Why seniors fear spending their own retirement wealth

Advisors are running into a new retirement problem: clients are not spending.

In fact, new data from Security Benefit shows that two in five financial professionals say 30% or more of their clients spend less than they prudently can in retirement, highlighting a growing “retirement confidence gap.”

In other words, clients might be financially prepared but are hesitant to use their savings.

“Our study showed clients are most concerned about rising healthcare costs, long-term care costs, and longevity risks. Uncertainty around costs combined with the potential to live much longer likely drives some of that hesitation around spending in retirement,” explained Justin Jacquinot, head of IMO and RIA sales at Security Benefit.

What does this mean for advisors? The focus should now shift to include confidence-building and income clarity alongside accumulation.

The real meaning behind this retirement behavior

Retirees have very real concerns about outliving their money or needing it later for health care, long-term care, or other major expenses.

“Many people have spent their entire lives saving, so flipping the switch to a spending mindset can feel uncomfortable, unless they have steady income sources or a strong understanding of withdrawal strategies and how to adjust spending when markets move up or down,” said Jeff Blomgren, managing partner and co-founder at Mountain Legacy Family Wealth Partners.

Most of their fears are completely valid.

“Some retirees also want to leave something behind for their families. For lifelong savers, retirement requires writing a whole new playbook, and that transition can be challenging. Planning and preparation make a huge difference,” Blomgren explained.

Longevity risk and market volatility concerns

There’s no denying that longevity risk and concerns about market volatility are often the biggest drivers of underspending.

“Longevity fears are shaped by what people have seen their parents experience later in life. If someone watches a parent struggle with long-term care, spend down their assets, or even sell the family home, it leaves a lasting impression,” Blomgren explained.

In many cases, retirees do not want to repeat that experience or place that burden on others. These generational experiences strongly influence how comfortable people feel spending in retirement.

How to focus client spending habits

The ultimate goal is to ensure retirement is stable and comfortable and that all needs are covered.

“It’s essential to plan for the wants, and beyond the wants we plan for the extra," Blomgren said. "The extra often includes charitable giving or gifting to children and grandchildren."

When clients clearly understand their needs, it becomes easier to plan for the wants and to encourage those who are underspending to enjoy more of what they worked so hard for.

Exploring other products is also worthwhile and can go a long way in helping people ease their fears of outliving their money.

“Protection-based products like annuities help clients build assets in the accumulation phase, and they also play an important role in retirement,” Jacquinot explained.

This sense of security provided by annuities and other retirement solutions often makes it easier to have deeper conversations about spending, advisors say.

These conversations are often the most rewarding because retirees sometimes need the reminder that this is exactly why they saved and worked all those years. Many also find joy in using the extra to help others. They long for a sense of accomplishment that leaves a lasting impact.

Retirement confidence does not happen overnight. It takes time and repeated conversations supported by visual planning tools.

“Seeing the actual numbers helps retirees understand their probability of success and how much they may be leaving behind if they underspend,” Blomgren explained.

While many want to leave an inheritance, most retirees did not save primarily for that reason.

Blomgren also encourages advisors to walk through potential lump sum expenses such as renovations, car purchases, bucket list trips, weddings, and other major items.

“When we stress test the plan and show clients how much they can spend while still maintaining a very high probability of success, many become more comfortable increasing their spending,” Blomgren added.

The best part of the process is helping clients think about what they truly want to enjoy beyond their basic needs and personal wants.

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