Retirees Often Accumulate Millions But Hesitate to Spend Savings, Financial Planner Says

Many retirees end up with significantly more than the commonly targeted $1 million in savings – sometimes exceeding $5 million – not due to exceptional investment strategies, but because they are reluctant to spend the money they’ve accumulated, according to a financial expert.

Certified financial planner Kevin Lum describes this phenomenon as the “consumption gap,” the difference between how much retirees could comfortably spend and how much they actually do. He notes that even during challenging market periods, many retirees see their nest eggs remain stable or even grow, yet still resist enjoying their wealth. Lum recounted a client with sufficient income from pensions and Social Security who declined a long-desired trip despite having $4 million saved, simply because they were retired.

Lum identifies two primary drivers behind this underspending: a lifetime of ingrained saving habits and anxieties about the future. After decades of prioritizing saving over spending, retirees can find it difficult to embrace a more liberal spending approach. Concerns about longevity, inflation, and potential market downturns also contribute to this hesitation, even when financial projections indicate security. He shared an example of a couple with $7 million at age 75 questioning whether they could “afford” a new front door, highlighting how fear can outweigh financial reality. This reluctance to spend can have significant consequences for quality of life in retirement, potentially delaying experiences or limiting access to needed care.

While leaving a substantial inheritance can be a priority for some, Lum emphasizes that overly cautious spending can lead to missed opportunities for travel, hobbies, and family connections. He encourages retirees to create realistic spending plans that account for inflation and long-term needs, and to allocate funds specifically for enjoyment. Planning for healthcare costs is also crucial, as medical expenses are a major source of anxiety. For further guidance on retirement planning, resources are available from the American Association of Retired Persons. Ultimately, Lum believes the biggest risk for many retirees isn’t outliving their money, but rather failing to enjoy it while they can; a sentiment echoed by many financial advisors offering financial planning services.

Lum advises retirees to ask themselves, “If not now, when?” and to remember that retirement funds are intended to support a fulfilling life, not just wealth preservation.