Entering retirement often signals a profound shift in an individual’s philosophy, time, and goals. This new chapter is a culmination of decades of diligent labor and saving – and for many, it brings excitement and newfound freedom. However, for some retirees, their diligence in saving makes it difficult to transition into a phase of life where spending down their savings feels appropriate. After years of building strict habits and shaping their identity around not spending, this transition can feel uncomfortable – and some clients may avoid spending beyond their basic needs even when they have activities and experiences they’d like to pursue.
In this 178th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss why some clients ‘underspend’ in retirement – and how advisors can tactfully encourage them to use their wealth in productive ways that align with their values.
Often, the tendency to underspend is shaped by some portion of a person’s identity. Retirees who have built their financial security through disciplined saving often take pride in their frugality. For these clients, just the idea of their net worth declining – regardless of purpose – can create anxiety. In such cases, even the most compelling spreadsheets and projections can fall flat in inspiring change. Instead of reasoning clients into spending, it may be more effective to reframe spending as a new skill to be practiced. Exposure to small, intentional spending – such as treating a friend to coffee or funding a grandchild’s sports lesson – helps clients build comfort and confidence incrementally.
At the same time, if advisors project their own values onto a client’s retirement goals, it may unintentionally distort the conversation. Some retirees are genuinely content with a simple life and may view indulgences as frivolous or unnecessary. Open-ended questions can help the advisor dig deeper into a client’s aspirations and goals, uncovering what they truly value. Sometimes, questions like “What’s something you used to love that you haven’t done in years?” or “If you had a happiness budget that had to be spent each year, how would you use it?” can unlock conversations that reignite passions or surface meaningful experiences clients have delayed for too long. Alternatively, a client may realize they already have what they want with little else they desire to ‘add’ to their life. Either way, these discussions can deepen understanding and help clients reframe wealth as a means to fulfillment, not just security.
Ultimately, the opportunity for advisors is to help clients align their money with what matters most – whether that’s relationships, personal growth, or experiences. By creating a safe space for dreaming, shifting the narrative around spending from fear to joy, and offering tangible ways to ‘practice’ using their wealth meaningfully, advisors can help clients live not only more richly in financial terms, but also more fully in retirement!
