How to Master Your Fear of Spending in Retirement

The 2025 Annual Retirement Study by Allianz Life surveyed 1,000 individuals ages 25 and over across the U.S. Participants had an average annual household income of $50,000 (single respondents) to $75,000 (married or partnered respondents), or investable assets of $150,000 or more.

What the study found surprised some people: 64% of survey respondents said they are more worried about running out of money than they are about death. If you fear spending cash once you've retired, this article is for you. Here, you'll find tips to help you overcome the apprehension hindering your ability to enjoy your golden years.

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3 tips for mastering your fear of spending

Getting over any fear takes time and practice. You may not immediately feel 100% comfortable, but it will come with time and experience. You'll likely feel much better once you notice that your portfolio hasn't taken a hit -- even with withdrawals.

1. Come up with a solid, but flexible, plan

Determining your personal withdrawal strategy is all about looking at historical data and what's worked for others in the past, and deciding on the plan you're most comfortable adopting. Remember, if you use one withdrawal strategy for a year or two and it's not working out for you, you can always change to another.

A widely used withdrawal guideline suggests withdrawing 4% of your retirement savings annually, adjusted for inflation. History shows that following the 4% rule makes it doubtful that you'll run out of money over a 30-year retirement. William Bengen, the "father of the 4% rule," recently revised his findings to say that the majority of retirees can safely withdraw 4.7% from their 401(k)s, IRAs, and other retirement plans without running out of money.

This is especially true if you tweak the rule to fit current economic conditions. For example, you may only withdraw 4.7% during economic growth periods and scale back when the market is sluggish. You may even skip withdrawals during bear markets and withdraw needed funds from cash or cash equivalent accounts instead.

Imagine your portfolio is growing at an annual rate of 7% and the market is flourishing. After withdrawing 4.7% of your earnings, you leave 2.3% to continue to grow. It may not be until you see that your portfolio can flourish -- even after withdrawals -- that you begin to feel comfortable.

2. Mix it up

Here, the focus is on failing to diversify, particularly as the inflation rate begins to creep up. Despite annual Social Security cost-of-living-adjustments (COLAs), inflation will drive up the cost of retirement over time and gnaw away at the value of your savings and investments.

Mix it up by reviewing your asset allocation to ensure you have inflation protection in the mix. For instance, consider mixing in:

• International stocks
• Treasury inflation-protected securities (TIPS)
• Real estate
• Precious metals
• Commodities

While no single asset class can protect against inflation completely, your strongest defense is broad diversification. That way, if one asset eats dirt for a while, others can keep your portfolio afloat.

3. Outsmart your fear

Studies clearly show that people with known income streams, like annuities or pensions, have less spending anxiety than those who must withdraw annually from their portfolios. Whether it makes sense or not, just knowing there's money coming in relieves anxiety.

A survey of 2,051 Americans by Retirement Income Institute Fellows David Blanchett and Michael Finke found that retirees with known income streams spend twice as much as retirees with equal non-annuitized savings.

Let's say a $10,000 guaranteed annual income annuity costs $150,000. Nearly 60% of those surveyed said they would feel more comfortable spending on nonessentials in retirement if they had the guaranteed income stream than if they had the $150,000 in retirement savings.

While retirement annuities have pros and cons, knowing there's a steady stream of income can boost a retiree's confidence in spending.

If the idea of spending in retirement is enough to make you break out into a cold sweat, here are a few important things to keep in mind:

• Your anxiety is natural. You spent years saving this money and want to ensure it stretches as far as possible.
• It takes time. By slowly pushing yourself to do a little more, you will likely become far more comfortable.
• Meet with a financial or retirement advisor. An advisor can take a look and let you know if you're on track, offer advice that may not have occurred to you, and help you feel more confident in your decisions. Even if you've never met with an advisor before, it's never too late.

Retirement is supposed to be a sweet time in life. Don't let fear get in the way of that.

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