You’ll probably never spend your whole nest egg no matter what — so stop living your golden years in fear. What the data actually says

A whopping 86% report they don’t feel free to spend their money on things they enjoy, according to Prudential’s Retirement Pulse survey. Even wealthy retirees aren’t immune to this — 61% of those with $500,000 or more in investable assets say they’re not comfortable spending for enjoyment.

Prudential points to “FORO” (fear of running out) as one of the main drivers holding retirees back from truly enjoying the spoils of their labor. More than half of retirees say they’d rather leave money behind than risk running out in their lifetime.

And it appears that FORO runs deep. A survey from Allianz Life reveals 67% of Americans say they’re more worried about running out of money in retirement than death.

The trouble is, these surveys reflect feelings. Another report by researchers David Blanchett and Michael Finke focused on actual spending data and came to a surprising conclusion: many retirees are actually underspending.

Here’s why there’s a good chance that your fears of draining your portfolio are overblown.

Retirees spend income, not savings

In a 2024 study published in the CFP Board’s Financial Planning Review journal, Blanchett and Finke found that retirees display a “behavioral resistance to spending down savings.” Instead, retirees focus on spending income from various sources such as Social Security, pensions and wages. In fact, nearly 80% of their lifetime spending is fueled by these sources.

The report also found that a typical 65-year-old couple only withdraws 2.1% from their portfolio annually, while a single 65-year-old withdraws just 1.9%. Both are significantly lower than the standard 4% rule that is widely recommended by financial experts. And in fact, the creator of that rule has since revised that number, suggesting that 4% may not actually be enough — he now recommends retirees start with a withdrawal rate of 5.5%.

Additionally, this study focused on 65-year-olds, meaning these retirees are still in the “go-go” years of retirement — or when spending is expected to be highest.

Simply put, millions of older Americans and retirees with robust sources of income and modest portfolios could be needlessly living in fear. Their chances of outliving their money are probably lower than they believe, although it’s always important to take your health into consideration.

If the data still hasn’t eased your worry, there are a few ways to boost your life satisfaction and peace of mind in retirement. Here’s how.

Build a retirement plan

Once you’re aware of this subconscious need to preserve savings, you can begin to plan around it. But shaking these habits on your own, not to mention developing a plan, could be a challenge, especially if your saving habits are entrenched.

Hiring a professional financial expert could help you counteract your behavioural bias towards spending from Social Security rather than withdrawals.

Advisor.com’s matchmaking engine can help connect you with an expert for free, and their network includes fiduciaries who are legally obligated to put your interests first. Once you have an experienced co-pilot by your side, you can try to mitigate your fears and make money moves with more confidence. They could also help you develop a new drawdown plan.

Better yet, Advisor.com lets you set up a free initial consultation, with no obligation to hire, to see if their pick is the right fit for you.

Another way to mitigate this subconscious bias is to create buckets of money with clear labels to make pre-planned decisions easier. For instance, you could automate a certain withdrawal from your retirement accounts to flow directly into a high-yield fund like a Wealthfront Cash Account.

With a base rate APY of 3.55% through program banks, Wealthfront Cash Accounts can keep your cash liquid while fighting inflation. Using a new client boost and direct deposit incentive, referred clients can earn up to a 4.55% APY.

That’s 10 times the national deposit savings rate, according to the FDIC’s September report.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, you get access to up to $8M FDIC Insurance eligibility through program banks.

If you’re further out from retirement, you may want to consider finding ways to boost your income. This can free up more mental space for spending the money you do have, especially if combined with a fuller understanding of your real financial runway.

One option is an income annuity through Ethos, which can help you convert your savings into predictable income. In exchange for a lump sum, you can get contractually guaranteed income for life, backed by the issuing insurer’s claims-paying ability. This guarantee requires annuitizing your funds and is subject to the specific contract’s terms, including any applicable surrender charges.

You can lock in predictable income you can count on every month and customize your payout schedule to fit your budget. If you need the money now, you can turn a lump sum into income that starts right away.

An income annuity can also help you diversify your retirement income strategy and provide another source of income alongside Social Security, pensions and other savings, with lifetime guaranteed income for those 59 and older, backed by the issuing insurer’s claims-paying ability and subject to annuitization, rider elections and contract terms, including surrender charges.

If you’re considering an income annuity, book a free consultation with a licensed Ethos insurance agent to explore your options. No purchase is required.

Not available for residents of New York.

Use your equity

Building an income plan is one thing, but there’s another major consideration: equity.

For those who’ve bought into the American dream, homeownership is a natural part of life. It’s also one of the clearest paths towards building equity. However, come retirement, that money can stay locked in your home, making you wealthy on paper and not necessarily in practice. If your retirement accounts look barren, but you have a fully paid-off home — there are options available.

If you’re at least 62 (and depending on your asset mix), it may make sense to take out a reverse mortgage with Longbridge.

This lets you convert a portion of your home equity into cash — without selling the property or making monthly loan repayments. You can take the funds as a lump sum, a line of credit or fixed monthly payments. The loan is repaid when you sell the home, permanently move out or pass away.