Therapy for Retirement Underspenders?

Most of the stories we read about retirees is how they do not have enough saved and/or are over-spending. But there are retirees at the other end of the spectrum. They do not spend enough and it is needlessly hurting their lifestyle. Sometimes it even affects their health. Some of these people may need therapy. I’m serious.

You have to read about retirees Martin and Eleanor. Here is a teaser:

They worked hard all their lives and managed to save $2 million. Today, they are both 72. Based on a very conservative withdrawal rate of 3%, they could easily afford to take $60,000 from their portfolio each year. Instead, they withdraw $10,000. With the $30,000 they get from Social Security, they live on $40,000 a year.

There is nothing wrong with being thrifty and frugal. But Martin and Eleanor are struggling with rational thinking. They are hurting themselves, including not seeing the dentist and not purchasing a hearing aide because they are “too expensive.” ¬†There is more. Read about it yourself.

You wonder what effort their children have made to rectify this situation. I can speculate a few scenarios.

It could be that the kids do not know that their parents have a $2 million nest egg sitting mostly dormant and unused. This is not unusual. I know of a family where even the spouse thought they were broke (and lived that way) because the irrationally frugal husband never shared information about their substantial wealth.

Another possible scenario is that the children think it is sadly amusing that their parents are so cheap. Maybe they make an occasional comment about it but that’s it. Of course, the parents ignore those comments.

A third scenario is that the children are seriously concerned about their parents bad spending habits (as in under-spending), have tried an “intervention” but were met with an adamant refusal to change or even to see a professional. (In these cases, the first professional to see may need to be a therapist.)

The fourth scenario – a cynical observation – is that the children may be thinking more about their inheritance than their parents’ happiness. With that in mind, watching their parents deprive themselves through life is easier to accept. Hopefully this is not the case although I’ve heard worse.

This is a situation where a long term retirement plan that included some form of consumption smoothing could have prevented Martin and Eleanor from adopting an irrational fear of spending. Now only therapy may fix things but at age 72, they could be resistant to any outside help.

This is a circumstance that I am trying to avoid. I want a reasonable balance between spending and financial security. It sure would help if savings interest rates would move up!


  1. Doris says

    As we all know, there is a psychology factor involved in a person’s perceptions of money. If you grow up in a family where your parents are frugal or lived through the Great Depression (as mine did) you would likely be quite careful with your accumulated wealth. I believe that maybe Martin and Eleanor must have experienced such conditions growing up and consequently are afraid of outliving their resources. It is really sad that they don’t care for their physical needs even though they can well afford to do so. That is definitely not sound thinking.
    I am smiling now , thinking of my late mother, who never threw out a plastic tub or container or re-used aluminum foil several times over—but she did enjoy her retirement years and traveled all over the globe. She treated herself well and deserved everything she ever bought for herself. She was a very giving woman to those in need— a life well lived.

  2. Robert says

    I retired last year. My wife retired six years ago. I am going through this now. I have accumulated substantial retirement savings through our IRAs and 457/403b workplace savings. In addition I get a pension. When I project out future income, I am convinced that I may never need the savings and can live quite comfortably on our pensions and Social Security. It is not easy after living ones whole life below our means and saving to assure we wouldn’t outlive our resources to change approach. For years I believed I would never get my pension due to the nature of my employment and always planned around worst case scenarios that never occurred. Now that I am there I am struggling with the “it is okay to spend” attitude . . . It sounds silly compared to those with unmet needs and in financial crisis but there is a psychological barrier that needs to be overcome. Then again you never know what the fates hold . . .

  3. Rick says

    @Robert: I am going through the same thing now and I am about 1 1/2 years to semi-retirement. In fact, I could probably simply retire in that time frame but cannot bring myself to do it based on the extreme uncertainty currently present in the world. I, too, could be quite comfortable, including travelling, just on social security income alone (which I plan to put off taking until 70 to maximize the benefit). Yet, I still can’t get myself to retire.

    Spending is a real chore for me as well. My home needs some serious work done to it and it will take everything out of me just to spend the money I plan to spend next year just to do what needs to be done.

    I am by nature very frugal. I do not mean to imply that I do without because I don’t. I simply don’t get a lot of satisfaction from buying material things. Furter, I figure what I am “buying” by not spending is peace of mind, which means more to me than any material thing I could spend money on.

  4. Frank says

    yep – planning for retirement – a lifetime of frugality by nature – current funds would support a withdrawal rate far exceeding my estimated current spending – some feel good spending money, I feel good avoiding spending – so underspending is likely to be a factor for me.

    Luckily my life partner helps me over that hump and quickly encourages me when I resist unnecessarily.

    Of course the elephant in the room – end of life health care costs, together with the surviving spouse needs – mean I can never be sure – but I figure I’ll start with 3% drawdown, bump it up to 4% (I think my self-funded pension has a gradually-increasing minumum between 3 or 4 and 10%pa – so I may follow that.

Leave a Reply

Your email address will not be published. Required fields are marked *