As you near retirement or enter the phase where you are beginning to withdraw from the savings and investments you’ve spent a lifetime accumulating, it’s common to experience a range of emotions—some expected, others less so.
For many of my Baby Boomer clients, the psychological shift from building wealth to depleting it can be one of the most challenging transitions of their lives. Even I am personally challenged by this concept, and I’m a financial advisor! I show clients how their planned withdrawals will support their goals until age 96 (the age to which we run most clients’ financial plans), but when I look at my own successful financial plan, it terrifies me.
So what are the emotional hurdles you (and me) might face as we begin to tap into our hard-earned savings? Here are a few ideas for tackling some big challenges:
1. The Fear of Running Out of Money
One pervasive fear in retirement is the possibility of running out of money. Having spent decades prioritizing saving and investing, the idea of drawing down on those funds can feel unsettling. For some of us Baby Boomers, this fear is tied to a deep-seated concern about security. We grew up with parents who lived through the Depression, for heaven’s sake!
Why it’s a challenge: You’ve likely been trained to accumulate wealth, so shifting to a mindset of distribution—where your primary focus is drawing down your assets—can feel like a complete reversal of everything you’ve worked for. The thought of outliving your savings can lead to anxiety, causing some retirees to adopt overly conservative spending habits that may limit their enjoyment of retirement.
What you can do: Take a strategic, structured approach to withdrawals. You can consider working with a financial advisor to create a sustainable withdrawal strategy. Some retirees follow the “4% Rule,” which suggests withdrawing about 4% of your savings and investments per year to minimize the risk of running out of money. I personally believe up to 5% can be a reasonable withdrawal rate. However, having a personalized strategy based on your lifestyle, health, goals, and market conditions can help determine what is right for you.
Knowing that there is a plan in place can provide peace of mind. Even as a financial advisor, I tapped a colleague to help reassure me that my plan is fine and I could indeed start withdrawing at any point when I’m ready to stop working.
2. A Loss of Identity and Purpose
For some Baby Boomers, a large part of our identity has been tied to our careers and the process of building wealth. Retiring can bring about feelings of uncertainty about one’s self-worth and purpose. Without the regular challenge of work, some retirees feel a sense of loss or confusion about what to do next.
Why it’s a challenge: 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.
What you can do: Reframe this transition as an opportunity to redefine who you are and what you want to accomplish. Retirement is the time to pursue passions that you may have sidelined during your working years—whether that’s traveling, volunteering, pursuing hobbies, or spending more time with loved ones. I worked with a retirement coach in 2023 to think about how I want this chapter to look for me. During that process, I learned that while I’m not quite ready for full time retirement, I am ready to work fewer days and have more spaciousness for creative and volunteer pursuits.
3. The Anxiety of Market Volatility
Another significant emotional hurdle in retirement is dealing with market volatility. The fear of losing your nest egg during a market downturn can cause considerable stress, especially if you’re relying on your investments to fund your lifestyle. The idea of watching your portfolio decline during periods of market turbulence can stir up feelings of vulnerability.
Why it’s a challenge: Over the years, you’ve worked hard to build your wealth, and the thought of watching your investments fluctuate can bring on anxiety. When you’re no longer earning an income from a job, the market’s unpredictability can feel even more intense. And it is true that retiring in a serious ‘down’ market period can result in a less successful financial plan, so having a clear and regularly updated picture of your financial plan is important.
What you can do: A way to manage this fear is investment portfolio diversification and a focus on long-term goals. As a financial advisor, I work to build a portfolio that is appropriate for my clients’ retirement phase, balancing growth potential with protection against risk. I encourage them to have an emergency fund separate from their investment portfolio, which can help reduce the anxiety of needing to sell assets during a downturn. Most retirees can withstand short-term fluctuations if they’re not required to access all of their assets at once. At Abacus, your financial plan is reviewed regularly so that it changes and grows with you as your situation evolves. If you had a one-time plan someone created for you years ago, it is probably time to talk to an advisor who has an on-going approach to planning. The ongoing approach with regular check-ins can help retirees feel at ease in their retirement.
4. Guilt About Spending
Some people experience a sense of guilt when it comes to spending their hard-earned money. Having spent decades saving, the transition to using that money for enjoyment or lifestyle can be difficult to accept. Some people worry about spending too much or too quickly, fearing they’ll eventually regret their choices.
Why it’s a challenge: Guilt about spending often stems from a lifetime of financial prudence, where saving and not indulging were seen as virtues. Can you resonate with this way of thinking about money? If so, you are probably a Boomer! I regularly see clients who are actually spending less than what we consider “sustainable spending” because they are worried about running out. It’s a fun part of my job when I get to show clients that they can actually spend or give more, without worry.
What you can do: Remember that you’ve worked hard for this moment, and it’s important to enjoy the fruits of your labor. Consider budgeting for both necessary expenses and discretionary spending that brings you joy, whether it’s travel, dining out, or spending more time on hobbies. Also, if leaving a legacy is important to you, include that in your planning, but don’t let it prevent you from enjoying your retirement years. Structuring your spending around both enjoyment and future security can help balance these conflicting emotions. Again, a regularly updated financial plan can help you feel more confident in your spending.
5. The Psychological Impact of Aging
As retirement often coincides with aging, you might experience physical changes that impact your ability to live as you did during your working years. Reduced mobility, health concerns, and the realization that your time is finite can be emotionally challenging. The awareness of aging can affect how you view your financial security, especially if there are anticipated health costs or a need for long-term care.
Why it’s a challenge: Aging can bring about feelings of helplessness or frustration, especially if you were accustomed to a highly active lifestyle. Planning for health care and the unexpected is also a complex task, which can increase stress.
What you can do: Plan for health care and long-term care needs. Ask your advisor about long-term care insurance or other options to prepare for potential medical expenses. Having a health care strategy in place — one that accounts for both physical and emotional well-being — can help to reduce the psychological burden. Also, remember that age often brings a deeper sense of perspective. While your body may slow down, some retirees find that they grow in wisdom and are more at peace with the life they’ve lived.
Conclusion: Embracing the Change
Retirement is a time of change, and with that change comes an opportunity to reflect, reevaluate, and adjust. As a Baby Boomer who has spent a lifetime saving and investing, transitioning into retirement spending can feel like uncharted territory. However, by embracing this phase with intentional planning and an open mindset, you can overcome the psychological challenges and embrace a fulfilling and secure retirement.
Remember: it’s okay to feel anxious or uncertain during this time, but don’t let those feelings prevent you from enjoying the rewards of your hard work. Whether it’s creating a sustainable withdrawal strategy, finding new passions, or simply taking time to relax, this is your time to live the life you’ve been working toward all along. You’ve earned it!
