Why do people find it difficult to spend more in retirement?

I spent time with someone recently who said she'd "splashed out" at Waitrose for the weekend as her children were visiting. She's in her late sixties, retired a few years ago, and is in a great place financially. The mortgage is paid off, she has a generous civil service pension and a healthy ISA balance. The splash was probably £30 more than a normal shop, and she could do it every week for the rest of her life and never notice it financially.

Most advisers will have met someone like her. The cashflow model says she can comfortably spend more. And although she's told her adviser she wants to spend her hard-earned money, not much seems to change.

I find this one of the most interesting problems in retirement planning. Showing someone the numbers doesn't mean they feel able to spend them. The value is in working out why that particular person is held back, and what might help beyond the cashflow model.

For context, I'm one of the founders of Towpath. We're building a new financial advice firm, and this is one of the topics I keep coming back to.

Spending more without feeling less safe

First, it's worth saying what this isn't about. A financial buffer is what gives most people peace of mind, and the aim is never to put that at risk. But I think it's a mistake to treat it as a choice between spending more and feeling safe. It can be both: spend more, enjoy it, and still keep a suitable buffer that lets you sleep at night.

The uncertainty problem

Part of what makes this hard applies to almost everyone. Once you retire, you can't course-correct by earning more through employment. So if there's a health scare, or markets have a particularly bad few years, there's no salary to help make up the difference. That alone can make spending feel scarier.

And unfortunately the uncertainty is highest at exactly the point you most want to spend. At 60 you might have 30 years of unknowns in front of you. At 75 it's closer to 15 years of unknowns. So you can be much more sure of what you can afford at 75, which typically means being able to spend more. And by then you're often less able to enjoy it.

But that's not the whole explanation. Someone spending £30k a year who could afford £50k can still struggle to get to £40k, even though £40k is very safe. And that isn't rare, which tells us uncertainty isn't the whole story.

Five ways people get stuck

Beyond uncertainty, it helps to look into how people think and feel. Different people get stuck for different reasons. Here are five of the biggest buckets I see:

"I'm a saver." Decades of building wealth leave a mark. Saving became part of who they are, and watching the numbers go up is a joy in itself. Spending it now feels a bit like acting out of character and it's hard to unwind habits.

"I don't know what spending brings me joy." Every purchase gets scrutinised for value, so they rarely try anything new. One person I've spoken to told me she knew she needed to start spending her money, but didn't know what on.

"What if I run out when I'm very old?" A reasonable worry, but it might be taken to the point where they're too careful with everything. The fear of being 95 and short of money shapes every decision at 65. Some people find it hard not to think about the worst-case scenario.

"I thought retirement would make me happy, and it hasn't." For a lot of people, work kept them busy and on the treadmill. What got them through a job they didn't love was the goal at the end of it: retirement, a pot of money, maybe the big trip to South America. Then they get there and it doesn't quite satisfy. Stepping off the treadmill leaves room for much bigger questions about health, relationships and what they'll leave behind. Spending more doesn't answer any of them.

"I think I'd rather give it away, but I'm not sure." Giving to your children feels more virtuous than spending on yourself. Friends are helping their kids with deposits, so it starts to feel like the expected thing to do. And for people who've spent decades putting others first, prioritising themselves doesn't come naturally. The "not sure" is often because they haven't worked out whether it's what they want, or what feels right to say.

Something I find interesting is how much this depends on which part of your life you feel most connected to. Some people live a lot in the past, thinking about who they were and what got them here. Some live in the present. Others can picture themselves 20 years from now really clearly. It often says a lot about how someone feels about spending.

And for couples, it's two sets of these at once. I'm surprised how often there's a spender and a saver in the couple. Which means one of them is often quietly compromising, and the more cautious one tends to set the pace. Some couples stop talking about it altogether, because it keeps turning into a disagreement.

Some ideas that might help

So what can help? Here are a few ideas I think are worth advisers trying. Underneath all of them is good coaching: asking the right questions to find out what's actually holding someone back.

Trying before deciding. Lots of people think they know what's worth spending money on, but have never actually given it a go. I'm not advocating being loose with money or spending on things that aren't worth it. But if you can afford it and have never tried, you've decided it isn't worth it without ever finding out. I sat down with someone recently and went through their spending categories one by one, asking "Which of these have you ever tried upgrading?" He loved it. A few categories jumped out as things he'd never properly given a go.

Lowering the stakes. Rather than one big jump, it can help to spend a little more this year and a little more again next year. A one-off, like a lovely holiday, is easier to commit to than a new regular cost. And framing it as an experiment means it doesn't have to last forever if it doesn't feel right.

Reframing the numbers. Sometimes a different way of saying the same thing lands better. If someone's finances are particularly healthy, a line like "At your current rate of spending, you could live to 125 and still have enough" can hit viscerally. It can also help to look at the pot less often, perhaps only once a year, as watching a balance go down hurts more than enjoying the income feels good.

Changing the shape of the money. The same money can feel very different depending on how it arrives. If a guaranteed income covers the essentials, everything above it can start to feel like it's for living. Some people might find it easier to take a dependable "salary" from their pot, with a "bonus" in good years, because a salary feels more solid to spend than a number drawn from savings.

The regret test. Ask someone to imagine being 90, with plenty of money still in the bank, looking back at the holidays they didn't take and the things they kept putting off. How would they feel? For some people that lands harder than any projection, because it flips the question from "what if I run out?" to "what if I held back for nothing?"

Worth the hours

I think these conversations are worth having, even when they take hours and several meetings. That's not easy when a review is often a single hour, and much of it goes on the portfolio. But for the person in front of you, it can mean more experiences, a few more of the nicer things in life, and a retirement that feels like the one they saved for.

There's one more thing I keep wondering about, and it's less about how people think and more about how the industry is set up. When a customer spends more, assets under management go down, and so do fees. I don't know whether that affects the advice people get. But Charlie Munger had a line for this: "Show me the incentive and I'll show you the outcome." If spending more is the right answer for someone, does the industry encourage that discussion?

I'd love to hear what you've seen. What's helped your customers feel comfortable spending more? Email us at [email protected].