Spend Without Worry

Fears of running out of money prevent many retirees from tapping the nest egg they’ve worked a lifetime to save. With these strategies, you can generate enough income to pursue your retirement dreams.

- SANDRA BLOCK

The Irish poet and playwright Oscar Wilde once said that it’s better to have a permanent income than to be fascinating—a sentiment many retirees undoubtedly share. Unfortunately, the decline of traditional pensions in favor of 401(k) plans (and other defined contribution plans) has forced many retirees to figure out how to make a lump sum of money—sometimes a very large lump sum—last as long as they do. // A growing body of research suggests that many retirees have responded to this challenge by withdrawing far less than they can afford to spend based on the amount they’ve saved and their average life expectancy. Research by the Employee Benefit Research Institute found that people with $500,000 or more in savings at retirement spent down less than 12% of their assets over 20 years.

Michael Finke, a professor of retirement at the American College of Financial Services, says research he conducted found that 80% of retirees are uncomfortable watching their nest egg get smaller. “To an economist, that’s a mystery,” he says. “Why did you save in the first place?”

Forgoing meaningful activities isn’t without cost, says Glen Franklin, director of customer research for Jackson National Life Insurance. Although you don’t necessarily need to go on an around-the-world cruise, he says, hobbies, travel and other activities that involve family and friends—and often increase spending— have been shown to reduce your risk of cognitive decline. “You live longer if you have purpose in life, and purpose isn’t free,” he says.