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Why Retirees Spend More With Guaranteed Income

The “License to Spend” Effect: How Income Shapes Spending Behavior

Retirees often struggle with a fundamental challenge: turning savings into spending. Research from the LIMRA Retirement Income Institute found that retirees with more guaranteed income, such as Social Security, pensions, or income annuities, spend significantly more than those with equivalent wealth in investments.

Why it matters:

Clients don’t always spend assets and income the same way. Many are reluctant to draw down investment accounts, even when doing so could support their desired lifestyle.

The takeaway:

Guaranteed income can provide a financial and psychological “license to spend.” The research suggests retirees may spend roughly twice as much when wealth is converted into reliable lifetime income.

By the numbers:

  • 59.4% of consumers said they would feel more comfortable spending from an additional $10,000 of lifetime income than from an equivalent $140,000 in savings.
  • Retirees with higher levels of guaranteed income consistently spent more across wealth and age groups

For financial professionals, the findings suggest that increasing guaranteed income through strategies such as delayed Social Security claiming or income annuities may help clients spend with greater confidence while improving retirement satisfaction.