Fear of Running Out: Are you afraid to spend your pension?

Worrying about having enough money in retirement?

Many people who have built up a healthy pension, accumulated substantial savings and paid off their mortgage still struggle to spend their money in retirement.

Despite years of careful saving, the Fear of Running Out can leave people worrying that one day they might run out of money.

What is the Fear of Running Out?

Financial planners sometimes refer to this as FORO, it’s more common than many people realise and can prevent people from making the most of the retirement they’ve spent decades working towards. Instead of taking the holidays they always promised themselves, helping family financially or simply enjoying life’s little luxuries, they continue to save out of habit, concerned that spending today could create problems tomorrow.

What causes FORO?

For many people, saving has become second nature. Growing up when money was tight, or spending a lifetime carefully budgeting and watching pension savings grow, can make it difficult to switch from saving to spending.

Retirement asks you to change habits that have taken decades to build. Instead of adding to your pension, you’re expected to start relying on it. That isn’t always an easy adjustment.

Of course, there are sensible reasons to be cautious. Retirement could last 30 years or more, and nobody knows what lies ahead. The cost of care later in life can be significant, and many people also want to leave something behind for their children or grandchildren.

We often joke about “spending the children’s inheritance”, but most people naturally want to strike the right balance between enjoying retirement and preserving wealth for future generations.

So how much money do you really need?

There is no single magic number.

‘Enough’ depends on your lifestyle, your ambitions and how much financial security gives you peace of mind. Whether you want to travel extensively, help children onto the property ladder, enjoy new hobbies or simply know that everyday expenses are covered will all influence how much retirement income you’ll need.

Retirement Living Standards provide a useful benchmark. They suggest a single person currently needs around £13,900 a year for a minimum lifestyle, £32,700 for a moderate lifestyle and £45,400 for a comfortable retirement. For couples, the equivalent figures are around £22,500, £45,400 and £62,700.

These figures provide a helpful guide, but they don’t tell the whole story.

Retirement planning is about understanding what those numbers mean for your circumstances. It considers your expected income, expenditure, savings and long-term goals to answer important questions such as whether you can afford to retire when you want, spend a little more each year or leave money behind for your family.

Retirement isn’t one long spending pattern

It’s also worth remembering that your spending is unlikely to remain constant throughout retirement.

Many people spend more during the early years while they are healthy enough to travel, pursue hobbies and enjoy new experiences. Later in retirement, spending often falls naturally, although it’s sensible to keep enough in reserve for unexpected costs or potential care needs.

The full new State Pension currently provides around £12,548 a year. While this offers an important foundation, it is unlikely to provide the retirement most people aspire to on its own. Workplace pensions, private pensions, ISAs and other savings will often need to bridge the gap.

Should you have the Fear of Running Out?

Appropriate financial planning can answer that question with confidence.

Looking purely at the size of your pension pot rarely tells the full story. What really matters is whether your income and assets can support the retirement you want to enjoy.

A financial adviser can help you understand how much income your pensions and investments could provide, model different spending scenarios and assess whether your plans remain on track, even if markets fluctuate or your circumstances change.

Often, that process provides something every bit as valuable as investment returns, confidence.

Getting help with your financial planning

A successful retirement isn’t defined solely by the value of your pension savings. It’s about having the flexibility and confidence to enjoy the lifestyle that’s suitable for you.

If you’re wondering whether you can afford to spend a little more, help your family financially or simply enjoy retirement without worrying about running out of money, speak to your Continuum adviser.

A well-constructed financial plan can help you understand not just how much you’ve saved, but what your savings could really do for you.

The Detail – Pensions UK – Retirement Living Standards

Past and projected period and cohort life tables – Office for National Statistics

This article is intended for general guidance only and is based on the opinion of Continuum it does not constitute financial advice. Individual circumstances vary, and you should consider seeking advice from a regulated financial adviser before making any decisions about your Savings, Investments, or retirement planning.

A pension is a long-term investment; the fund value can go down as well as up and this can impact the level of pension benefits available. Pension Income could also be affected by interest rates at the time benefits are taken. Pension savings are at risk of being eroded by inflation.

The value of an investment can go down as well as up. When investing Capital is at risk.

Investors in ISAs do not pay any personal tax on income or gains. Levels and basis of reliefs from taxation are subject to change and their value depends upon your personal circumstances.

The Financial Conduct Authority does not regulate deposit accounts, trust advice or will writing.