The story of a frugal retiree, akin to Scrooge, stockpiling wealth instead of enjoying their golden years may seem far-fetched, yet it is unfortunately a reality for numerous individuals.
According to the Life Cycle Hypothesis, such scenarios shouldn’t occur. A retiree adequately prepared financially should maintain a steady income during retirement, ensuring their overall consumption remains unchanged.

### Who Faces Difficulties in Spending Retirement Funds?
Approximately 25% of retirees find themselves in a position where their spending decreases during retirement.
Furthermore, studies indicate that this issue could deteriorate. Observations reveal that the problem is especially pronounced among those relying on personal savings for income in retirement. In contrast, individuals with dependable income sources—like annuities, Social Security, and pensions—are generally more likely to spend their income.

### What Hinders the Transition from Saving to Spending?
One perspective suggests that individuals often perceive a reduced need to spend in retirement.
For instance, upon retirement, people might discover a decline in work-related expenses. They are likely to engage in more at-home activities—like cooking for themselves or managing their own lawns—which were previously costs they incurred. Additionally, many retirees might have paid off their mortgages, further reducing their expenditures.

Another perspective highlights psychological factors that contribute to changing spending habits.
Prior to retirement, individuals may be more influenced by present bias, placing greater emphasis on immediate situations over long-term financial planning due to uncertainties surrounding future income. This uncertainty may lead to thoughts like, “I can work extra hours next month to cover this trip,” or “I might receive a bonus soon.”
However, following retirement, individuals shift to a fixed income sourced from their savings. This transition initiates a phenomenon known as loss aversion, where the fear of depleting funds becomes more significant than the desire to enjoy them. In retirement, overspending today can lead to certain losses in future consumption—especially considering the prospect of an aging self, potentially hindered by work capabilities at 85 years old.

### How to Navigate Retirement Spending Challenges
Each retiree’s situation is unique, and various factors may resonate differently depending on individual circumstances. Therefore, retirees should reflect on their spending patterns carefully.
Begin by evaluating your financial status and comprehending how much you can afford to spend.
Utilizing an online tool to track spending by category can be beneficial, ideally starting before retirement, although not essential. Periodically, review your overall expenses and identify any categories where your spending has shifted. Ensure that these changes correspond with your financial objectives. For instance, did you notice a substantial decline in dining out, despite having a passion for exploring new cuisines with friends?

### Assembling the Retirement Income Puzzle
If you identify with the underspending group, research indicates that retirees with guaranteed income sources tend to be more willing to allocate their funds.
If transitioning to guaranteed income sources feels daunting, consider reinterpreting your retirement income as a paycheck from an external source.
While the challenge of not spending adequately in retirement may not be universal, it constitutes a significant missed chance for those affected.
Ultimately, it’s crucial to recognize that this money has been earned through years of hard work and careful management. Now, during a fulfilling and lengthy retirement, is the opportune time to utilize both your financial resources and free time effectively, channeling them into a well-lived life.