• Fear of Spending Money (Chrometophobia)
• Why Most Retirees Will Never Draw Down Their Retirement Portfolio
• 2025 BlackRock Retirement Study
• Americans Are More Worried About Outliving Their Savings Than Death
• Learn About the The Total Retirement System™

When it comes to retirement, one fear stands above all others, running out of money. It’s such a powerful and widespread concern that even people with multi-million dollar portfolios still struggle to give themselves permission to spend.

The numbers say they’re fine, but emotionally, it still doesn’t feel that way. And here’s what’s surprising, research shows that most retirees never actually draw down their savings.

In fact, many see their wealth grow throughout retirement, even during some of the worst periods in market history.

In today’s episode, we’ll explore why that happens, what the data really shows about retirement spending, and how to find the right balance between confidence and caution. Welcome to another episode of the Stay Wealthy Retirement Show.

I’m your host, Taylor Schulte, and every week, I tackle the most important financial topics to help you stay wealthy in retirement. And now on to the episode.

Why Retirees Fear Running Out of Money — Even Though They Rarely Do

According to BlackRock’s latest retirement study, two-thirds of Americans worry they’ll run out of money in retirement, a 10% jump from last year, largely due to recent market volatility and rising retirement costs.

Perhaps even more striking, roughly the same percentage of people said they’re more afraid of outliving their savings than dying. Running out of money is without question the single biggest fear for retirement savers.

And while about 45% of Americans over age 50 have less than $100,000 saved, giving them good reason to be worried, this fear still exists for successful retirement savers with healthy seven-figure nest eggs.

They might have more money, but they also tend to spend more, and their lifestyles, obligations, or financial goals are often more expensive. It’s all relative. Worrying about money is real.

In fact, there’s even a clinical term for it. Chromophobia, which is the fear of money. Symptoms can include hesitance to even think about money, withdrawing from social activities because of financial stress, obsessively checking account balances, or in some cases, refusing to physically touch cash.

At first, those symptoms might sound a little extreme, but if we’re being honest with ourselves, I’m willing to bet that most of us can relate to at least one of them. And the truth is, even our clients, who have been disciplined savers their whole lives and built sizable nest eggs, still wrestle with this.

The retirement planning work we do, the tax projections and guardrails approach to creating income absolutely help build their confidence. They’re a big part of the process. But emotional comfort often lags behind the math.

It’s one thing to see that you’re going to be okay on paper, and another to actually feel okay spending down your savings. As I’ve shared many times on this show, our attitudes and behaviors toward money start forming very early.

Some research suggests as young as age 6 or 7. In other words, how we handle money today is deeply rooted in lessons and experiences from 40, 50, or even 70 years ago. And rewiring those habits later in life is no small task.

The Spending Transition

Because think about what retirement asks of us. You spend decades building and saving, watching those balances climb year after year, and then suddenly the goal flips. Now you’re supposed to do the opposite. Start spending it down, traveling more, enjoying the fruits of your labor. It’s one of the biggest psychological transitions most people ever face, and many underestimate just how difficult it can be.

And that brings us to the heart of today’s episode, because this exact tension between what the math says and how people actually behave is something that my friend and fellow financial planning nerd Michael Kitsis has studied and written about extensively.

In fact, his research shows that contrary to popular belief, most retirees will never truly draw down their retirement savings. If you’re not familiar with Michael, he’s the chief financial planning nerd at kitces.com, one of the most respected sources of financial planning research out there.

He wrote one of my favorite articles exploring the dynamics of retirement spending, and he was kind enough to steal the microphone from me for a few minutes to share his insights and what they might mean for anyone navigating this stage of life or getting close to it. getting close to it.

Retiree Consumption Gap

Michael Kitces: So a few years ago, a research paper came out that lamented how retirees were underspending their retirement portfolios.

I know for a lot of people, we just hope to accumulate enough dollars to be able to retire, but they found that there was a phenomenon where often some of the people who have been most successful at saving for retirement actually became so good at saving and managing their spending that when they retired and it became time to spend, they were having trouble spending their own retirement dollars. And so over the first decade or so of their retirement, their portfolios were actually equal or larger to when they started. And the researchers labeled this a retiree consumption gap. But in practice, retirement spending isn’t quite so simple as saying, well, let’s spend down our retirement savings during our retirement.

In part, it’s because we don’t know how long retirement will actually be. Especially in early retirement where it just seems like a long time when you’ve stopped working and you’re living day to day and week to week and realize there is a lot of time, a lot of years ahead of us in retirement, and there isn’t going to be any more employment income coming in. Like whatever we’ve got, this is it. This is everything we’ve got. It tends to make us naturally feel a little bit conservative about holding on to what we’ve got.

Now, the other challenge around spending down retirement savings in retirement is simply that phenomenon of inflation. Right? Things get more expensive as time goes by.

Now, in general, inflation has been modest, at least for the past several decades. But when you’re planning up for a 30-plus year retirement, that adds up. At 2% inflation, the price of everything almost doubles over the span of 30 years. At 3%, it’s up almost 2.5x. At 4%, it’s more than triple.

So just to put that in context, if you’re looking to live an $80,000 lifestyle in retirement, that’s going to be almost $150,000 a year, 30 years from now, just to maintain that $80,000 lifestyle, given how much more expensive everything will be.

If inflation turns out to be 3%, that’s a $200,000 a year lifestyle, just to buy the things you’re buying today with how much more expensive they become over 30 years.

And what that means is, even if you want to spend all of your retirement savings in retirement, in the first part of retirement, you actually have to build up the balance at least a little bit for just the mathematics of how expensive everything gets later.

In fact, if you do the math, a normal plan where you plan to spend everything over a 30-year retirement, we have done the math and figure out exactly how much you can spend to use up all of your savings after 30 years, your portfolio of savings would still grow in the first decade. In fact, you wouldn’t even touch any of the original principle until nearly the end of the second decade. And only in the final 10 years of retirement would you use most of the original nest egg to do those final years of very high inflation adjusted spending.

And if you’re concerned that returns might be a little bit lower, that inflation might be a little bit higher in today’s environment, it will lead you to spend even less early on. Not because we’re somehow mentally failing to enjoy our own retirement savings, but simply because that’s how it’s supposed to work. That’s the mathematics of retirement with long time horizons and the pernicious effect of inflation.

Now, the other challenge, of course, is that in the end, we almost never actually really spend it all down. Because even with the mathematics of growth and inflation over long retirement time periods, we never really quite know exactly what that time period is going to be. Because we don’t know when the end is coming.

Classically speaking, the ideal retirement plan is to die broke. If you do it perfectly, the last check you write is to your undertaker and it bounces. But in practice, it’s almost impossible because we don’t actually know when that time is coming.

We always have to have a little bit left in reserve just in case we’re still going a few more years or maybe a lot more in reserve. If we’re concerned, we might still go a lot more years. We lived this in our family as my grandmother lived to be 101 years old.

Withdrawal Strategies

We actually see this today with the growth of alternative strategies, I would call it, for how to generate spending dollars in retirement. Things like the 4% rule, which says we’re simply going to start out spending 4% of our initial retirement savings, and then we’re going to adjust that dollar amount up each year for inflation.

So even if market returns don’t go well, we know historically that starting at that 4% spending level is sustained even through horrible environments like the stagflationary 1970s and the Great Depression. But again, the challenge of those conservative spending strategies is, it often drives a lot of upside in the end.

For as popular as the 4% rule has been in the media lately, what people often don’t realize is that the 4% rule actually doubles your nest egg more than two-thirds of the time.

So in other words, two out of every three times not only do you not use your retirement savings, you leave double the nest egg without ever actually having gotten around to using it.

In fact, the 4% rule is as likely to quintuple your starting wealth, as it is to have you finish with less than you started, which is leading to newer approaches to retirement planning, most popularly called either floor and ceiling or guardrails approaches. I have young children, so occasionally we take them out bowling.

For those who have been over the years bowling for young children, we have guardrails, we have little bumpers that come up, that keep the ball from rolling into the gutters on either side.

And so, when my daughter goes up to roll the ball at any particular time, one of two things happens. Either she rolls it fairly straight down the lane, rolls down to the end, hits the pins, and she does her celebratory dance. Or she rolls it slightly askew, it drifts off to the side, heads towards the gutter, but it hits the bumper, bounces off the bumper, goes back to the middle lane, hits the pins at the end. She is equally happy either way.

She doesn’t really care about whether or not we happen to bump off the bounce, the bumpers along the way. She just wants to make sure that it’s a successful run to the end at every time. And we can do the same thing with retirement portfolios. So rather than arbitrarily saying we’re going to spend this much or that much, we try to make it a little bit more dynamic. But say let’s keep within the guardrails.

Okay, maybe we’ll start out spending 5% of our portfolio, but we’ll put guardrails on. As long as our spending stays somewhere between 4 and 6 through the first half of retirement, we know we’re on track.

And so if markets are good, we’ll get to lift our spending up. If markets are more challenging, we may have to turn it back a little bit. But rather than blindly saying, well, let’s just see what happens, and we’ll finish with extra along the way, we can actually make adjustments along the way.

The key point to all of this, though, is to simply recognize that in practice, it is, perhaps unfortunately, truly difficult to ever actually spend down our retirement savings in retirement, even if we want to, because we don’t know how long retirement will be. And the more conservative we are about the uncertainty of how long we’ll live, the more inflation adds up over time and drives that mathematical reality that you should be spending less than your growth in the early years of retirement. That’s just the mathematics of how prudent retirement planning works when this is your only nest egg for retirement, and it might have to last 20, 30 years or more.

Key Insights

Taylor Schulte: Okay, a big thank you to Michael Kitces for dropping in and sharing his insights with us today.

While much of his research is written for financial planners, a lot of what he studies and publishes, especially topics like this, has direct takeaways for retirement savers who care about understanding the why behind their financial decisions.

And as I listened to what he shared, a few things really jumped out to me. Three insights in particular that I think are worth highlighting.

1.) The first is this idea of the consumption gap.

I find it fascinating that retirees, on average, not only avoid spending down their portfolios, but they often spend less over time. Despite having the resources and freedom to spend, their spending tends to decline as retirement goes on.

Perhaps even more interesting, during the last decade in the early 2000s, when market returns were relatively poor, the financial assets of wealthier retirees actually increased. So when the markets weren’t doing great, retirees were still seeing their wealth grow simply because they weren’t spending all that was available to them. This reinforces two important takeaways.

First, many retirees can probably give themselves a little more permission to spend and enjoy their savings.

And second, it underscores why having a legacy plan, a clear plan for what happens to your money after you’re gone, is so critical.

I often hear people say, whatever’s left, my kids can figure it out. But having a documented legacy plan, one that matches your intentions, means that your assets can be passed down more tax efficiently, potentially saving your heirs money and in some cases, even creating opportunities for you to realize tax benefits while you’re still alive.

2.) The second big takeaway was Michael’s comments on inflation.

Inflation reports are regularly making headlines, and while no one can predict exactly what’s coming next, even small consistent increases in prices can dramatically change your long-term spending needs. That’s why understanding how inflation impacts your plan isn’t just about adjusting your assumptions, it’s also about how you invest. If you hold too much and short-term bonds or cash, you’re essentially losing purchasing power a little bit every day.

To protect your income and keep up with rising prices, you need a thoughtful asset allocation that balances growth potential with stability, something that allows you to sleep well at night while still keeping your plan on track.

And as I’ve said before on the show, while most advisors talk about risk tolerance, which is how much risk you can stomach, risk capacity is just as important, if not more so. As a refresher, risk capacity is the amount of risk you actually need to take to reach your goal. And inflation assumptions play a huge role in that calculation.

3.) And finally, number three, while it’s been discussed at length on this show and many others in recent years, I’m still fascinated by the data behind the incredibly popular 4% rule.

As he shared, the research shows that in two-thirds of historical scenarios, retirees actually finished with more than double their starting wealth after 30 years. And perhaps even more remarkable, the 4% rule historically has been more likely to quintuple your wealth than to deplete it. Now, to be clear, the 4% rule is not perfect.

It was designed for some of the worst case market environments imaginable, but it can still be a useful starting point, a simple way to sanity check your plan or gauge your progress toward retirement readiness. If we used average long-term market returns, instead of worst case assumptions, a safe withdrawal rate could be well above 6%.

But since no one can predict when the next downturn will hit, many experts, myself included, believe that dynamic withdrawal strategies, like guardrails or floor and ceiling, are a more prudent approach.

These flexible spending systems remove the pressure of having to predict the future. Instead, they automatically adjust your withdrawals based on what the market is doing in real time. They provide structure, flexibility and protection, helping you spend with more confidence and avoid both overspending and underspending, no matter what the market throws your way.

At the end of the day, everything we talked about today points to one simple truth. Retirement success is not just about the math. It’s about confidence, and it’s about having a clear system for making informed decisions.

One that helps you stay calm when markets get noisy, spend freely when life gives you opportunities, and still protect what you’ve worked so hard to build.

That’s exactly why we created our Total Retirement System, a step-by-step process that integrates tax planning, retirement income, investments, and legacy strategies into one coordinated plan. So you always know where you stand, what to adjust, and how to stay on track. If you’d like to see how this framework applies to your situation, or you simply want a second opinion on your current plan, my team and I would be honored to have a conversation.

You can schedule a free retirement strategy session by following the link right there in the episode description in your podcast app or by visiting definefinancial.com.

There’s no obligation, it’s just a chance to learn more about each other, get your big retirement questions answered, and see if we’d be a good fit to work together. Because ultimately, that’s what this is all about, clarity and confidence. When you have a system guiding your decisions, the numbers stop feeling abstract, and you can finally trust your plan enough to live the life you save for.

Thank you, as always, for listening.

And once again, to view the research and resources referenced in today’s episode, just head over to youstaywealthy.com/259.

Disclaimer

This podcast is for informational and entertainment purposes only, and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.