Do Money Habits That Build Wealth Actually Limit Retirement?

It took some doing.

After 20+ years in academia, a notoriously underpaid career choice, followed by a brief stint as an employee in a small engineering services company, I started my own one-person consulting practice.

That let me set my own compensation, and not worry about job security, as long as I could find customers who would pay my rates. Which I did.

Fifteen years later, we decided our portfolio was enough to let me mostly retire, so I did.

The Money Habits That Help You Build Wealth

Beyond increasing our income by taking the solopreneurship path, here’s what helped us reach this point.

• Consistently allocating 2/3 of new income to increase our savings rate. This was the most sustainable way to set aside a large chunk of money without pinching pennies.
• Taking maximal advantage of tax-deferred accounts like Health Savings Accounts (HSAs), IRAs, and individual 401(k) plans.
• Dollar-cost averaging into the market through disciplined monthly investments.
• Investing in a prudently aggressive way, with a 90%+ allocation for equities, and a heavy weighting to the tech sector, using mutual funds to avoid having to pick individual stocks, which isn’t my strong suit.
• Never panic-selling when the markets crashed.

More generally, while we took advantage of opportunities to enjoy the present, we emphasized avoiding excessive spending, even when we could afford it, if it would have come at the expense of building long-term financial security.

We were even cautious with relatively small expenses. For example, we’d buy lower-cost but still good TVs from Costco, rather than splurging on the latest and greatest big-screen experience.

And we avoided unnecessary risk in our investments. 

The Habits That Help You Build Wealth Can Make Retirement Harder to Enjoy

If you’re like me, you’ve spent decades training yourself.

• Delay gratification.
• Save consistently.
• Invest for the future.
• Avoid excessive risk.
• Prioritize future security over present spending.

And, if you don’t come from a wealthy family, it’s those habits that can move you up the financial freedom ladder to the point that retirement is possible.

But once you get there, those habits that were perfectly adapted for accumulating wealth, if unchanged, can make it harder to enjoy retirement.

Because a successful retirement isn’t a game where the winner is whoever dies with the largest net worth. It’s one where winning comes from balancing future security with enjoying your life in the present.

And as straightforward as that sounds in theory, it can be surprisingly hard to make that shift in real life.

After spending decades getting really good at accumulating assets, it’s hard to break those habits. More accurately, what’s needed is to recalibrate those habits enough that you stop optimizing mostly for money outcomes and, instead, optimize for a balance of flexibility, long-term security, and, crucially, fun.

And that’s especially hard to do once your non-portfolio income stops.

Market Volatility Feels Different in Retirement

Dr. Steven Crane, Founder of Financial Legacy Builders, put it succinctly, “DIY investors tend to underestimate the emotional side of retirement. The math is one thing. Actually living through market volatility without a paycheck is something completely different. That’s where people panic, get overly conservative, or start making emotional decisions that hurt them long term.”

When, not if, the market crashes, but you’re still in the accumulation phase, you have the luxury of covering expenses from current, non-portfolio income, and letting your portfolio recover as the market comes back.

In fact, by continuing to dollar-cost average into the market when it’s down, you buy more shares than you would have been able to at the pre-crash prices, so once the market recovers, you’re even further ahead.

But once you’re retired, that opportunity is mostly gone.

Now, you have to draw from your portfolio every month, even in bear markets. There are ways to mitigate the cost of doing that, e.g., by keeping a few years’ worth of expenses in low-risk assets.

But selling any assets when your portfolio is down 20%, 30%, or even more, is emotionally difficult, even when the underlying math still supports the plan.

This is a big change, as illustrated by Table 1.

For many retirees, this creates a low-grade, persistent tension.

At the same time, many retirees are not actually in a financial crisis. A survey from the Employee Benefit Research Institute (EBRI) found that nearly 7 in 10 respondents reported maintaining the same or a higher standard of living in retirement than during their working years, and 6 in 10 felt their spending was about right for what they could afford.

That’s part of what makes this transition so complicated emotionally. Many retirees are doing reasonably well financially in an objective sense, while still feeling uncomfortable loosening habits that helped them build financial security in the first place.

Unless you, e.g., won the “early Bitcoin lottery,” while you may have accumulated enough to retire, by most reasonable measures, you know you’re not financially invulnerable.

Inflation, healthcare costs, longevity, and market uncertainty are still very real concerns. Which means that caution is still rational.

The good news is that you don’t need to flip 180 degrees from following the instincts that helped you win the accumulation phase.

The bad news is that even the appropriate recalibration isn’t emotionally easy.

The “Savings Mindset” Doesn’t Automatically Turn Off

It should be a clear change when you retire. You stop saving and start spending more than your non-portfolio income brings in.

However, the above-mentioned EBRI survey found that the fraction of retirees who retained the “savings mindset,” at 38%, was more than 3 times larger than the 11% fraction of those who managed to switch to a “spending mindset.”

As unfortunate as that is, it’s understandable.

People who spend decades developing, honing, and exercising habits that allow them to build wealth, such as caution, delayed gratification, optimization, and maintaining significant margins, can’t just switch all those habits off when they retire.

For financially responsible people, decades of asset accumulation made increasing assets emotionally rewarding. That emotional pattern doesn’t go away quickly or easily.

EBRI’s survey reflects all this. 

They found that 64% of respondents say that saving as much as possible makes them feel happy and fulfilled, while 31% just feel better when their account balances stay high. 

Morningstar’s Christine Benz described experiencing a similar emotional reaction after selling appreciated stock and setting aside money to pay the resulting taxes. Even though the funds were already sitting in a brokerage account specifically for that purpose, she wrote that “Taking money out feels terrible. I hate it.”

That’s completely understandable. 

After decades of working to keep your account balances going up, the adjustment to intentionally drawing them down is emotionally difficult and takes longer than most people expect.

Marcel Miu, CFA, CFP, Founder and Lead Planner at Simplify Wealth Planning, sees this regularly: “The biggest mistake I see is over-optimizing for a perfect 100% success rate in financial planning software. Data from EBRI’s Spending in Retirement Surveyanalysis shows that 38% of retirees remain anchored in a strict savings mindset rather than a spending mindset. They end up severely underspending and lowering their own quality of life out of habit or vague fears.”

This tendency is reinforced by the way retirement planning is usually framed.

As Justin Fitzpatrick, PhD, CFP, CFA, writing for Kitces.com, points out, retirees and advisors treat higher Monte Carlo “success rates” as automatically better, but that framing biases plans toward underspending in retirement. 

He writes, “The Monte Carlo success/failure framing, in essence, focuses only on minimizing the risk of overspending, hiding a bias towards underspending by calling it a ‘success.’ Or, put another way, a 100% probability of success is exactly a 100% probability of underspending. Which means that solving for higher probabilities of success generally necessitates underspending to the point where clients, while comfortable knowing that they almost certainly won’t run out of money, may have to significantly revise their desired expectations for their standard of living.”

That doesn’t mean retirees should ignore risk or spend carelessly.

But it does imply that retirement planning shouldn’t be treated as a pure financial optimization problem, where higher safety margins equal better outcomes. Instead, plans should balance long-term security and flexibility with intentional spending that lets retirees enjoy their retirement, and especially their healthiest retirement years.

Interestingly, EBRI’s research also found that fear of running out of money was cited by fewer retirees than wanting to preserve flexibility in case of unforeseen future expenses and/or wanting to leave a larger bequest to heirs.

In other words, underspending in retirement is often driven less by fear and more by lifelong habits of maximizing safety, flexibility, and financial comfort.

When Wealth-Building Habits Work Against You in Retirement

As shown above, the habits built over decades of successful wealth accumulation are difficult to “switch off” once we retire, which often pushes us to underspend, limiting our enjoyment of retirement.

Table 2 contrasts the benefits of these habits pre-retirement with their drawbacks once we retire.

Too often, the hardest part about retirement finances is giving yourself permission to use your money.

As I shared elsewhere, when I stepped in to help my mom manage her finances after my dad passed away, one of the most important things I did for her was to repeatedly reassure her that it was ok to spend her own money. 

One such moment sticks in my memory most. It was when she asked me if she could buy herself some new panties.

John Davis, CFP®, EA, Founder and Financial Planner at JKD Financial, expands, “Outside of purely monetary mistakes, the non-financial trap I see is retirees not spending enough while they are healthy. It is far more common for me to sit across from clients in their 80s who say ‘I wish I had’ rather than ‘I wish I hadn’t.’ Money is simply a tool to fund the life you want. More money is not the end goal, and I actively encourage clients to enjoy what they worked hard to save while they are physically able to do so.”

That observation captures something many people miss. 

As we consider retirement, we focus mostly on minimizing the danger of running out of money. 

Less often do we ask whether fear of that outcome may cause us to underspend during the years when we’re still healthy enough to travel, pursue experiences, and enjoy the life we saved for.

That doesn’t mean we should spend with reckless disregard for our financial reality. However, we do need to do a better job of balancing the present-day enjoyment of our retirement with maintaining appropriate margins and flexibility.

As we grow older, temporarily putting off travel, experiences, and hobbies risks permanently missing out on some of the very things that make our lives worth living. 

This brings to mind something our financial planner recently told me when we discussed when we want to downsize our home. He said that planners have to push back when retirees decline to do something now, preferring to plan on doing it a few years later. 

The question they often ask is, “What do you expect to change in these few years that will make you comfortable doing something then that you aren’t comfortable doing now?”

I didn’t have a good answer.

Which was exactly his point.

Many financial decisions in retirement aren’t purely about the numbers. Especially the big decisions are often driven by emotions and emotional inertia.

So, How Do You Recalibrate for Retirement?

Unfortunately, no switch flips automatically once you retire.

The habits and instincts that helped you build enough assets to be able to retire don’t magically go away. They remain emotionally powerful long after you stop working for a living.

And that isn’t necessarily all a bad thing. You still need to keep your eye on the long-term sustainability of your finances.

However, you will benefit greatly from intentionally recalibrating them.

When considering current spending decisions, ask yourself:

1. What experiences am I postponing, and what will make it easier to spend on them later?
2. What specific future risk am I trying to protect against?
3. Am I protecting future security, or maximizing safety indefinitely?
4. Would a reasonable middle ground still leave my retirement sustainable?
5. If I don’t do this, would that be driven by math, habit, or discomfort?

Several other things can also help with the necessary recalibration.

First, and it isn’t a copout, you can reduce the emotional pressure by covering some of your expenses from non-portfolio sources.

As Davis shared, one of his clients took on a “retirement job” earning about $70k annually. Beyond the financial benefits, arrangements like that can make retirement feel less fragile emotionally, especially during market downturns.

This avoids the “all-or-nothing” thinking of many retirees, who go overnight from being fully employed to being fully retired.

That’s why I call myself “mostly retired.” I still consult about 20 hours a month and write, both of which bring in nice annual amounts to supplement our portfolio income.

This sort of arrangement creates some financial and emotional breathing room, letting you:

• Spend more comfortably.
• Avoid drawing as heavily from investments during bad markets.
• Feel less anxious about everyday spending.

Next, recognize that spending from portfolio earnings feels different from spending earned income. You’ve spent decades doing the latter but have little experience with the former.

That’s why it feels so uncomfortable.

Understandably so, but once you recognize why it happens, you can move past it.

Another strategy is to tilt at least some of your portfolio to income-producing assets. Somehow, spending dividends without selling shares is often less emotionally unsettling.

A fourth tactic is to tie spending increases to portfolio performance. That’s the basis of the Guyton Klinger “Guardrails Approach,” which has you trim spending by 10% when your portfolio balance drops by 20% from baseline during the first 15 years of retirement, and increase spending by 10% when it grows by 20%.

Finally, working with a financial advisor can help reassure you when your spending, even if it feels unsafe, is actually on-plan.

None of these will make spending more money feel natural and eliminate any anxiety. However, they can help you gradually recalibrate your habits and emotions from what helped you build wealth to what’s needed to appropriately and sustainably enjoy it.

The Bottom Line: Retirement Is Won by Spending Well, Not Just Saving Well

Even people who have successfully accumulated enough assets to retire aren’t, mostly, “home safe.” They still need to manage uncertainty and risk, which continues to require similar long-term thinking to what they exercised pre-retirement.

The challenge is to balance competing priorities.

• Maintaining future security and flexibility.
• Enjoying the present while alive and relatively healthy.

The habits of our accumulation phase, spending less than we earn, saving and investing more, avoiding major mistakes, and optimizing for building wealth, served us well in getting us to where we are.

However, if we’re to “win” the retirement game, we need to recalibrate and adapt these habits to our new reality, so we avoid unsustainable spending but, at the same time, spend more than we’re likely emotionally comfortable with.

That’s not something you’ll achieve from a spreadsheet.

You need to recognize that holding off on each financial decision until it feels completely safe before allowing yourself to enjoy retirement can easily lead to later regret.

Successful retirement is no longer about maximizing account balances. It’s more about using those balances intentionally to enjoy the life they’re meant to make possible.

It’s about balancing long-term security and flexibility with enjoying the time you still have.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

About the Author

Opher Ganel, Ph.D.

My career has had many unpredictable twists and turns. A MSc in theoretical physics, PhD in experimental high-energy physics, postdoc in particle detector R&D, research position in experimental cosmic-ray physics (including a couple of visits to Antarctica), a brief stint at a small engineering services company supporting NASA, followed by starting my own small consulting practice supporting NASA projects and programs. Along the way, I started other micro businesses and helped my wife start and grow her own Marriage and Family Therapy practice. Now, I use all these experiences to also offer financial strategy services to help independent professionals achieve their personal and business finance goals. Connect with me on my own site: OpherGanel.com and/or follow my Medium publication: medium.com/financial-strategy/.

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