Most of us look forward to the day when we can retire from working, kick back and savor our retirement years.

But the anticipation is often accompanied by anxiety. After slaving and saving for decades, will our nest egg cover our living expenses? Will we outlive our savings? Or what if we never put away that much in the first place? It’s enough to make many retirees extremely reluctant to spend money.

A new study of the spending habits of retirees offers some reassurance—you may wind up spending less than you expect to.


Many Americans are being supercautious, according to a new report from Ameriprise Financial, Inc., a financial investment firm. It surveyed 1,075 retirees, ages 40 to 79, exploring how they were managing their money and what steps they were taking to make sure it would last. Half of the respondents had retired in their sixties, 36% in their fifties. All reported having investable assets of at least $100,000. A significant number of them had saved substantially more—the median amount saved, in fact, was $839,000.

Surprising finding: More than two-thirds (68%) of the retirees had withdrawn from their retirement accounts no more than the federal required minimum distribution (RMD) that becomes mandatory at age 70 1/2. The RMD is the amount that must be withdrawn annually starting at age 70½ to avoid a tax penalty. (RMDs apply to tax-deferred accounts, such as 401(k)s and regular IRAs, but not to tax-free accounts, such as Roth accounts.) The disbursements typically start at 3.65% of a retiree’s available balance, a percentage that declines annually.

So why were so few of the retirees not touching their retirement savings at all except for the mandatory withdrawals? Many relied primarily on Social Security and, in some cases, pensions.


There are plenty of cautionary tales of people overspending in retirement—taking many expensive trips, lavishing gifts on the grandkids, joining the expensive golf club they never had time for while working. But what explains the underspending phenomenon?

One obvious issue is the savings shortfall that plagues many Americans. You’ll likely do whatever you can to keep your nest egg intact if you’re not sure that it will carry you through retirement—especially given that increasing numbers of people are now living into their 90s. That was indeed a concern for many people surveyed—a quarter of the respondents were not sure their money would last their lifetimes. About the same percentage said that they had fallen short of their savings goal by at least $250,000.

But others reported a different reason—confusion. Managing the financial complexities (and, yes, uncertainties) of retirement can be daunting. Given the unpredictability of the financial markets and the economy, it’s not that surprising that only 21% of the retirees surveyed said they felt confident about tapping into their assets. They said they felt stymied by the complexities of managing investment risks and returns (59%)…understanding the tax ramifications of draw-down strategies (53%)…and figuring out how to set up a retirement income plan (46%).

Money management is challenging. Whether they felt financially prepared for retirement or not, respondents reported that holding onto their accumulated assets was a top priority.


How you manage your nest egg in retirement is your own decision, of course. You may feel comfortable living below your means so that you are superconfident that you’ll have enough for the rest of your days. But if it’s financial confusion, or simply anxiety, that’s holding you back, getting good financial advice may liberate you to open up your wallet a little wider—and enjoy yourself. Additional ideas

Update your budget. If you are working from a preretirement budget, it’s time to create a new one that will help you keep your spending within limits and prioritize the things that bring you joy. Unlike so many things in life, a budget has the advantage of being within your control.

Set up autotransfers. Money that is automatically transferred from retirement investment accounts to your bank account will feel more like income than a drain on your savings—a psychological plus for underspenders. If you invest in a “managed payout fund,” which distributes a small percentage of its value as a monthly payment, you can have those monies deposited in your bank account—again, just like income.

Splurge now, not later. Most retirees spend less, not more, as they get older, choosing to travel less often and curtail home improvements. You’re likely to get the most pleasure from splurging early in retirement when you likely have the health and energy to enjoy it more. After all, that’s partly what you were saving for, isn’t it?