Apr 16, 2025
You’ve worked hard to save for retirement and the time is finally here. Now, the challenge isn’t simply about how you’ll spend your time. A far more pressing one is that the fear of outliving your savings may influence how you spend your money.
In other words, your fear could lead to spending less to truly enjoy your retirement. But how do you spend without anxiety when many Americans aren’t sure how long their savings will even last.
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The average retirement savings is $609,000 by the time Americans hit 65. And, a Gallup poll showed that three quarters of retirees say they have enough money to retire comfortably. Where’s the disconnect then, with even wealthier seniors being too scared to spend?
The answer could have to do with your mindset, and your very valid fears of running out of money. It’s hard to change your habit of saving when you no longer need to.
Here are some best practices to make sure you can spend more without risk of outliving your nest egg.
Determine a retirement budget
Having a clear spending plan in place is key now that your ‘accumulation years’ are over. Many retirees report that they wish they’d done more planning before retiring. Taking the time to assess your expenses now can help ease your fears.
One simple task you can do right now is to track every penny you spend, and on what. That way, you can see how much money you might need for the basics and anticipate any costs that might go down or go up.
For example, you plan to downsize in a few years, so your housing costs will go down. Or, you don’t travel much now, but want to in the future so that cost will go up.
Having a better understanding of what you’ll spend during retirement will help you to see how you can safely withdraw from your retirement accounts.
Using the 4% rule — where you withdraw 4% of your portfolio in your first year of retirement, then adjust the amount for inflation in the years that follow — can be a useful guideline. However, it might not be the best strategy for you.
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Instead, finding a way to get a steady source of income to cover the essentials may be the way to go.
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Have a fixed source of income
The 2024 MassMutual Retirement Happiness Study found that the longer someone is retired, the less fear they have about financial uncertainty.
While there weren’t indicators as to why this may be, having a solid financial plan could help you ease fears and feel more comfortable spending more.
One such way to do so is by establishing your essential costs and making sure you have fixed income sources to cover them. Then, you look at what you have leftover to spend as your fun money.
You have several options to choose from when it comes to fixed income sources. One that most Americans qualify for is Social Security. There are also fixed-income securities, such as municipal bonds, whereby you’re paid interest at regular intervals.
Annuities are another popular option. You invest in or purchase a contract backed by an insurance company. You’re paid regularly, for a specified amount of time, based on premiums paid or a lump sum payment you’ve made.
Once you’ve figured out your baseline spending — what you need to pay for housing, transportation, health care and food — you can make a plan on getting it from fixed income sources. Then, determine the amount you can withdraw safely from other sources to spend on extras, like travel.
Work with a fee-only advisor
A financial advisor can help you to assess your needs and to figure how much you can safely spend during retirement.
There may be no need to work with them regularly. As you plan for retirement, consider consulting a fee-only advisor — you pay a set rate for their services but not commissions on products they sell you. Then, meeting with them once or twice a year after retiring may be enough to make sure you’re still on track.
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Sarah Li-Cain, AFC is a finance and small business writer with over a decade of experience.
