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Many retirees enter their golden years with the goal of financial security, but what if the biggest risk isn’t running out of money—it’s not spending enough of it? A surprising new study reveals that retirees are withdrawing just 2% a year from their savings—barely half of what’s traditionally considered safe. This cautious approach might seem responsible, but it often leads to unnecessary frugality, missed experiences, and larger-than-expected tax burdens later in life. The hesitation to tap into personal savings, even when there’s plenty available, raises an important question: What’s stopping retirees from spending with confidence?

Research shows that retirees feel much more comfortable spending guaranteed income from sources like Social Security and pensions while being reluctant to withdraw from their own investments. This behavioral tendency can leave money unspent for decades, only to be forced out later through required minimum distributions (RMDs) that create tax inefficiencies. Meanwhile, large inheritances often arrive too late to make a meaningful impact on the next generation.

Rethinking the 2% mindset means understanding what keeps retirees locked into ultra-conservative spending habits and finding ways to turn savings into income that feels reliable. A simple shift—such as automating monthly withdrawals or adjusting expectations around financial security—can open the door to a more fulfilling retirement. The money was saved to be spent, and spending it well can be just as important as saving it wisely.

Spending too little can be just as costly as spending too much. With the right approach, retirees can enjoy their wealth now while keeping future financial security intact. Click here to listen​

Outline of This Episode

• (0:00) Why Retirees Spend Far Less Than They Could
• (1:46) The study: Retirees underspending their savings
• (3:33) Why the 2% problem exists
• (6:10) The impact of underspending on taxes & an inheritance
• (8:11) The role of financial planning & behavioral coaching
• (9:20) Possible solutions: Turning savings into reliable income
• (11:04) Listener question: A simple withdrawal plan

The 2% Problem: Why Retirees Spend Less Than They Could

A new study shows retirees withdraw just 2% a year from their savings—far below the traditional 4% rule and well under what many could safely spend. Guaranteed income, like Social Security and pensions, is used freely, while personal savings often sit untouched.

This ultra-cautious approach may feel responsible, but it leads to missed opportunities, larger tax burdens, and less enjoyment in retirement. The money was saved to be spent, yet behavioral habits from decades of saving make it hard to shift into spending mode.

The Hidden Cost of Underspending

Keeping too much in savings can create major tax inefficiencies down the road. Required minimum distributions (RMDs) force withdrawals later in life, often pushing retirees into higher tax brackets.

Large account balances also lead to unintended inheritances. While leaving money behind can be a great gift, heirs often receive it at an age when it makes little impact. A lifetime of saving builds security, but when withdrawals are too small, the financial benefits of that hard-earned money diminish.

How to Turn Savings Into Reliable Income

One reason retirees hesitate to spend is that market-based withdrawals feel uncertain. A structured withdrawal system—one that deposits money regularly, much like a paycheck—can make spending feel more natural.

Guardrails that adjust withdrawals based on market performance provide flexibility without fear of running out. When spending decisions are automated and predictable, retirees can enjoy their money without second-guessing every withdrawal.

The goal isn’t reckless spending; it’s about using money efficiently while ensuring long-term stability. A steady, planned approach can replace hesitation with confidence.

Spending With Confidence, Not Guilt

Spending too little can be just as costly as spending too much. The money was saved for a reason, and using it wisely means balancing security with enjoyment. Automating income, setting clear withdrawal guidelines, and adjusting expectations can make all the difference. Financial security isn’t just about having enough—it’s about knowing how to use it.

Resources & People Mentioned

• ​The Retirement Podcast Network​
• ​David Blanchett – Head of Retirement Research at PGIM DC Solutions
• ​Michael Finke – The American College of Financial Services
• ​Die With Zero by Bill Perkins – Book on intentional retirement spending

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That's it for our three hundred and seventieth installment of "Every Day is Saturday." As always, reply to this email with your retirement questions and you might hear them featured on the show! I read and respond to (almost) every email.

Have a great "Saturday",
- Benjamin Brandt (your humble host)

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