Dealing with the Financial Anxiety of Retirement?

23 JUN 2025

Understanding the psychology of retirement spending
By Nigel Danzelman, Head of Marketing Services & Communications

So you’ve worked for many years, putting money aside for your future, and the day you plan to retire is fast approaching. You’re excited about the freedom and seemingly endless possibilities that lie ahead, but in parallel you are also gripped by a nagging fear: will I have enough money?

According to Aberdeen, 58% of people feel anxious that they have not saved enough money throughout their lifetime.

And those fears may not be entirely groundless either. Research from IFGL Pensions shows that Financial Advisers claim around 60% of their clients considerably under-estimate the size of the pension pot they will need.

But how much is enough? Many people have set a “magic number” in their mind for the size of pension pot they believe they will need, but the reality is there is no one size fits all answer. There’s too many variables – such as the age at which you retire, your health and the standard of living you expect in retirement.

However prepared we think we are, as retirement approaches, the nagging voice still says “do I really have enough”?

Watching the news or researching online doesn’t exactly allay those fears either.

We are constantly bombarded with alarming information - the perilous and unsustainable state of government finances, state pension ages increasing, rising inflation, spiralling oil, gas and electricity prices, increasing taxes/tariffs and pressures on healthcare (or the growing cost of private healthcare if there’s no free healthcare available).

And then there’s the stock market volatility, up then down, down then up depending on what global crisis we are facing at the time. All messing with the value of our pension pots at a time we seek stability.

The foundations on which you made your financial calculations can feel like they are constantly shifting beneath your feet, undermining your assumptions.

So it’s important to understand what’s fuelling your anxiety and take back some control. But how do you shut out all that unhelpful, external noise and focus on your financial needs in retirement?

The emotional rollercoaster of retirement

It’s important to understand and acknowledge the various emotions you may feel on retirement – whether that be grief, elation, anxiety or worry.

Retirement means change, and change can be scary. From a financial perspective, overnight you switch from being someone who’s spent many years accumulating wealth into someone who instead spends it.

For years, you’ve watched your pension pot rise (market blips aside). It’s a comforting feeling. And now you’re spending that money you worked so hard to save. However obvious (and natural) this is, it can still be a difficult reality to accept.

Retirees often describe three emotional stages in the early years of retirement.

The “honeymoon” – the euphoria of stopping work and having the time and freedom to do new things. It’s likely you will spend more than usual in this period as you try out new things and fulfil some of your dreams
The reality hits – a realisation that your working life is over, you are eating into your life savings and you’re experiencing complicated feelings about loss of identity and purpose. During this period it is likely that you will worry about your finances and tighten the purse-strings
Adapting to the “new normal” – an acceptance of retirement living with renewed vigour and purpose with spending settling into a more sustainable and consistent pattern

It’s totally normal to be disorientated by a significant change in your life. The trick though is to recognise these feelings are usually transitory and to not let them spoil your retirement.

Speak to a financial adviser

A lack of planning can be a significant trigger for anxiety in retirement. A financial adviser can help you prepare a financial plan for your retirement and model different scenarios. They can help you understand how much money you have, consider how much you may need, and advise on ways to address any shortfalls.

As well as Financial Advisers, there’s also a raft of free information and support available – for example on the Money Helper website.

This dispassionate, independent advice can give you the confidence to feel you are well prepared for retirement.

Speak to other recent retirees and friends and family

A fear of the unknown can often leave us feeling vulnerable. While many people are reluctant to talk about money, there is value in speaking to those who have gone before you and experienced what it’s like to be retired. Being open and having honest conversations with those who’ve been in your shoes is often extremely helpful and illuminating.

Seek reassurance from trusted friends and family who have your best interests at heart. They know you better than anyone and can help you put your anxieties into perspective.

Create a financial plan

Create a detailed financial plan based on your own financial circumstances and regularly review progress. A plan should consider your short and long term goals, an emergency fund, address any debt you hold and establish a budget for normal costs. Review your progress regularly to make sure you remain on track. Again, a financial adviser can help with this – they’re experienced at helping people transition between different life stages and can make helpful suggestions and provide insights.

Have a Plan B

If you find that you are using your savings faster than expected, don’t panic.

Review your spending pattern and cut back. You may have had unsustainable aspirations that you have to rein back in. Creating a budget will help you get your spending back on track
Consider if you could down-size to a smaller home, or whether you need 2 cars or have other expenses that could be removed or reduced
Consider a part-time job to supplement your income

The kids will be alright

Sometimes we inhibit our spending over a fear of spending the kids’ inheritance. We want to be able to help the generations that follow us. After all, if it’s been hard for us, it’s even harder for them, right?

While this is a perfectly normal emotion, it’s more than likely our children and grand-children will want us to be happy and enjoy our retirement.

Alleviate this worry by preparing a succession plan: seek professional help to write a will and establish trusts and other estate planning strategies to ensure your wealth is passed on efficiently and in accordance with your wishes.

Live well – the best revenge!

Many people face a crisis of identity and purpose when they retire, and this inevitably plays into our fears about our finances. Coping with change, losing your “work identity” and routine and struggling to find a new purpose now you have more time on your hands can make some retirees feel stressed and isolated.

It’s time to refocus. As CS Lewis wrote: “You are never too old to set a new goal or dream a new dream”.

Retirement is the perfect opportunity to re-invent yourself, to engage in new activities, take on new experiences and hobbies, to travel and to meet new people. By focussing on new possibilities rather than dwelling on the “loss” of your old, working life, you can find new meaning and purpose and a new identity, distinct and separate from your old, work self.

It can also be an opportunity to give something back to the world – a chance to focus your energy on things that are meaningful and give purpose to your life while helping others. This could be volunteering for a charity or helping family members or friends during times of need.

Remaining active (exercise, walking), spending time in nature and socialising are also good ways to reduce stress and improve general well-being.

Retirement is something you’ve earned, deserve and worked towards for many years. So it’s important to remember that retirement is wonderful if you have the two essentials – much to live on, and much to live for.