The Conundrum of Retirees Struggling to Spend Confidently 

The idea of “struggling” to spend money may sound strange to you spendthrifts out there. (We’ll cop to that.) For many retirees, however, it’s the reality. 

Almost nine in 10 people over age 50 don’t feel free to spend their savings on things they enjoy, per a recent survey by Prudential. Among those with $500,000 or more in investable assets, 61% feel uncomfortable spending purely for enjoyment, even though many in this group have sufficient assets on paper to engage in reasonable discretionary spending. What gives? Most people inherently need to be given a “license to spend,” said David Blanchett, head of retirement research at Prudential Financial. This can come in the form of a detailed plan showing how current spending (discretional or otherwise) may affect their financial security in the future, particularly if markets should go south or inflation runs rampant. 

“Our results support a lot of prior work showing spending confidence isn’t simply a function of greater wealth,” Blanchett said. “We should be helping retirees support not only their needs but their dreams in retirement. The solution lies in planning tools and advice that transform uncertainty into confidence.”

Respondents cited a range of factors making them uneasy with discretionary spending:

• 44% said they doubt Social Security will be there for the long term, raising fears of poverty in old age.
• 42% said inflation sparks fear about a reduced standard of living in the future, while 34% point to the cost of healthcare and long-term care. 

FOMO vs. FORO

“Forty percent of respondents said they would prefer to leave money behind over the risk of running out, and over a quarter feel proud watching their balance not decrease,” Blanchett said. “I see this as the fear of running out, or FORO, versus the fear of missing out, or FOMO. It’s the advisor’s job to bridge that gap.” 

Indeed, about half of respondents struggle to enjoy experiences now versus wait until it may be too late, with this tension felt even more among those with more savings. There’s also a clear gender divide, said Barbara Pietrangelo, a financial planner with Prudential Wealth Advisors, with women being 33% less likely to feel comfortable enjoying their savings than men.

“Spending money you worked so long to save can feel like a loss,” she said. “For my clients, having a financial plan that we build together which clearly shows their priorities accounted for, in a time frame they chose, helps to ease anxiety around spending.”