Spending retirement savings a dilemma for Americans, finds new research

Nearly half of US retirees report significant anxiety over spending their retirement savings, according to the latest research from the Alliance for Lifetime Income.

In the latest addition to its ongoing Protected Retirement Income and Planning Study, the annuity industry group found growing emotional and financial pressures among retirees and working Americans amid mounting challenges from inflation, healthcare costs, and uncertainty about Social Security.

ALI's study, based on a survey of 2,516 adults aged 45 to 75, found nearly half (46 percent) of retirees experience anxiety when spending their savings, while one-third (32 percent) are using funds more quickly than anticipated.

Inflation and cost of living were cited by 82 percent of respondents as the top factor impacting retirement finances, followed by healthcare costs at 70 percent.

“It can be a very emotional thing when you wake up one day and realize that paycheck from work won’t be coming,” Jean Statler, CEO of the Alliance for Lifetime Income said in a statement Tuesday. “If there’s just one thing you can do to prepare and lower your anxiety, it’s having a clear retirement income plan.”

The study revealed that fewer than one-third of respondents have a specific income plan in place, and 41 percent are unsure how to manage withdrawals from retirement accounts. Additionally, only 49 percent of retirees feel confident about handling required minimum distributions or minimizing taxes.

Concerns about Social Security add another layer of uncertainty, with 90 percent of respondents identifying it as important to their retirement income. Among the 37 percent of respondents who have already begun claiming benefits, 28 percent cited fears of future payment cuts, a depletion of funds the Social Security system, or dying before retirement age as reasons for starting early.

Statler emphasized the importance of incorporating “protected income” sources like Social Security, annuities, or pensions to cover essential expenses.

Among other key findings in the study, 97 percent of participants agreed that having protected income beyond Social Security is valuable, and consumers are likely to be confused about protected income, with more respondents believing falsely they could get it from a 401(k) (58 percent) or an IRA (54 percent) than annuities (40 percent).

Meanwhile, two-thirds of financial professionals (63 percent) agree having an annuity income stream to help cover monthly expenses would help clients spend more money in retirement.