Retirees who aim to spend less than the widely discussed 3%-4% “safe” withdrawal rates often see themselves as protecting their money, and Morningstar retirement planner Christine Benz said that mindset is common. But in an analysis shared through The Associated Press, Benz argued that the tendency toward underspending can also create a predictable outcome: sizeable residual balances late in life, even when retirees follow a standard withdrawal path.
Benz said she spends “a lot of time talking to retirees about their spending plans,” and that many describe withdrawing far less than initial safe rates. In the same discussion, she said those retirees often frame the approach as frugality and caution, and that “underspending tends to lead to big residual balances” is highlighted by Morningstar retirement income research.
She described what happens in a “base case” scenario that Morningstar used in 2025: a retiree taking 3.9% initially and then inflating withdrawals each year thereafter. Benz said that even in that scenario, retirees who withdraw for 30 years tend to end with significant remaining balances.
Benz provided a specific illustration to show the range of outcomes. She said that for people starting retirement with $1 million, withdrawing $39,000 initially (3.9% of the balance) and then inflating that dollar amount for the next 30 years, the median ending balance was roughly $2 million for balanced portfolios, and even higher for more equity-heavy portfolios.
Benz said leaving a large residual balance is not necessarily a negative outcome, because those remaining assets often go to heirs and other beneficiaries, including children, grandchildren, charities, or other loved ones. She also said many retirees worry about long-term care expenses later in life, and that underspending may be a rational response for those without long-term care insurance or a dedicated long-term care fund.
Still, she raised concerns about timing, particularly for beneficiaries who inherit later. Benz cited that the “average age of someone inheriting money is 51,” and she said more than one-fourth of people who inherit assets are over age 61, adding that inheritances at those ages may not offset retirement spending needs for the heirs.
Benz also said that median inheritance figures from the Survey of Consumer Finances suggest that inheritances can be relatively small compared with the resources needed to cover retirement costs. She wrote that the median inheritance of $69,000 reported in the 2022 Survey of Consumer Finances is “just a drop in the bucket,” and she argued that smaller gifts earlier—such as down payments or student loan help—could improve financial footing for younger relatives.
She tied the argument to lived experience and to the psychology of retirement planning, noting that shifting from saving to spending can be difficult for people who identify with frugality. Benz said that determining the “right” withdrawal rate also involves uncertainty, because retirees are managing withdrawals across uncertain market conditions and an unknowable time horizon.
Instead of endorsing a rigid rule for minimizing withdrawals, Benz said she prefers flexible strategies that adjust spending to portfolio performance. She described an approach that tightens spending after portfolio losses and allows “raises” after good market years, calling it both investment-planning sensible and psychologically aligned, and she said the strategy is consistent with remarks from financial planner and researcher Jonathan Guyton.
Benz concluded that retirees should rethink how they view underspending and inheritance size, saying it may be more beneficial to withdraw more during their own lifetimes when they do not need the money. She added that if someone else in a retiree’s life does need support, “it takes less than you might think” to help, and she pointed to giving that she said helped her family with a home down payment in 1994.