Weekend Reading: 3 Behavioral Factors Can Affect Retirement Spending

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend reading behavioral factors retirement spending Weekend reading behavioral factors retirement spending
Weekend Reading

The decumulation phase of retirement can be one of the most challenging chapters to navigate. After decades of working, saving and accumulating, it can feel foreign to finally allow yourself to enjoy the fruits of your labor.


Here, you’ll find a list of the top hindrances to drawing down assets, as well as ways to combat them. They include:

📌 Self control: In many cases, including saving for retirement, self-control can be a great trait. However, this makes switching to decumulation mode difficult for farsighted investors in particular. To feel more comfortable with spending, try asking yourself these questions: Why did you save for retirement in the first place and what do you truly value in life? And, how will you feel in the future if you don't live in the moment or enjoy spending what you can afford now?

📌 Loss aversion: This is one of the major cognitive biases that can stop you short of enjoying your hard-earned dollars. Simply put, it means the negative feelings of losing money outweigh the positive feelings of gaining the equivalent amount of money. As a remedy, try shifting your mindset and view withdrawals as paychecks to yourself, not depleted savings. Or, draw down larger amounts of money on a quarterly, bi-annual, tri-annual, etc. basis and keep them in a separate spending account, versus taking small monthly withdrawals.

📌 Scarcity and opportunity costs: Taking money from a fixed pool of non-replenishing savings can make you feel anxious, or it might also cause you to stress about “opportunity costs”; For example, if you buy this, then you can’t buy this. Your history with money and how it was handled might cause you to take on a scarcity mindset, but reminding yourself of your “bottom line” and remaining focused on the long-term can help clarify why you saved this money in the first place.

Pinpoint your money’s purpose: What brought you here, won’t necessarily get you there. In other words, you’ve saved your whole life so that you could live on your own terms, but are you still living with that scarcity mentality?