Do You Have This Financial Problem – Not Spending Enough?

October 12, 2025 — Running out of money is the biggest worry people usually have in retirement. But there are a surprising number of folks who are in the opposite situation – they are not spending enough. Many reasons deny them the pleasure that their hard earned savings could bring. This article will explore some ideas on how to get over those fears and inertia.

Most baby boomers grew up with parents who lived through the depression of the 1930’s. That legacy often installed a strong sense of frugality. Don’t spend what you don’t have, shut off those lights, only buy what’s on sale, etc. For many, even those who have the money, it can be very hard to part with that deep rooted training.

Ideas to Help Get Over the Hump

For those fortunate enough to have sufficient resources to not have to worry about running out of money, here are some ideas to get over the not spending enough hump.

The .01% Rule

This one is a little hard to grasp, but it is reassuring. Assume you have retirement assets of $1 million, not uncommon for many successful people. If you subscribe to the 4% withdrawal rule you can safely take out $40,000 every year, adjusted for inflation, and never run our of money over a 30 year retirement.

The .01% rule, proposed by Ritholtz, CEO of Ritholtz Wealth Management, means someone can spend .01% every day without any worries. In the case of a person with $1 million in retirement funds, that means they have $100 to spend each day. People with additional income from Social Security, pension, or other sources might be in a position to spend all, or a portion, of that $100 on anything else. Others might have to budget it all for rent, food, taxes, etc. If anything is left they can safely spend it on something frivolous. If they don’t spend any of that extra anything extra for 30 days, they might have paid for a vacation.

Spending Your Gains

The stock market has been very kind to investors over the past several years. Many have experienced something like an 8% return versus a plan return of 6%. When that happens they could feel free to spend that extra 2% ($20,000 on $1 million) without going outside their withdrawal strategy. The corollary to this is that if they only get a 2% return in one year, they might consider reducing their annual withdrawal by $20,000.

Portfolio Escalation

Similar to the previous situation, a retirement portfolio might be worth much more than when it was used to calculated a withdrawal plan. The assumption have been based on $1 million, but after a few years is now worth $1.25 million. In that case they could feel free to skim off the top and still keep the original plan intact. Or, increase your annual spending plan based on the new portfolio value.

How to Get Over the Spending Hump

Let’s face it, it’s hard to break old habits. You’ve saved and made sacrifices to get where you are – but can you change your mindset and be freer about your spending? In this case what you spend is a question of ordering your priorities.

Here are some possible priorities (yours might be a combination)

• Enjoy life and spend every last dollar. One estate attorney’s stock lines to his clients is that the perfect withdrawal plan is to plan on spending it down so the check to the undertaker bounces. This theory supports the thought that they earned it, so they might as well enjoy it.
• Leaving it to heirs. How much do you want to bequeath to family and friends? Don’t forget that if you own a home, it’s value will be part of your estate. Some folks struggle to leave the kids every cent, while others, like billionaire Howard Buffett, have a view that enough is enough (and might be too much!)
• Give it away. Charitable giving can make a difference in the world and your community, and be very satisfying. There are many ways to donate money, from listing beneficiaries in the will and charitable remainder trusts. Most plans have tax advantages. When there are hefty Required Minimum Required Distributions (RMDs), donating those to charities will help keep taxable income down.
• Help the kids out now. Let’s say someone lives to their early 80’s and have a nice estate for the kids to inherit. They might be in their early 50’s at that time, in their peak earning years and nearing retirement. Why not help them when they are younger, when they have the maximum need for extra cash. You (and your spouse too) can give $19,000 to each child every year without triggering the gift tax. You can give the same amount to their spouse, and their children. Funding 529(c) plans for grandchildren is also a good way to take the worry out of ever escalating college tuition costs, freeing the parents to save for their own retirement.

Bottom Line

In our view it is smart to carefully consider your retirement spending plan, rather than just drifting into it. Many people, unfortunately, have to carefully manage every dime just to stay afloat, so they have to carefully budget to a very tight budget. But others are just increasing their assets every year and not changing their spending plans. If you are fortunate enough to be in that group, maybe it’s time to rethink your spending patterns, enjoying it now, rather than just passing into the next world with a big estate.

Comments?
Have you been rethinking your spending plan, or do you have trouble parting with a dollar, even if you have it? Please share your thoughts in the Comments section below.