Most people spend their entire working lives preparing for retirement. They scrimp, sacrifice, and defer. Then the day finally arrives, and something unexpected happens: they can’t bring themselves to spend a single dollar. It sounds counterintuitive. You did everything right. The money is there. The plan is in place. Yet after decades of saving, investing, and preparing, retirement should be the time when you finally enjoy the fruits of your labor. Yet ask most new retirees how they feel about spending their nest egg, and you’ll hear a surprising mix of hesitation, anxiety, and even guilt. This is not a fringe experience. It is one of the most quietly widespread psychological challenges of modern retirement, and research in 2024 and 2025 has started to take it seriously.
The Savings Mindset Runs Deeper Than You Think
In a late 2024 survey of American retirees between the ages of 62 and 75, 38% said they have a “savings mindset,” while only 11% said they have a “spending mindset.” That gap is striking. It means that even among people who are officially retired, the mental machinery of accumulation is still running full throttle.
Transitioning from a life of diligent saving to one of mindful spending can be one of the most challenging adjustments for new retirees. After many years of focusing on accumulating wealth, watching investments grow, and building a financial safety net, the prospect of drawing down on those savings can feel counterintuitive, and can even be anxiety-inducing.
For many who have been successful in accumulating wealth, the same habits that helped them save diligently can become obstacles in retirement. The identity tied to being a “saver” can make spending feel like the opposite of the values that led to financial security in the first place.
Nearly Half of Retirees Say Spending Causes Them Anxiety
Nearly half of America’s retirees (46%) say spending their retirement savings creates anxiety and takes an emotional toll, and nearly a third (32%) are spending money faster than they expected. This is according to the Alliance for Lifetime Income’s 2024 Protected Retirement Income and Planning (PRIP) Study.
The study is based on a survey of 2,516 consumers ages 45 to 75, and found inflation or cost of living (82%) and healthcare costs (70%) as the top two issues having a negative impact on their spending in retirement. Not having a clear plan for drawing down savings and knowing how to generate income in retirement are major contributing factors to people’s anxiety.
About 25% of retirees fall into the camp of people who decrease spending during retirement. So although this doesn’t impact a majority of retirees, it’s still a meaningful number, and it’s concerning to see so many people not enjoying the fruits of their labor.
The Retirement Consumption Puzzle: A Recognized Phenomenon
It’s not uncommon for retirees to have more than enough to live comfortably for the rest of their lives but still think a vacation is out of the question. In fact, a number of retirees actually experience a sharp decrease in spending and increase in savings in retirement. According to the Life Cycle Hypothesis, this shouldn’t need to happen. A retiree who is financially prepared for retirement should keep a consistent income in retirement, and her overall consumption should not change.
Research has shown that well-off retired investors often don’t spend much of their retirement savings, but that could mean they don’t know how much is “safe” to spend. By being too cautious, they may be keeping themselves from fully enjoying retirement.
According to researchers, part of the reason retirees are reluctant to spend more freely is the complexity of navigating a retirement system focused on saving and investing (accumulation) rather than spending (decumulation of assets). In other words, the entire financial infrastructure we’ve built trains people to put money in, not take it out.
Loss Aversion: The Brain Wired Against Spending
Loss aversion is a cornerstone of prospect theory developed by Daniel Kahneman and Amos Tversky. According to their findings, losses loom approximately twice as large as gains, making individuals more motivated to avoid losses than to pursue gains. Every withdrawal from a retirement account registers in the brain as a loss, not a reward.
Loss aversion is believed to be a result of the human brain’s tendency to assign greater value to things that we already possess. When we stand to lose something that we already have, it can trigger feelings of fear, anxiety, and sadness, leading us to make decisions driven more by emotion than by rational thought.
Research centering on studies conducted between 2019 and 2024 highlights the significance of framing styles and loss aversion tendencies in decision-making processes, especially in high-stakes situations. Results indicate that loss-framed messages are found to be more influential in modifying behavior, especially in financial contexts where the threat of losing something is emphasized. Retirement spending, by its very nature, feels like a sequence of losses, and the brain responds accordingly.
Retirees Spend Income, Not Savings – and the Difference is Enormous
A study by David Blanchett and Michael Finke, Research Fellows at the Alliance for Lifetime Income, found that retirees are hesitant to touch savings even if they can easily afford it. Instead, they appear to spend significantly more from their sources of lifetime income, such as Social Security, pensions, and annuities, than they do from their retirement savings accounts.
In a June 2024 study, “Guaranteed Income: A License to Spend,” Blanchett and Finke determined that retirees with assets that annuitize income spend twice as much as retirees with an equal amount of non-annuitized savings. Blanchett and Finke find that every $1 of assets converted to guaranteed income could result in roughly twice the equivalent spending compared to money left invested in a portfolio.
The research clearly demonstrates that households spend differently across sources of wealth. Retirees spend a much higher percentage of their lifetime income (about 80%) and spend about half the amount that they could safely spend from other sources. The type of money matters just as much as the amount.
Identity Crisis: When Being a Saver Was Who You Were
Your identity is closely tied to your profession or your ability to earn. Research by the Mental Health Foundation found that retirement can trigger a loss of identity and self-worth for some, as they move away from their earning years. This shift can exacerbate the difficulty of moving to a spending mindset, where you will no longer see yourself as an earner but as a spender.
The shift from being a “provider” to a “spender” can be disorienting. If you’ve always worked to accumulate wealth, suddenly having to depend on your savings might feel uncomfortable. This psychological shift can leave you questioning your value or sense of direction.
This psychological shift could be more daunting than the stress experienced during your working years, as it requires breaking away from deeply ingrained habits and potentially overcoming mental and emotional barriers. For many high achievers, frugality was never just a habit. It was a badge of honor.
The Fear of Running Out: A Rational Worry That Can Go Too Far
Retirees’ greatest retirement fears revolve around money and health, including fearing that Social Security will be reduced or may cease to exist in the future (42%), declining health that requires long-term care (37%), losing their independence (32%), outliving their savings and investments (32%), and cognitive decline, dementia, or Alzheimer’s disease (28%).
The numbers behind the nation’s emerging retirement challenge tell the story: nearly 51% of Americans worry that they will run out of money when they are no longer earning a paycheck, and 70% of retirees wish they had started saving earlier. Some fear is rational. The issue is when it paralyzes people who actually have enough.
Given the substantial nest egg needed for an adequate retirement, roughly 40% of retirees worry they will outlive their savings, and 46% say they have no plan if their savings run out. That uncertainty about an unpredictable lifespan is one of the most powerful drivers of the refusal to spend freely.
The Well-Being Cost of Not Spending
In 2024, retirees rated two out of three well-being measures lower than they did in 2020 and 2022. On a scale of 1 to 10, retirees rated lifestyle alignment with pre-retirement expectations an average of 5.7, down slightly. A lack of sufficient savings and retirement preparation negatively influences retirees’ spending outlook.
Spending constraints contribute to declining levels of well-being in retirement. At the same time, longer tenure, fewer employers over a career, more years participating in a retirement plan, and the presence of guaranteed income in retirement are correlated with more positive outlooks on spending and well-being.
Three in 10 retirees (30%) have trouble making ends meet, 27% indicate they often feel unmotivated and overwhelmed, and 24% often feel anxious and depressed. Underspending out of anxiety doesn’t guarantee peace of mind. Often, it quietly erodes it.
The Role of Guaranteed Income as a Psychological Bridge
Research suggests that people using guaranteed income sources are more willing to spend their income. Although the causes of the relationship between annuitizing and spending are still being studied, one theory is that people with an annuity feel they have more of a “license to spend” because they know they will always have money coming in.
Researchers also found that retirees spend a higher rate of their savings after taking a required minimum distribution (RMD) from a retirement savings account. Retirees seem to view the forced asset distribution as income and spend it at a higher rate than they spend from other savings. The structure of the payment changes the psychology of the spend.
Having guaranteed income as a component of current income is positively correlated with strong well-being in retirement. This suggests that the solution isn’t just financial planning. It’s designing income streams that feel psychologically safe enough to actually use.
Breaking the Spell: What the Research Actually Suggests
For many, the hardest financial adjustment won’t be saving enough – it will be embracing the idea that it’s okay to spend. After decades of careful planning, the challenge becomes not whether you can afford it, but whether you’ll allow yourself to enjoy it. That framing shift is, according to behavioral research, where the real work begins.
The first and most crucial step is psychological. For years, you were conditioned to save. Spending now may feel like you’re doing something wrong. But the truth is: this is exactly what you saved for. Reframing retirement spending as a reward for your lifelong discipline helps remove guilt and empowers you to enjoy the fruits of your labor.
Various surveys have found that three-quarters of retirees reported that their assets remained the same or actually grew in retirement, and 55% of financial professionals said that many of their clients spend “much less” than they can afford in retirement. The numbers keep growing. The life doesn’t always follow. That gap between what people have and what they allow themselves to use may be the defining financial psychology story of our time.
