The FORO Investment Paradox: When a Strategy Becomes a Trap

“What if I run out of money?”—this question has surely crossed everyone’s mind at least once in their life. But what if you live with this fear constantly? It’s not just “financial anxiety,” but a deep-seated psychological mechanism rooted in early childhood experiences and driven by the instinct for survival. When it’s too active and constant, it’s referred to as FORO, or Fear of Running Out. It forces even wealthy people to merely exist, denying themselves the joys of life. Why does this happen, and what can investors do about it?

The term “FORO” was coined by financial manager William Bengen, the creator ofthefamous“4% rule”for retirement savings. He calculated that if you withdraw exactly 4% of your retirement savings each year—with an annual adjustment for inflation—your money will most likely last for 30 years.

Bengen also pointed out a paradox: many people who have saved enough to live comfortably continue to live very frugally, fearing that their money will run out. In some countries, this sometimes goes too far: according to data from the insurance company Allianz Life from 2025, 64% of Americans fear running out of money more than they fear dying. The fear is clearly irrational, yet it drives their behavior.

From a psychoanalytic perspective, FORO stems from a deficit—a lack of vital experience that occurred during childhood or during periods of crisis. This can refer to both material deprivation and—primarily—emotional deprivation on the part of caregivers. The root of the problem is an atmosphere of chronic deprivation, in which a person’s sense of self has not yet been formed, and the very fact of this deprivation influences their development.

From the perspective of cognitive-behavioral psychology, such experiences shape deep-seated beliefs about helplessness, an inability to cope on one’s own, and sometimes about one’s own worthlessness or unattractiveness. Even when the situation changes—and a stable income, savings, and even investments appear—the mind continues to function in its usual mode. A person lives in the past, fearing a future that may never come: the brain simulates the worst-case scenario—such as illness, job loss, or a market crash—and reacts as if it were already happening. In this situation, a tightly controlled budget and minimal spending create the illusion of being in control of one’s life, and frugality becomes part of one’s identity.

Here, the other side of the coin is clearly visible—greed, which is “I want to have more,” whereas FORO is “I’m afraid I won’t have enough.” Classical psychoanalysis views greed as an attempt to fill an inner void with external objects: deep down, a person feels that something is missing inside—love, security, recognition—and tries to compensate for this by accumulating money, possessions, or power.

Existential psychologists, such as Irvin Yalom and Rollo May, take their reflections on greed even further, seeing it as an attempt to overcome death through accumulation: “If I have enough resources, I will become invulnerable.”

Neurophysiologically, FORO activates the same areas of the brain as a physical threat—the amygdala reacts to the thought of a lack of money in the same way as it does to a real threat to life. In other words, the illusion of personal interpretations is further fueled by the body itself. As a result, a person makes decisions out of fear rather than through a balanced assessment of a wide range of objective facts.

The first step is to acknowledge that there is a problem and realize that “my fear does not match my actual situation.” This does not mean ignoring the risks—it means assessing them based on reality, rather than on your own feelings.

The second step is to reevaluate your rules. Behind every deep-seated belief—or right alongside it—lie what are known as conditional rules. Everyone may have their own, but for a person with FORO, the essence of these rules will be something like: “If I don’t save every euro, I’ll end up with nothing” or “If I allow myself to spend more than I need to, that would be irresponsible.”

Instead of automatically cutting back and relying on rules like these, ask yourself: “Does this expense improve my life right now, or is it just putting off enjoyment until later?” Sometimes the answer will be “no,” and that’s okay. But sometimes the answer is “yes,” and in that case, the expense is justified.

The third approach is to set up a separate “survival fund” with enough savings to last, say, 2–3 years, and a second “everyday living fund.” This serves as a psychological trick to allow yourself to spend without feeling guilty.

As Bengen said, “People have spent years saving and making sacrifices. They should be able to get the most out of it.” That’s only possible if you live life to the fullest.

This article was AI-translated and verified by a human editor