Josh Strange is the Founder & President of Good Life Financial Advisors of NOVA. The firm works with federal employees and contractors.
Most people spend years doing what they’re told to do: save, invest wisely and avoid big financial mistakes. Through advertising, the broader financial industry reinforces that message daily by warning about what can happen if you don’t plan carefully.
The takeaway is clear: accumulating wealth is what really matters. And by many measures, that message has worked. Millions of Americans are living comfortably in retirement.
But perhaps it has worked too well. Economists and researchers have documented what’s known as the “retirement-consumption puzzle,” showing that retirees are often far too cautious about spending once they stop working.
In part, this makes sense. After all, you have fewer sources of income at that stage of life. Yet that shouldn’t come as a surprise since it’s the whole point of planning. Still, many retirees can’t quite relax and let themselves enjoy what they’ve built.
Spending And Fear
Sometimes it’s due to memories of economic hardship, such as the financial crisis. Others who grew up in lower-income households or emigrated from countries where money was scarce often retain lifelong habits of frugality. Even affluent Americans fear that spending too freely could jeopardize their independence.
Whatever the reason, fear is a common thread that runs through them. It’s natural to worry about depleting savings at the very stage of life when you have the most to lose. Those feelings are only amplified by headlines about Social Security shortfalls, Medicare cuts, disappearing pensions and political gridlock.
At some point, though, the focus must shift from preservation to purpose. For years, we’ve been told that financial success is defined by how much you keep. But the real measure of success is something different: the freedom it provides you.
The goal isn’t to die with money left over. It’s to live, to enjoy experiences, make memories and spend time with the people who matter most. Wealth is the means, not the end. Yet fear and inertia have a way of getting in the way.
Consider a retiree in her seventies, in good health and with a full bucket list. Her situation is solid: $2 million is invested across a diversified portfolio of mutual funds and ETFs spanning multiple asset classes, including domestic and international equities, short- and long-term bonds and cash. She has no debt and modest annual expenses, meaning she could easily afford to do everything she wanted.
But she doesn’t. She watches the markets every day, convinced that any sign of volatility means her portfolio could vanish entirely.
Another retiree with similar means and the same level of wealth is also paralyzed by emotion. They may not monitor the markets as closely, but they constantly trim small discretionary costs, such as dinners out, family trips and small indulgences, even though they can easily afford them.
Both scenarios, based on actual clients of mine, illustrate how emotional risk can overshadow rational thinking. Fear can turn wealth from a source of comfort into a source of anxiety. Recognizing that distinction is often the first step toward restoring balance between financial independence and quality of life.
The Bottom Line
If you’ve taken the time to build a sound plan, you may already be better prepared than you realize. Even a balanced portfolio (i.e., 40% equities and 60% bonds) can provide a steady annual income stream with limited risk.
Understanding how that translates into real dollars can help put emotions in perspective. Many retirees find comfort in running through different “what if” scenarios. Seeing the numbers laid out clearly can provide the reassurance needed to spend with confidence.
The retirement-consumption puzzle may never be fully solved, but it highlights an important aspect of our relationship with money. Fear, especially fear of scarcity, often lingers long after it’s warranted.
The point of saving and planning wasn’t just to avoid running out of money. It was to make sure you could live life on your own terms. That means giving yourself permission to enjoy what you’ve earned.
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