Rich Retirees Are Sitting On Millions But Living Like They're Broke — Turns Out, They Fear Running Out Of Money

A surprising number of wealthy retirees are living like they're scraping by, despite having millions in the bank. According to Fortune, this phenomenon—dubbed the "retirement consumption puzzle"—reveals that many baby boomers are so afraid of outliving their savings that they're holding back on spending, even when they don't need to.

The Fear of Running Out of Money

Recently published research by David Blanchett and Michael S. Finke found that retirees are withdrawing just 2.1% of their savings annually—far below the traditional 4% rule, which has long been considered a sustainable spending rate for a secure retirement.

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Blanchett, head of retirement research at PGIM DC Solutions, told The Wall Street Journal that the fear of longevity risk—outliving one's savings—has grown significantly. With life expectancy stretching well into the 90s and costs for housing, healthcare, and essentials skyrocketing, many retirees are choosing to spend cautiously rather than risk financial instability in their later years.

Even retirees with seven-figure nest eggs are hesitating to spend. Instead of splurging on dream vacations or spoiling grandkids, they're holding onto their money—just in case.

Retirement Isn't the Party People Expected

Many assume that baby boomers, who collectively control more than half of America's wealth, are kicking back in their mortgage-free homes, living the retirement dream. The reality? Not quite.

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According to Federal Reserve data, less than half of all boomers have actually saved enough to comfortably retire. Worse, 43% of Americans aged 55 to 64 had no retirement savings at all in 2022. That same year, about 30% of those over 65 were considered "economically insecure."

Nearly one in four U.S. adults aged 50 and older who haven't retired yet say they expect to keep working indefinitely, according to an AARP survey. Rising costs are a major concern, with 70% worried that prices are climbing faster than their income. 

The Rise of ‘Unretirement'

"Unretiring" isn't just a trend—it's becoming a necessity. In the U.K., a Institute for Fiscal Studies survey found that  nearly 20% of baby boomers and late Gen Xers have rejoined the workforce or are planning to. In the U.S., the number of Americans working past 65 has quadrupled since the 1980s, according to the Pew Research Center.

Today, nearly 20% of Americans 65 and older are employed—almost double the rate from 35 years ago. That's about 11 million older workers, making up 7% of all wages and salaries paid by U.S. employers. Back in 1987, that figure was just 2%, Pew said. 

And forget about spending retirement sipping piña coladas on a beach—many of these workers are just trying to cover the basics. Rising costs, market fluctuations, and unexpected medical expenses have forced retirees to keep earning, whether through traditional jobs or side gigs.

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How to Retire Without Fear

If retirees with millions are still pinching pennies, what can the average person do to avoid financial stress in their golden years? Here are some tips:

1. Plan for Longevity, Not Just Retirement – With people living longer, it's crucial to factor in at least 30 years of post-retirement expenses.

2. Consider a Flexible Spending Strategy – The traditional 4% rule isn't a one-size-fits-all solution. Some financial experts suggest adjusting spending based on market performance.
3. Don't Be Too Conservative – While it's wise to be cautious, overly frugal retirees may miss out on enjoying their hard-earned money. A balanced approach is key.
4. Create Multiple Income Streams – Having rental income, dividends, or a part-time business can provide financial stability beyond just savings.
5. Reevaluate Housing Costs – Downsizing or moving to a lower-cost area can stretch retirement savings significantly.

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The Bottom Line

Retirees have built significant wealth, yet many hesitate to spend, worried they'll run out too soon. While caution is smart, holding back too much can mean missing out on the retirement they planned for.

The best approach is balance. Having a solid financial plan ensures security without sacrificing enjoyment. A financial advisor can help create a strategy that lets retirees spend with confidence, making the most of their hard-earned money without fear of the future.

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