Fiedler said. “What we haven’t done nearly as well is teach them how to spend in retirement.”
The Corebridge study found that nearly half of Americans ages 45 to 79 don’t know what the term means. And among those 55 and older, fewer than one in three have any kind of withdrawal plan in place.
The Fears That Are Keeping Retirees From Spending
The top fears holding people back from spending in retirement, according to the Corebridge study, are healthcare costs, inflation, and market volatility.
These fears aren’t irrational. They’re especially real for women, who live an average of five years longer than men and therefore face more years of retirement to fund. But Fiedler cautioned against letting fear become paralysis.
“All of those are legitimate risks, and I would not minimize any of them,” she said. “But the problem is when you freeze, and every possible future risk begins to dictate how you actually live.”
There’s another risk that gets talked about far less: underspending. Getting to the later years of retirement and realizing you could have done more of the things that mattered to you.
“Financial security shouldn’t mean being afraid to use your money,” Fiedler said. “The answer is spending with purpose, a thoughtful plan that balances future security with present-day enjoyment.”
Three Questions to Ask If You Haven’t Started Planning
If you’re five to ten years from retirement and haven’t thought about decumulation, Fiedler says start with three questions:
- What is my life actually going to cost? Sit down and calculate your housing, healthcare, travel, family commitments, and the things you want to do.
- Where is my income already coming from? Calculate your Social Security, a pension, and any other predictable source.
- What is the gap? Finally, figure out the distance between what your life will cost and what your predictable income sources will provide.
Once you understand those three things, you can start making decisions: how much to keep invested for growth, how much liquidity you need, when to claim Social Security, and whether some portion of your savings should be converted into guaranteed lifetime income.
Fiedler also recommends working with a financial professional to help you build the confidence to actually spend the retirement you’ve worked so hard to create.
“The real tragedy,” she said, “would be doing everything financially right over your career and your lifetime, and then being too afraid to enjoy what you’ve built.”
MORE ON HERMONEY:
- Stop Keeping Up With the Joneses in Retirement
- Do We Have Enough? Four Women Honest About Retirement Planning, Financial Peace, and the Money We Leave Behind
- Is it Too Late to Start Saving for Retirement?
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