The New Longevity

Navigating Retirement’s Blind Spots

How to stop the mind from playing tricks that can erode financial confidence

by Tim Munsie

Mr. Munsie is head of RIA, Platform Distribution and Planning at Jackson National Life Distributors LLC (JNLD), the marketing and distribution arm of Jackson National Life Insurance Company®. Visit

There is a popular assumption that most retirees have not accumulated enough assets to live comfortably throughout retirement and are at a high risk of running out of money. While this certainly applies to some, new evidence from the Employee Benefit Research Institute (EBRI) found many retirees are actually spending less than they could from their retirement assets. According to the recent study from EBRI, three-quarters of respondents indicated their retirement savings had remained the same or even grown since retiring.

With such a dynamic pivot away from what industry experts had forecasted for decades to be retirees’ greatest challenge — not saving enough money — it is essential to explore the factors influencing overly conservative spending habits in retirement and for financial professionals to recognize these habits in their clients’ financial plans.

It’s equally as important for retirees to understand how “saving one’s savings” in retirement may not always be an optimal approach and could limit them from experiencing the joy and freedom this exciting stage of life can offer.

Let’s examine three emotional biases – or “behavioral blind spots” – that can influence retirees’ financial decision making and strategies to counter their effects.

Behavioral Biases

  1. Mental accounting

The mental accounting bias describes the phenomenon in which people often mentally “bucket” their assets for specific purposes — such as everyday expenses (mortgage payments, groceries, etc.), unforeseen expenses (job change, high medical bills, etc.) or future expenses (college, retirement, etc.) — rather than a singular deposit of money. These buckets may exist in different bank accounts or they may be purely mental constructs, such as when a person likes to keep a minimum balance in their checking account as a buffer against unforeseen expenses.

Mental accounting can sometimes be a beneficial behavior, as sound planning for meeting different financial needs is simply smart. However, mental accounting can also have a negative effect. After leaving the workforce, many investors use the same mental accounting schemes they used during their careers — one of which is spending income and preserving assets. Consequently, many retirees with abundant assets and anemic income spend far less in retirement than their assets could reasonably support, which can needlessly constrain their lifestyle.

This mindset is even seen with multimillionaire retirees. Many spend decades saving and building assets so they can enjoy their retirement years, yet 42% of multimillionaire retirees spend less than $100,000 per year. By almost any objective standard, they could afford to spend a great deal more, but they choose not to. When we examine this group of “under spenders,” we find they are less confident that their money will last their lifetime. In short, they are often scared to spend their money.

  1. Planning fallacy

Planning fallacy is the behavioral bias that recognizes we often make plans based on limited, imperfect information. Specifically, we overestimate the likelihood of positive events occurring in the future and underestimate the chance of negative events. For retirees, this often means that they overestimate what their predictable cashflow will be in retirement.

Simply recognizing how mental obstacles influence perspectives on the use of money in retirement is an important starting point for financial professionals to help their clients view savings in a different light...

One example of planning fallacy is how retirees drastically overestimate how long they will work. According to proprietary research conducted by Jackson, nearly half of pre-retirees in the Golden Generation plan to work in retirement, but in reality, only 2% of retirees in that same cohort report working in retirement.

This bias can trick many into making decisions and choices based on best-case scenarios that data clearly show are the exceptions rather than the norm. Retiring earlier than anticipated or not “easing into retirement” mean having less money upon leaving the workforce and a smaller nest egg to support additional years without earning income from a job. Faced with lower than anticipated retirement income, the natural response for these retirees is often to reduce their spending even if they could afford to maintain their lifestyle.

  1. Anchoring bias

Anchoring bias occurs when someone relies too heavily on preexisting information or the first evidence they encounter when making decisions. An example of this cognitive bias involves the critical decision retirees need to make concerning when they will claim Social Security benefits.

To illustrate this, consider that the most common age for claiming Social Security is 62, despite there being only a small percentage of people that would benefit from doing so. Why would the number 62 be prominent in the minds of many retirees? Chances are because it is often the first number they see when evaluating different Social Security claiming ages. In essence, 62 becomes the “anchor.”

While some retirees may claim benefits early simply out of financial need, it is evident that the anchoring effect is real and can be detrimental to the long-term financial plans of many who claim Social Security early. By claiming early, retirees harm their cashflow which ultimately leads to lifestyle reductions that may be unnecessary relative to asset levels.

Avoiding The Blind Spots

Simply recognizing how mental obstacles influence perspectives on the use of money in retirement is an important starting point for financial professionals to help their clients view savings in a different light.

For decades, consumers have been encouraged to invest strategically with a long-term perspective and a goal of saving adequately for retirement — programmed to follow a universal concept focused on saving. However, little guidance is provided during their earning years on how they should plan to spend their savings once retired. As a result, a savings mindset developed over a lifetime of work is difficult to shed in retirement.

Financial professionals can ensure their clients are aware of these blind spots and feel confident knowing their planning has put them in position to spend their hard-earned money and enjoy their retirement years.




 1- Employee Benefit Research Institute, “Retirees’ Dilemma: Spend or Preserve?,” May 6, 2021.
2- Investopedia, Behavioral Finance: Biases, Emotions and Financial Behavior, 2022.
3- Maresca & Drinkwater, LIMRA, Secure Retirement Institute, The Retail Retirement Reference Guide, Fifth Edition, 2021.
4- Jackson Customer Research, “Accumulation Conundrum Study,” 2022.
5- Jackson Customer Research, “Decumulation Paradox Study,” 2021.
6- Jackson calculation from Social Security Administration benefits tables.