I had an interesting conversation with a client a few weeks ago. A couple, both retired, financially very comfortable. We were doing our regular review, going through the numbers, and I said something I find myself saying more often than you might expect.
“You know you could be spending more, don’t you?”
They looked at me like I’d said something slightly odd. Which, coming from a financial adviser, I suppose it is. We’re supposed to tell you to be careful. To save more. To watch the pennies.
But the truth is, for many of our clients, the opposite conversation is the one that actually matters.
Morningstar – one of the most respected investment research firms in the world – published a fascinating study this month. They surveyed nearly 700 retirees across the US, the UK, and Australia, all with above-average retirement savings. The question was simple: how do you decide what to spend each year?
The answer, for most people, was equally simple. They don’t really decide at all.
Half the retirees in the study relied entirely on basic, hands-off approaches. Some just withdrew whatever the minimum required amount was.
Others based their spending on whatever their current bills happened to be. Some only took the dividends and interest their portfolio generated, leaving everything else untouched.
A few handed the whole thing to an adviser and didn’t ask many questions about the process.
None of these are bad starting points. But as the researchers pointed out, if you never move beyond a starting point, you can end up spending significantly less over your lifetime than you safely could – not because the maths doesn’t work, but because you never really engaged with the question.
What struck me most was what didn’t explain this behaviour.
You might assume people underspend because they’re worried about running out of money. But 73% of the people in the study said they weren’t particularly worried about that.
It wasn’t a lack of financial knowledge either. And it wasn’t that they were deliberately holding back for inheritance or care costs – the researchers tested for all of that, and none of it held up as the main explanation.
So what was going on?
The researchers’ conclusion is one I’ve seen play out many times in my own experience of working with clients.Most retirees aren’t underspending because they’re afraid. They’re underspending because they haven’t found a compelling enough reason to spend more.
Their current approach covers their bills, keeps the lights on, and doesn’t feel risky. So why change it? Why engage with a more complex question when the simple answer seems to be working fine?
The problem, of course, is what gets left on the table. Not just money – but experiences, generosity, time with family, things that would genuinely enrich the years you’ve worked so hard to fund.
This is where I think good financial planning earns its keep – and I don’t mean the investment side. The portfolio allocation, the tax efficiency, the drawdown strategy – all of that matters, and we take it seriously. But the conversation that really moves the needle is a different one.
It’s the conversation about what you actually want this next chapter to look like.
The Morningstar researchers suggested that retirees need goals – not vague ones, but specific, personal ones rooted in what they genuinely value. Not “travel more” but “take the grandchildren to Japan next spring.” Not “be generous” but “help Sarah with a deposit this year.” Not “enjoy life” but “finally learn to sail.”
When the goal is vivid and personal, the motivation to understand what you can safely spend – and then actually spend it – tends to follow naturally.
98% of the people in that study had no intention of changing their spending approach. That’s not a sign of contentment. That’s inertia disguised as strategy.
One of the things I’m most proud of in the work we do at Capital is that we don’t just manage money. We try to help our clients to use it well.
And sometimes that means gently pointing out that the financial plan says you can afford the trip, the gift, the experience – and that the only thing stopping you is a habit of caution that served you brilliantly while you were building your wealth – but may not serve you quite as well now.
If that resonates, even a little, it might be worth a conversation. Not about your portfolio – about your plans.
As always, I’m here.
Charles Riches
Director
P.S. If you know someone – a friend, a family member, a former colleague – who might find this helpful, please do share it with them. Sometimes the most valuable thing isn’t advice. It’s simply permission to enjoy what you’ve earned.
One Response
This is an excellent article and captures our situation remarkably well. The line, “They’re underspending because they haven’t found a compelling enough reason to spend more,” really resonates with us.
Perhaps by explaining why we identify with this description, it may also strike a chord with many clients who have built their wealth through hard work rather than inheritance.
We both come from very similar family backgrounds, where money was tight. I am now 77, and my wife is a few years younger. Our parents, born in the 1920s, lived through challenging times, and we ourselves experienced the effects of post-war rationing. From an early age, they instilled in us a simple philosophy: only spend money you have. Do not buy anything unless you can pay for it outright or are completely confident you can afford it.
We have followed this principle throughout our lives. In the early years of our marriage, we often went without. Even as our financial circumstances improved, that same mindset remained embedded in us—it still shapes our decisions today.
As a result, we feel no real desire to buy a boat, a Bentley, or an Aston Martin, despite having the means to do so. Nor have we ever wanted to draw attention to ourselves. We have always preferred to stay under the radar, a philosophy that also served us well in business.
That said, there are inevitably signs we cannot entirely conceal. Our home, for example, may suggest to those who know where we live that we fall into a more affluent category. Nevertheless, we do not see ourselves as extravagant.
More often than not, we carefully consider whether a potential purchase truly represents value for money. This habit can sometimes create a genuine dilemma—and often results in hesitation, or even choosing not to spend at all.
Perhaps some of the characteristics that apply to us also applies to other Capital clients and explains “why they are not spending more.”