Retirees worry they will live too long to enjoy their money.

Studies show those who spend more report greater satisfaction in retirement, yet older Americans often live below their means. The prospect of a life of 95 or 100 years turns many into penny-pinchers, reluctant to spend their hard-earned savings now with so many years of bills remaining.

Researchers call it the retirement consumption puzzle.

Married 65-year-olds with at least $100,000 in financial assets withdrew an average of 2.1% of their savings annually, according to a forthcoming study that analyzed data from a long-running survey of approximately 20,000 people over age 50.

That is well below the 4% spending rate many advisers recommend, which would have protected retirees from running out of money in every 30-year period since 1926, said co-author David Blanchett, head of retirement research at PGIM DC Solutions, an affiliate of Prudential Financial. The goal is to ensure nest eggs last 30 years in the worst of times, which means they last even longer in better markets.

Spending below one’s means is especially prevalent among wealthier retirees. Those in the top 20% of the wealth distribution could safely spend an estimated $773,000 to $1.165 million more over a 30-year retirement, depending on how their money is invested, while still setting aside 40% of their initial wealth for emergencies or bequests, said Michael Finke, a professor at the American College of Financial Services.

Fear is making them miss out. While it is crucial to plan for longevity, it is also important to find pleasure in retirement, when “many people have the time and money and wisdom to enjoy their lives in a way they never could before,” said Meir Statman, a finance professor at Santa Clara University in California who has studied later-in-life financial and personal well-being.

Prosper and live long

After retiring in 2019, Jay Myer, 62, said the loss of a paycheck unnerved him so much he started worrying about running out of money.

When Myer realized he and his wife, Anita Myer, were regularly spending about $1,800 more a month than anticipated, he began scrutinizing every purchase, down to the napkins.

But the former software executive said this penny-pinching made him even more anxious. “All it did was scare me,” the Cary, N.C., resident said.

So Myer ran a new analysis of their retirement finances incorporating the higher expenses. The results indicated they could afford to spend more.

The couple’s priorities include travel and their two young grandchildren, who live nearby. In 2025, they plan to take two cruises, plus a vacation with their son and his family.

They have also started giving some money to their two adult sons in years when their investments perform well.

“It feels really good to do that,” Myer said. Since their sons are early in their careers, “they need the money more than we do,” he said.

Spending time

After years putting money into retirement accounts, it can be a struggle to transition to taking money out.

There is so much uncertainty about how long we will live and how well markets will perform that many opt to spend conservatively, Finke said. A common approach is to spend mainly Social Security, pension and investment income and take little from IRAs and 401(k)s until age 73, when the government requires those with traditional accounts to take minimum distributions and pay the taxes due.

Finke said a desire to leave an inheritance might explain some, but not all, of the underspending. Psychological barriers to spending likely play a role.

Pulling money from retirement accounts can feel as painful as watching the balance fall because of a stock market crash, Statman said.

Saving is often seen as a virtue, while spending can feel like irresponsible behavior, said Adam Chapman, a financial adviser who specializes in helping retirees enjoy their wealth.

Those who consider themselves frugal can find the idea of splurging on first-class airfare or a fancy watch hard to reconcile with their identity, Chapman added.

“People feel they’re becoming a different person. They wonder what the neighbors will think,” he said.

Chapman said he coaches clients to identify a handful of things they value and would get pleasure from spending more money on. “If you die with a lot of money, it means you sacrificed too much and lived too small,” Chapman said.

Giving permission

Statman said he has always been careful with money. “But at some point, you look at your balance and say, ‘What am I doing? There is no way for me to spend this money.’” He had to give himself permission to use the money.

“People who have a hard time spending more have strong self-control, which is why they often end up wealthier than they had imagined,” he said. “Breaking this habit is hard. We need to be able to step away from our habits and emotions and analyze our money more objectively.”

Financial advisers can sometimes help with that process, he said.

Blanchett recommends covering essential expenses, such as food and utilities, with lifetime income: Social Security, pensions and immediate annuities, which convert a lump-sum payment into lifelong payouts. Studies show retirees spend far more from lifetime income than from savings—and those with pensions tend to be happier.

Home equity can be earmarked for any long-term-care needs, he said.

That frees a retiree to spend savings and investments on travel and other priorities, said Blanchett. One approach is to divide big accounts into smaller ones, each for a specific purpose.

“If you’ve got $300,000 set aside for travel, it makes it easier to spend the money,” he said. It also makes it easier to spend it earlier in retirement when people often are healthier and better able to enjoy travel.