The Hidden Risk of Retirement: Spending Your Savings

The Forgotten Phase of Retirement

When most people think about retirement, they focus on one thing: saving. We're told to contribute to 401(k)s, max out our IRAs, and build up those nest eggs. But what happens once you have all that money? How do you spend it without running out? This is where many retirees run into trouble, and it's a challenge that's often overlooked.

In fact, a new survey by Corebridge Financial found that only 31% of Americans even know what "decumulation" means—yet it's arguably more important than accumulation. Decumulation refers to the process of drawing down your retirement assets over time. It's the art of making sure you don't outlive your money, while also enjoying life while you still can.

It's a paradox that many retirees face: they're so afraid of running out of money that they end up spending less than they could, often to their own detriment. According to a report from the Employee Benefit Research Institute (EBRI), one-third of retirees still had 100% or more of their initial retirement assets by their mid-80s—a sign that they were being overly conservative with their money.

"The big takeaway is that the plan for decumulation is as important as the plan for accumulation," said Jean Chatzky, a personal finance expert and co-founder of HerMoney. "Most people do not have a plan for spending down. But if you can get yourself to the point where you do have a plan, you're going to find the whole experience in retirement of actually using this money that you've worked so hard to save much more pleasurable and empowering."

That sentiment is backed by the data: nearly 70% of retirees said they were worried about outliving their savings. Yet only 29% of people aged 55 and older had a plan for how they would withdraw money from retirement accounts.

The 4% Rule: A Starting Point, Not a Solution

For decades, the financial world has relied on the "4% rule" as a standard guideline for retirees. This rule suggests that you can safely spend 4% of your retirement savings in the first year, adjusting for inflation in subsequent years.

It's a useful starting point, but experts now caution against relying solely on it. The rule doesn't account for market volatility, investment fees, taxes, or even longer-than-expected lifespans. In fact, Charles Schwab notes that this rule may be more of a baseline than a universal solution.

"You can always prevent running out of money by doing nothing," said Bryan Pinsky, president of individual retirement and life insurance at Corebridge. "We want them to take action so they can live the retirement that they've always dreamed of."

The 4% rule, while helpful, doesn't address how people can best structure their withdrawals to maximize both security and enjoyment. For many, it's time to move beyond a one-size-fits-all approach.

Retirement's New Reality: No Pensions, No Guarantee

One major factor contributing to the retirement spending crisis is the changing landscape of retirement benefits. Unlike previous generations who often had defined-benefit pensions that guaranteed an income stream, younger workers are largely dependent on self-directed plans like 401(k)s and IRAs.

The EBRI report found that retirees with pension income tend to report greater financial stability. Without a guaranteed income, the burden of managing retirement funds falls entirely on the individual—and it's a heavy one.

This is where some experts suggest a shift in strategy. Rather than relying solely on market returns, retirees may want to consider adding products like annuities that offer guaranteed annual payments. In Corebridge's survey, nearly half of respondents said they would prefer a guaranteed $60,000 per year for life over receiving a lump sum of $1 million at age 65.

"We all need money in the markets, we all need to be able to keep pace with inflation and we all need that kind of growth," Pinsky said. "But guaranteed-income products can help retirees cover essential expenses and reduce the fear of outliving their savings."

This isn't about abandoning the stock market or being overly conservative—it's about balancing risk and security in a way that allows people to enjoy retirement, not just survive it.

The Fear of Spending Too Much vs. Spending Too Little

There's a fine line between saving enough and spending too little. And while the fear of running out of money is real, many retirees are actually spending less than they should due to that same fear. This creates a cycle where people miss out on experiences and opportunities because they're afraid of the financial consequences.

"If you're constantly worried about depleting your assets, you might avoid taking trips or making purchases that could bring joy," said Chatzky. "But the real danger is not being able to afford what matters most—like healthcare, family time, and the lifestyle you've always wanted."

The data supports this idea: only 6% of people surveyed said they would regret dying with money left behind, but 56% said they'd regret running out of money before they die. That's a clear indication that most people want to enjoy life in retirement—and they need the right plan to do it.

Retirement as a Lifelong Financial Journey

Retirement isn't a destination; it's a new phase of financial management. And just like any major life transition, it requires planning, adaptability, and sometimes even a shift in mindset.

We're not just talking about saving for retirement anymore—we're talking about managing money in retirement with confidence, clarity, and a plan that evolves as we do. Whether it's through annuities, diversified withdrawals, or smart investment strategies, the key is to make informed decisions early on so that you can live your best life after work.

Ultimately, this isn't just about financial advice—it's about personal fulfillment. It's about ensuring that all those years of saving are used not just for security, but for joy. And as we continue to see changes in how people retire, it's more important than ever to start thinking about retirement not just as a time to stop working, but as a new chapter full of possibilities.

• Start planning early—decumulation strategies should be part of your retirement conversation from day one
• Consider guaranteed income products like annuities to provide stability in your spending strategy
• Revisit your plan regularly—your needs, circumstances, and market conditions change over time
• Don't let fear of running out of money keep you from living fully in retirement