A deeply ingrained savings culture has left millions of Americans psychologically unprepared for the transition to spending in retirement, creating a ‘decumulation planning gap.’
Just 28% are comfortable with the prospect of their retirement savings declining to cover everyday living costs and half associate retirement spending with uncertainty, while 44% connect it with anxiety, despite the fact that 61% view retirement itself as a time for enjoyment.
New research from Corebridge Financial based on a Greenwald Research survey of 2,210 adults between 45 and 79, each with at least $100,000 in investable assets, reveals a paradox at the heart of retirement planning, with the habits and instincts that help people build wealth can actively work against them once the paycheck stops.
The study follows on from a recent release from Vanguard.
"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. Having a thoughtful decumulation strategy can help individuals manage complex financial decisions and feel more secure about the future."
The fear of outliving savings is central to the hesitation and when forced to choose between two regrets, 56% said they would feel worse about running out of money while still alive, against just 6% who would regret dying with money left over.
Preserving financial security ranks as the top retirement goal for pre-retirees at 85% and retirees at 82%. Perhaps more revealing, 38% of current retirees acknowledge they have spent less than they wanted specifically to avoid shrinking their nest egg.
The inheritance motive, sometimes cited as a driver of excessive frugality, appears to play little role as 83% of retirees said they have no specific inheritance target and expect to leave behind whatever happens to remain.
What the data does implicate is a structural gap in planning with only 29% of pre-retirees aged 55 and older having any kind of withdrawal plan in place, while 14% of retirees have a detailed strategy for managing required minimum distributions.
Nearly half the overall survey population, 46%, said they were unfamiliar with the term decumulation itself.
Among pre-retirees aged 55 and older who have a decumulation plan, 57% report high confidence in their ability to manage spending throughout retirement. That figure falls to 26% among those without a plan.
The divide is similarly stark for those already retired with 55% of retirees with a spending strategy stating that they feel highly confident, compared with 29% of those without one. And those who are highly confident are five times more likely to describe retirement spending as empowering and three times more likely to call it rewarding.
The dominant strategy used by retirees to manage withdrawals is drawing a consistent percentage of assets each year, cited by 34%, with maximising investment returns the second most common approach at 31%.
Income-oriented strategies such as guaranteed lifetime income appeared further down the list, yet the survey data suggests they carry outsized potential to shift behaviour.
Nearly three quarters of respondents said having guaranteed lifetime income beyond Social Security would meaningfully improve their ability to spend on things that matter to them.
When presented with a hypothetical choice at age 65, more respondents preferred $60,000 a year guaranteed for life over a $1 million lump sum, while 69% of retirees said guaranteed income would lead them to spend more on travel, with home improvements at 29% and dining out at 25% also ranking highly.
"With fewer pensions, Social Security uncertainty and people living longer, it's time to rethink how retirees transition from saving to spending," Fiedler said. "Previous strategies and rules of thumb may not cut it anymore. The new paradigm calls for a greater focus on guaranteed lifetime income."
With 60% of survey respondents expecting retirement to last at least 20 years and 45% anticipating living to 90 or beyond, the stakes of getting decumulation wrong extend well beyond personal discomfort.
The research argues that without deliberate planning and access to reliable income streams, a generation of savers risks arriving at the finish line only to discover they never learned how to spend.
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