6 Telltale Signs You’re Being Too Cheap in Retirement

​2. You don’t have a plan​

We spend years mapping out our retirement saving plan, methodically putting money away and making sure it’s invested properly. But once retirement hits, we don’t have a detailed plan on how to spend it. Without a plan, it’s hard to tell how much you should actually be drawing down, Williams says. It can lead to overspending by some and underspending by others.

3. ​You are following the 4 percent rule too rigidly ​

There’s a common retirement spending formula in which you draw down 4 percent of your retirement savings during your first year. In the following years, you adjust the amount you withdraw to reflect inflation. That strategy increases the odds you won’t run out of money during 30 years of retirement. But according to Williams, it doesn’t work for everyone and could cause you to leave too much money on the table during your retirement years.

For starters, Williams says, the 4 percent rule assumes spending each year will increase by the rate of inflation and assumes spending is consistent from one year to the next. That tends not to be the case, with expenses changing even annually and throughout the golden years. At the beginning of retirement, you may spend a lot, but as you age, your spending could decrease. “It’s a fine place to start up, but it doesn’t always line up,” Williams points out. “Your spending rate has to be personalized, flexible and updated annually.”​

4. You’re holding on to a big house​

Many retirees cling to their old lifestyle, holding on to their home because that’s where they raised their children or spent their working years. But keeping that big house can be costly as you age, especially if you have to pay people to maintain it. If you downsized your residence, you could free up more money to live on. “A lot of people say they want to travel when they are older. Maybe you don’t need the two-story house that your family lived in all those years,” Meadows says.​

​5. You wait too long to tap your retirement account

​It’s common for retirees to wait until age 72 to begin drawing from their tax-deferred retirement accounts. That’s the age the government requires you to take minimum distributions, which are taxed as ordinary income. If you wait to draw down until then, you could be burdened with a greater tax bill. Plus, you are older and may not have as much energy or the health to enjoy life as you would during your early retirement years, Williams notes. If that sounds familiar, he suggests considering tapping some retirement money while you can still enjoy it: “Spend some of that money in the go-go years of retirement.” ​

6. You have too much in savings as you get older

Retirement comes in stages. In the early years spending tends to be higher as retirees pursue hobbies, check off bucket list items and otherwise enjoy their newfound freedom. As they get older, particularly after age 65, the spending starts to slow. A recent Rand Corp. study found real spending for both singles and couples declined 1.7 percent and 2.4 percent respectively after age 65. The spending decline was across the board from the wealthy to those with modest amounts of cash.  “In determining retirement income needs, households and the financial planners should not rely on the common assumption that real spending will be constant or even increase, because this is not supported by household-level spending data,” wrote Mark Hurd, director of the Rand Center for the Study of Aging.