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Retirement Reality Check: Am I Spending My Nest Egg Too Fast?
It’s natural to second-guess after decades of saving, but answering a few questions can ease your mind
Guessing won’t cut it. Run the numbers to find out if your retirement savings can go the distance.
Kyle Ellingson
Key takeaways
- After decades of setting money aside for retirement, many people struggle to shift their mindset from saving to spending.
- Research shows that total spending often declines with age, despite rising health care costs.
- Setting a benchmark for withdrawals and reviewing your expenses can ease fears and guide your spending strategy.
Alanis Morrissette isn’t quite retirement age (she turned 52 in June), but if she were, she might add this to her famous catalog of ironies: After a lifetime of setting aside money for retirement, many recent retirees find it hard to feel good about spending what they worked so hard to save.
It’s ironic but also understandable. Sure, you’ve been sacrificing, saving and investing for decades for the precise purpose of having money to spend now. But it can be disconcerting to flip the switch from saving to spending, and easy to second-guess every financial decision — especially when it involves serious spending, like a big trip or a major home repair. Nearly 2 in 5 retirees say they are reluctant to spend down their savings, according to insurance company Allianz Life’s 2026 Annual Retirement Study, and more than 7 in 10 workers anticipate feeling the same hesitancy when they retire.
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Before you give in to panic, take a moment to assess the big picture. Financial planners and advisers often base retirement plans on assumptions that your spending will increase every year as medical and long-term care needs become more acute. But numerous studies (including one by my former employer, J.P. Morgan Asset Management) show that on average, retirees’ total spending declines over time, even as spending on health care rises.
You may find you’re ‘done with things’
Surprising, isn’t it? When my team and I started looking into this about a decade ago, I recalled something my grandmother said as she neared her 85th birthday: “Don’t give me any presents that I can’t either eat or read — I’m done with things.” As people age, their spending patterns tend to reflect lower consumption of just about everything.
I saw it in my parents, too. Heading into their 80s, they cut back on travel (and eventually stopped it altogether). They sold one of their cars, then the other. They stopped dining out and buying new clothes. Their medical expenses increased drastically in the last years of my father’s life, but over the prior decade, they spent considerably less than they and their financial adviser had assumed 25 years earlier. That more than made up for the costs of my father’s care.
Why am I telling you this? Because it’s a useful reminder for those worried about spending down their nest egg too quickly. Pause, take a deep breath and look at how you are spending money now. This can help you identify categories of spending that may naturally decrease as you age and, perhaps, mitigate your fears of spending too much, too soon.
3 key questions to align your spending
Of course, some retirees do spend too much, too soon. Asking yourself a few questions can help you clarify whether you are, in fact, blowing dangerously through your nest egg.
First: Have you ever set a budget benchmark? Working with a financial professional or using an online calculator can help you get a firm grip on how much of your savings you can afford to spend each year.
As I noted in a prior column, the 4-percent rule can be a useful guidepost. That’s the idea that you can make your money last as long as you do by budgeting 4 percent of your savings to cover spending in your first year of retirement and withdrawing the same amount, adjusted for inflation, each year after. It doesn’t have to be 4 percent, but an adviser, or a tool like the AARP Retirement Calculator, can help you refine your estimate.
Then: Are you spending less than your benchmark? Crunch the numbers. If your spending comes in under that 4-percent (or whatever) threshold, you are probably fine. You might just be feeling uncomfortable subtracting from your savings instead of adding to it. After decades of ingrained behavior, it would be surprising if you didn’t!
But what if you’re spending more? Then it’s time to do some digging and ask yourself what’s driving those higher numbers.
For example: Was it a one-off expense, like a bucket-list trip, a new car you hope will last a decade or more, or home improvements to help you age in place safely? If so, you may need to adjust your withdrawals to ensure your projected spending stays within your total income. But if you are reasonably confident that you won’t be repeating those splurges, you’re probably still fine going forward.
But if you haven’t recently covered a singular or unexpected expense and are still outspending your income, it’s time to look for ways to cut back. Check your memberships — are you still going to the gym or golf course regularly? Are you eating out more often, at nicer places, now that you have the time? Maybe switch from dinners out to lunches, or host potluck parties. Do you and your spouse still need cars now that you don’t have your own commutes? Getting rid of one can save you loads on insurance and upkeep.
Separate fears from facts
It’s natural to fear that you’re spending too much in retirement and leaving yourself too little for later in life, but you want to weigh those fears against facts, not just feelings. Now you’ve gathered the facts and taken steps: accounting for big-ticket items, trimming your discretionary spending. What if you still can’t reconcile what’s going out with what you’re bringing in?
You may need to look at the biggest expense you can control: housing. Are you still paying a mortgage? Living in an area with high property taxes or home insurance costs? It might be time to consider downsizing and/or relocating.
Moving to a smaller house or an apartment can mean significantly lower spending on utilities, maintenance and taxes, not to mention reducing or eliminating your mortgage payment. There can be nonfinancial upsides, too: With less upkeep to do, you may find that you have more mental and physical energy for other things.
One final benefit of living in a smaller space? It might encourage you to spend more time out and about and with other people, which, after all, is one of the best ways to continue living a long, healthy and happy life.
The key takeaways were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.
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