The $10 Million Retirement Mistake: Spending Too Little

Written by: Trevor Scotto, CPA, CFP®
Reviewed by: [Placeholder]
Last reviewed: July 23, 2026

This article is for educational purposes only and does not constitute individualized tax, legal, or investment advice. Every retirement plan should be customized based on the individual's taxes, goals, family circumstances, and available assets. Consult your own tax, legal, and financial advisors before acting on anything described here.

Many affluent retirees arrive at 65 with more wealth than they ever expected to accumulate -- and then spend the next twenty years afraid to touch it. We see it regularly: a couple with $8 million in investable assets cutting vacations short, hesitating to help adult children financially, and agonizing over a kitchen renovation they could fund without a second thought. The account balance says one thing. The behavior says another.

This is not a math problem. It is a psychology problem. And it is worth naming directly, because the cost of getting it wrong -- in unlived experiences, unnecessary tax exposure, and wealth transferred to heirs in ways that reflect anxiety rather than intention -- is real.

The short answer: the habits that built the wealth work against spending it. Decades of living below your means, maximizing contributions, and watching the account balance climb create an identity tied to accumulation. Spending down that balance -- even modestly, even intentionally -- triggers a visceral loss-aversion response that the rational mind cannot simply override.

Behavioral finance research has documented this pattern for years. Loss aversion -- the tendency to feel losses roughly twice as acutely as equivalent gains -- is powerful for everyone, but it tends to be especially pronounced in people who built wealth through sustained discipline. Every dollar spent feels like a permanent loss. Every market dip feels like a threat to the number.

There is also the question of identity. For many successful professionals and business owners, the portfolio balance has functioned as a scoreboard. Watching it decline, even in pursuit of a good life, can feel like losing. That is worth understanding, not as a flaw, but as a bias to plan around deliberately.

Finally, there is the conditioning effect of a lifetime of financial advice built around a single message: save more. That message was exactly right for thirty years. It is often exactly wrong for the next thirty.

Widely circulated retirement spending rules of thumb -- flat percentage withdrawal guidelines, fixed monthly drawdown figures -- are designed to be broadly applicable. For families with $3 million to $20 million in investable assets, they are usually the wrong starting point.

At this asset level, the primary retirement risk is not running out of money. It is misallocating resources across time, accounts, and tax situations in ways that reduce the wealth that could otherwise support the life you want and the people you care about. A retiree with $10 million has different planning constraints than one with $1 million: far more tax complexity, more flexibility in Social Security timing, greater exposure to estate tax if assets are not structured carefully, and a longer planning horizon than most rules of thumb assume.

Generic guidance also tends to treat retirement income as a single-variable problem -- how much can I take out each year? -- when it is actually a multi-variable coordination problem. Taxes, account sequencing, Medicare costs, healthcare, and legacy goals are not side considerations at this asset level. They are central to the plan. Optimizing them together, rather than solving each one in isolation, is where meaningful value is found.

The financial planning conversation tends to focus on the risk of spending too much. The risk of spending too little is less discussed and, for wealthy retirees, often more relevant.

The most obvious cost is experiential: travel deferred until health makes it difficult, family gatherings scaled back out of habit, philanthropic goals left unfulfilled because spending feels indulgent. These are real losses, not abstract ones. A retired couple who could have taken that trip at 68 does not get to take it at 82.

There is also a tax cost to underspending. Leaving pre-tax assets in traditional IRAs to compound for decades means those assets will eventually surface as taxable income -- through required minimum distributions, or through a taxable inheritance. A family that does not draw down tax-deferred accounts intentionally during the early retirement years may leave heirs a large IRA with a compressed withdrawal window and a significant income tax obligation. Proactive planning -- including Roth conversions during lower-income years -- is designed to reduce that exposure, though the right approach depends on individual circumstances.

And for estates above the federal estate tax exemption threshold, holding excess wealth without a coordinated gifting or legacy strategy can mean a larger share of those assets passes to the IRS rather than to the people and causes the family intended to benefit. Learn more about how FFG approaches legacy and estate planning at Legacy & Estate Planning.

The most common version of the retirement spending question is: how much do I have? The more useful question is: what will my cash flow look like, over what time horizon, and what does that mean for how I can spend?

A retiree with $10 million and $200,000 a year in Social Security, pension, and rental income has a very different spending picture than a retiree with $10 million and no reliable income floor. The portfolio plays a different role in each case, and the amount that can be spent from that portfolio -- confidently, sustainably -- depends on understanding both sides of that equation.

Time horizon matters enormously. A couple where both spouses are in good health at 63 may be planning for a 30-year retirement. The investment strategy, the withdrawal pace, and the tax sequencing look different across a 30-year horizon than they do across a 15-year horizon. A static withdrawal rate applied without regard to longevity, income sources, and spending flexibility misses most of what actually matters.

Goals matter too. A retiree who wants to leave the majority of the estate intact for the next generation plans differently than one whose primary goal is to fund their own life fully. Neither is wrong. But they require different strategies, and a single withdrawal rule serves neither well.

Our investment management approach is designed around these individual variables rather than one-size-fits-all frameworks.

One of the most consistent patterns we see in clients who come to us after working with a less integrated advisory structure: each piece of the plan was handled competently in isolation, and the coordination between pieces was left to chance.

The tax advisor filed an accurate return. The investment manager managed the portfolio. The estate attorney drafted the documents. But no one modeled how this year's Roth conversion would affect Medicare premiums two years from now, or whether this year's capital gains realization would interact with Social Security taxation thresholds, or how the RMD trajectory from age 73 onward would affect the estate plan designed years earlier.

At the asset levels we are describing, these interactions are not edge cases. They are central to the plan. Some examples of how they connect:

• Roth conversions during the early retirement window -- before required minimum distributions begin -- may reduce the taxable income that surfaces later from large pre-tax accounts. Whether a conversion makes sense, and how much to convert, depends on your current bracket, projected future income, and estate goals. (IRS, Retirement topics - Required minimum distributions (RMDs), reviewed Apr. 8, 2026.)
• Social Security timing affects both lifetime income and provisional income calculations that determine how much of the benefit is taxable. For couples with significant other assets, the higher earner's delayed benefit also functions as a survivor benefit -- a consideration that interacts with the rest of the estate plan.
• Healthcare costs and Medicare premiums are income-sensitive. Distributions, conversions, and capital gains realizations in a given year affect IRMAA surcharges two years later. Planning income deliberately -- rather than reactively -- can meaningfully reduce this cost over a long retirement.
• Legacy and gifting strategies depend on knowing which assets are most tax-efficient to give during life and which are better passed at death (where a stepped-up cost basis may apply). A coordinated plan makes this choice deliberately, not by default.

Our tax planning and mitigation services and our retirement transition planning are designed to address these moving parts together, not sequentially. The same applies to planning for business owners approaching a transition, where the coordination complexity is often even greater.

The reason many affluent retirees underspend is not greed or irrationality. It is uncertainty. When you do not have a clear, forward-looking model of your cash flow, your tax picture, and your estate plan working together, the rational response to that uncertainty is caution. You spend less than you could because you are not sure what "could" actually means.

A comprehensive retirement income plan -- one that models your cash flow across a realistic time horizon, coordinates account sequencing for tax efficiency, and integrates your Social Security timing, healthcare costs, and legacy goals -- is designed to replace that uncertainty with a number you can actually spend confidently. Not a rule of thumb. A number built around your specific situation.

The psychological shift this produces is real. Clients who have spent years anxious about spending routinely describe a different relationship with their wealth after working through a coordinated plan. Not because the number changed, but because they finally understood it. That understanding is what makes intentional spending possible.

This is where a fee-only, fiduciary model -- with CPAs and wealth managers working under one roof, no commissions, no product sales -- is designed to make a practical difference. The same team modeling your withdrawal sequence is the team managing your investments and reviewing your tax return. Coordination is not an extra feature. It is the structure.

How much can I safely spend in retirement?

There is no single answer that works for every retiree. The amount you can sustainably spend depends on your portfolio size, time horizon, other income sources (Social Security, pensions, rental income), spending flexibility, and tax situation. Widely cited withdrawal rules of thumb are starting points for a conversation, not guarantees of any outcome. A comprehensive plan built around your specific cash flows, account structure, and goals is designed to produce a sustainable spending range tailored to your situation -- though any projection involves assumptions that will change over time.

Can you spend too little in retirement?

Yes. For affluent retirees, underspending can mean deferred experiences that become unavailable as health changes, missed opportunities for tax-efficient Roth conversions during lower-income years, unnecessary estate tax exposure from assets that could have been given or gifted more efficiently during life, and wealth transferred to heirs in ways that reflect accumulated anxiety rather than deliberate intention. The risk of spending too little is real -- and at higher asset levels, it is often the more relevant risk to plan around.

How much cash should retirees keep?

A common framework is to maintain one to two years of planned net spending in cash or cash equivalents -- enough to cover near-term expenses without needing to sell investments during a market downturn. Some retirees use a bucket approach, segmenting assets across short-term, medium-term, and long-term pools and replenishing the short-term bucket periodically. The right amount is personal and shifts as spending needs, tax situation, and portfolio change. Holding excess cash carries its own inflation-related cost over a long retirement, so the goal is a buffer appropriate to your situation, not a maximum.

Should wealthy retirees worry about running out of money?

For retirees with $3 million or more in investable assets, running out of money is typically not the primary planning risk -- though it is not zero, and it depends heavily on spending levels, longevity, investment results, and healthcare costs. The more material risks at this asset level are tax inefficiency (paying significantly more in lifetime taxes than necessary), estate planning gaps (wealth passing in unintended ways), and behavioral risks (making poor decisions during market stress or illness). A coordinated plan addresses all of these, not just the portfolio balance. That said, every situation is different, and a retirement plan should be stress-tested for a range of scenarios.

There is a version of financial success that looks impressive on paper and feels hollow in practice: a large account balance, a conservative withdrawal rate, a frugal retirement that accumulates more than it spends, and an estate that passes to heirs who were never sure why their parents didn't live more fully.

The goal of retirement income planning is not to maximize the account balance at death. It is to use wealth intentionally -- to support the life you actually want, to help the people you care about in ways that are meaningful while you are here to see it, and to protect what you have built from the tax, legal, and behavioral risks that erode it quietly over time.

That requires a plan. Not a rule of thumb. Not a withdrawal rate. A coordinated, forward-looking, tax-aware plan built around your specific situation -- your income sources, your accounts, your goals, and the people who matter to you.

If you are approaching retirement or recently retired, and you want to understand what your wealth can actually support, we invite you to schedule a conversation with our team. We also encourage you to explore our retirement transition planning services and our comprehensive guide to retirement income and tax planning for additional context on the decisions that matter most in this phase.