Retirement spending dilemma: Why millions fear running out of money

After decades of saving for retirement, many Americans face an unexpected challenge: actually spending their money.

A new Prudential survey found that 54% of retirees would rather leave money behind for heirs than risk running out of money during retirement.

Even retirees with sizable nest eggs are feeling the pressure. According to the survey, 61% of retirees with at least $500,000 invested say they don't feel comfortable spending money for enjoyment.

Experts say the fear is understandable, especially as traditional pensions become increasingly rare.

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"People get to retirement and they're so emotionally invested in the balance that they are having trouble pulling the money out and they are not living the life that they saved for as a result," said Jean Chatzky, author and AARP personal finance columnist.

Why retirees are worried

For previous generations, pensions provided a predictable monthly income throughout retirement. Today, most workers rely on 401(k)s, IRAs and other retirement accounts that require them to decide how much to withdraw and when.

"Now we've got retirement accounts. We've got 401ks and IRAs that we have saved money in and invested money in ourselves," Chatzky said.

That shift means retirees are no longer just focused on building savings. They must also figure out how to turn those savings into income that will last for decades.

For many people, that's easier said than done.

Beyond concerns about market volatility, retirees are also worried about rising healthcare costs, inflation and the possibility of living much longer than expected.

How to create a retirement paycheck (subhead)

In her book The Forever Paycheck, Chatzky argues that retirees should think less about account balances and more about generating reliable monthly income.

"You take a chunk of the money in your retirement accounts, typically about a quarter to a third, and you use it to either build or buy yourself a paycheck," she said.

That paycheck can come from several income-producing investments, including:

Certificates of deposit (CDs) Bonds Dividend-paying stocks Annuities that provide guaranteed monthly payments The goal is to create an ongoing stream of income that retirees can count on regardless of how long they live.

"Either way, you know that the money is going to keep coming, even if you live into your 90s, even if you live past 100," Chatzky said.

Don't let fear keep your money on the sidelines

Experts caution that simply leaving retirement savings untouched may not always be the safest strategy.

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Without a withdrawal plan, retirees could miss opportunities to use their money more efficiently while balancing taxes, investment growth and lifestyle goals.

"Spending down, decumulating rather than accumulating money for retirement turns out to be a really thorny problem, both when it comes to math and taxes," Chatzky said.

Bottom line

Saving for retirement is only part of the challenge. For many retirees, the harder question is how to spend their savings without fearing they'll run out. Financial experts say creating a predictable income stream can help retirees feel more confident using the money they've spent a lifetime building.