Rich Retirees Living Like They’re Broke — The Fear of Running Out of Money.
It’s not just younger generations like Gen Z struggling to make ends meet — even retirees sitting on millions are finding it hard to spend freely. A new study by Prudential Financial reveals that many retirees with six-figure savings are still living below their means, driven by a deep fear of running out of money in their later years.
The study, which surveyed over 20,000 individuals over 50 years old, discovered that married 65-year-olds with at least $100,000 in financial assets are withdrawing an average of only 2.1% of their savings annually.
This is nearly half the typical withdrawal rate recommended for retirees, signaling a widespread fear among wealthier retirees about outliving their funds. David Blanchett, head of retirement research at PGIM DC Solutions, part of Prudential Financial, explained to the Wall Street Journal that historically, retirees could safely withdraw 4% of their savings annually without risking their financial security.
However, with life expectancies increasing — many are living well into their 90s — the cost of healthcare, housing, and other expenses is set to rise, leading many retirees to tighten their belts rather than indulge in the lifestyle they once envisioned.
The Retirement Consumption Puzzle
This phenomenon has led to what researchers are calling the “retirement consumption puzzle.” Despite having accumulated wealth over decades, many retirees still feel unprepared for the long years ahead, choosing to save rather than spend. According to a paper on the subject, retirees often fail to plan rationally for the income reduction that comes with retirement, leading to a tendency to hold back on spending.
This trend challenges the common assumption that baby boomers — who collectively hold more than half of America’s wealth — are enjoying a carefree retirement in luxury. Federal Reserve data, however, paints a different picture: fewer than half of baby boomers have saved enough for retirement, and an alarming 43% of individuals aged 55 to 64 had no retirement savings at all in 2022. In that same year, 30% of those over 65 lived in economic insecurity, earning less than $27,180 annually. With such financial strain, it’s no wonder that many retirees are returning to work instead of basking in their golden years.
“Unretiring” — A New Trend in the Workforce
The trend of “unretiring” has gained momentum globally. In the UK, nearly 20% of baby boomers and late Gen Xers are either returning to work or planning to. In the U.S., the number of individuals working past 65 has quadrupled since the 1980s. Today, almost 20% of Americans aged 65 and older are employed, nearly double the percentage of those working 35 years ago. In total, approximately 11 million Americans over 65 are working, accounting for 7% of all wages and salaries in the U.S. — a significant increase from 2% in 1987.
Many of these retirees aren’t returning to work out of choice, but out of necessity. Instead of living out their years in leisure, they are taking part-time jobs or working longer to ensure they can cover their growing financial needs as they age. For many, the goal isn’t a luxurious retirement but a baseline financial security that allows them to meet changing needs and rising expenses. This is especially concerning for the next generation of retirees, Gen X, who are already struggling to save enough for retirement while dealing with rising housing costs, student loan debt, and other financial challenges.
The Changing Retirement Landscape
This trend signals a shift in how retirement is viewed and experienced in modern society. The idea of a leisurely retirement with travel and relaxation is becoming less of a reality for many, even those who have saved diligently. As life expectancy increases and the cost of living continues to rise, more retirees are focusing on ensuring they don’t run out of money, even if it means working longer or making significant lifestyle sacrifices. Financial advisors and planners are now looking more closely at strategies that account for longer life expectancies and unpredictable expenses, such as health care and long-term care.
The future of retirement planning will likely involve more tailored strategies that reflect the economic realities of an aging population. For both the baby boomer and Gen X generations, building a secure retirement may mean delaying full retirement, working part-time in later years, or adopting alternative methods of income generation. In addition, more retirees may turn to alternative investments and financial products that offer greater security in uncertain times, such as annuities or reverse mortgages.
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The broader implications of these shifts suggest that retirement no longer guarantees freedom from work, and the expectations around retirement may need to evolve to reflect the financial challenges retirees face. The idea of “unretiring” could become a permanent fixture of the modern workforce as individuals adapt to longer lifespans and rising living costs. For future retirees, it may become essential to plan for the possibility of working in their later years, ensuring they have the flexibility and resources to maintain a comfortable standard of living.