Christine Benz of Morningstar argued in a recent retirement column that “underspending” in retirement can look prudent on paper while still producing large residual balances when withdrawals continue for decades. Benz said she often hears retirees describe spending far below the 3%-4% initial withdrawal amounts that circulate in safe withdrawal rate discussions, and she framed that restraint as understandable—particularly when frugality becomes part of retirees’ identities.
Benz said Morningstar’s retirement income research suggests that this pattern can translate into leftover assets late in life. She wrote that even retirees who follow what she described as a “base case” withdrawal pattern—taking 3.9% initially and inflation-adjusting withdrawals each year thereafter—tend to end with significant balances after 30 years of withdrawals.
To illustrate the point, Benz described an example of someone retiring with $1 million and withdrawing $39,000 initially (3.9% of the balance), then inflation-adjusting that amount for the next 30 years. She wrote that, in that scenario, the median ending balance was roughly $2 million for balanced portfolios and even higher for portfolios more heavily invested in equities.
Benz also acknowledged that a sizable residual balance is not necessarily a negative outcome. She said remaining funds are often intended for beneficiaries such as children, grandchildren, charities, or other loved ones who may use the money effectively. She added that some retirees worry about future long-term care expenses and may find peace of mind in maintaining larger balances, especially for people without long-term care insurance or a dedicated long-term care fund.
In that context, Benz cited advice from Mike Piper’s book “More Than Enough,” saying that giving smaller gifts earlier in life may be a better strategy than leaving assets after death. Benz pointed to household inheritance timing, writing that the average age of someone inheriting money is 51 and that more than one-fourth of people who inherit assets are over age 61, based on the 2022 Survey of Consumer Finances.
Benz argued that when inheritances arrive in the 50s and 60s, they may not address the biggest financial leverage points for recipients. She wrote that the median inheritance of $69,000 is “just a drop in the bucket” for what someone needs to pay for retirement, and she contrasted that with the potential impact of smaller, earlier gifts—such as help with a home down payment or paying off student loans—to build financial footing earlier in a working life.
Benz also described a personal family example to underscore her preference for spending more during retirement rather than waiting for end-of-life transfers. She wrote that her parents helped with a down payment in 1994, which she said made a “much more” meaningful difference to her and her husband than the inheritance they later received at the ends of her parents’ lives, despite the later inheritance being a significantly larger sum.
Benz said the shift from saving to spending during retirement can be psychologically difficult, especially for “best savers” for whom frugality is part of their identity. She also said the “right” withdrawal rate is not settled science because retirees must plan under uncertain market conditions and an unknowable time horizon, and that worries about outliving assets are normal.
In place of a strategy that relies on consistently smaller withdrawals, Benz said she increasingly favors flexible withdrawal approaches that adjust to a portfolio’s balance. She wrote that such methods typically call for belt-tightening after portfolio losses and “raises” after strong market years, and she described financial planner and researcher Jonathan Guyton as pointing out that the strategy both aligns with investment and financial planning logic and with how it can feel psychologically to retirees.
Benz ended her column by urging retirees to be cautious about praising underspending in retirement in a way that leaves large bequests by default. She said that if retirees do not need the money, they may still choose to retain it, but she urged them to consider that someone else in their life might benefit from support during the retirees’ own lifetimes—and suggested that making that difference can take less than many people assume.