After decades of piling up money for their golden years, many retirees find it difficult to make the transition from saver to spender. But one group is much more comfortable cracking open their wallets.
Retirees who annuitize at least a portion of their income spend twice as much as those who have an equal amount of non-annuitized savings, according to a recent study.
The Retirement Income Institute — a part of the Alliance for Lifetime Income, whose members include financial institutions that offer annuities — found that those who annuitize income are more likely to overcome “the uncertainty of life expectancy and the reluctance to spend down savings.”
In a survey of more than 2,000 Americans, nearly 60% of respondents said they would feel more comfortable spending in retirement on nonessential activities — including taking a vacation or eating dinner with friends — if they received an additional $10,000 of income for life than if they had an additional $140,000 in their nest egg.
In a recap of the findings, David Blanchett — fellow at the Retirement Income Institute — says:
“Essentially, annuities with lifetime income protection give retirees a psychological license to spend their savings in retirement. Retirees clearly prefer to live off income, but many don’t feel comfortable depleting down assets to fund a lifestyle. This is an unfortunate paradox since funding a lifestyle is what motivates people to save for retirement, and few retirees indicate a desire to pass on significant wealth at death.”
The study’s findings echo those of earlier research by the Alliance for Lifetime Income. The 2024 Protected Retirement Income and Planning (PRIP) Study found that 46% of retirees admit that spending savings triggers anxiety.
Part of this anxiety appears to be tied to pessimism about the future of Social Security, with just 58% of respondents expressing confidence that Social Security will provide income for the rest of their life.
For more on annuities, check out “4 Reasons To Buy an Annuity — and 4 Reasons To Walk Away.”
Add a Comment