Most retirement advice focuses on saving enough. But a growing body of research shows that millions of retirees have the opposite problem — they are spending far too little and missing out on the retirement they worked so hard to fund.
What Is Retirement Underspending?
Underspending in retirement happens when retirees spend significantly less than they safely could, often out of fear of running out of money. Studies show that a large share of retirees die with the same or more assets than they retired with, having never fully enjoyed their savings.
Why Do Retirees Underspend?
- Fear of outliving savings — uncertainty about how long they will live
- Healthcare cost anxiety — worry about large unexpected medical bills
- Depression-era mindset — ingrained habit of saving over spending
- Lack of a spending plan — no clear framework for how much is safe to spend
The 4% Rule Explained
The widely-cited 4% rule says you can safely withdraw 4% of your retirement savings per year with a very low risk of running out of money over a 30-year retirement. For example, if you have $500,000 saved, you could spend $20,000 per year from your portfolio in addition to Social Security.
Signs You May Be Underspending
- Your savings balance is growing, not shrinking, in retirement
- You are spending less than your Social Security and pension alone
- You feel guilty spending money even on things you can clearly afford
- You are delaying travel, experiences, or gifts to family out of money fear
How to Build Confidence to Spend More
- Work with a fee-only financial planner to create a retirement income plan.
- Run a Monte Carlo simulation of your finances (many free tools exist online).
- Create a "fun money" bucket separate from your core expenses.
- Consider annuitizing a portion of savings to guarantee income for life.