Too many retirees spend without a plan—and it could cost them
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Retirement is often seen as the finish line after decades of saving, yet what happens once you finally cross that line is not always simple.
Many people assume that having money set aside is enough, but the truth is the way you spend it can matter just as much as the way you saved it.
Without clear direction, years of effort can be undone faster than expected, and the safety net you counted on may start to unravel. The challenge is not just about having resources but about using them wisely so they can last.
Recent research shows that a surprising number of retirees do not have a strategy for withdrawing their savings.
According to IRALOGIX, 49% of retirees simply take out money as they need it, without any formal plan in place.
Only 22% follow a systematic withdrawal process, while 17% rely solely on interest and dividends.
The problem with this approach is that it leaves retirees vulnerable to spending too quickly and facing financial stress later in life.
Experts warn that random withdrawals can easily create long-term problems. For example, many retirees do not factor in how inflation affects their withdrawals, with 44% admitting they ignore it altogether.
In addition, nearly a third of retirees have no plan to adjust spending based on market performance, which can be devastating if funds are withdrawn during downturns.
This combination of habits creates a real risk that savings will run dry just as healthcare and living costs are at their highest.
A lack of planning also creates hidden financial consequences that retirees may overlook. Taking too much money too quickly can increase taxable income and even push someone into a higher tax bracket.
Also read: The 4% rule is outdated—experts say the 4.7% rule could help retirees stretch their paychecks further
Withdrawals made at the wrong time can also cause Social Security benefits to become taxable, shrinking income even further.
What begins as an innocent decision to “take a little out” can have compounding effects that impact stability for years.
To avoid these pitfalls, retirees are encouraged to create a withdrawal plan that fits their lifestyle and long-term needs.
Some follow the well-known 4% rule, which means taking out 4% of retirement balances in the first year and adjusting for inflation annually.
Also read: 8 Ways retirees can protect their savings from running dry
Others prefer to use IRS-required minimum distribution tables or limit spending to interest and dividends, trading flexibility for security.
Whichever option is chosen, the key is to commit to a clear process rather than relying on guesswork.
Read next: Getting ready for retirement: Tips to handle this major life shift
Do you think retirees should stick to a structured withdrawal rule like 4%, or is a more flexible approach better in today’s uncertain economy? Share your perspective in the comments and let us know how you would manage retirement withdrawals.
Many people assume that having money set aside is enough, but the truth is the way you spend it can matter just as much as the way you saved it.
Without clear direction, years of effort can be undone faster than expected, and the safety net you counted on may start to unravel. The challenge is not just about having resources but about using them wisely so they can last.
Recent research shows that a surprising number of retirees do not have a strategy for withdrawing their savings.
According to IRALOGIX, 49% of retirees simply take out money as they need it, without any formal plan in place.
Only 22% follow a systematic withdrawal process, while 17% rely solely on interest and dividends.
The problem with this approach is that it leaves retirees vulnerable to spending too quickly and facing financial stress later in life.
Too many retirees spend without a plan—and it could cost them. Image source: Alicia Christin Gerald / Unsplash
Experts warn that random withdrawals can easily create long-term problems. For example, many retirees do not factor in how inflation affects their withdrawals, with 44% admitting they ignore it altogether.
In addition, nearly a third of retirees have no plan to adjust spending based on market performance, which can be devastating if funds are withdrawn during downturns.
This combination of habits creates a real risk that savings will run dry just as healthcare and living costs are at their highest.
A lack of planning also creates hidden financial consequences that retirees may overlook. Taking too much money too quickly can increase taxable income and even push someone into a higher tax bracket.
Also read: The 4% rule is outdated—experts say the 4.7% rule could help retirees stretch their paychecks further
Withdrawals made at the wrong time can also cause Social Security benefits to become taxable, shrinking income even further.
What begins as an innocent decision to “take a little out” can have compounding effects that impact stability for years.
To avoid these pitfalls, retirees are encouraged to create a withdrawal plan that fits their lifestyle and long-term needs.
Some follow the well-known 4% rule, which means taking out 4% of retirement balances in the first year and adjusting for inflation annually.
Also read: 8 Ways retirees can protect their savings from running dry
Others prefer to use IRS-required minimum distribution tables or limit spending to interest and dividends, trading flexibility for security.
Whichever option is chosen, the key is to commit to a clear process rather than relying on guesswork.
Read next: Getting ready for retirement: Tips to handle this major life shift
