You spend your whole working life hearing one thing about retirement: don’t run out of money. Save hard, withdraw slowly and don’t outlive your nest egg.

A lot of people end up with the opposite problem. About 1 in 3 retirees reach their mid-80s with all of their original savings intact (not counting their home) — or more, according to (1)the Employee Benefit Research Institute (EBRI) (1). They didn’t spend it down. They barely touched it.

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That’s underspending, and a growing number of financial advisors call it a real danger that few people plan for.

“It represents a life not lived, the vacations you didn’t take because you were afraid you were going to run out of money,” Marianela Collado, a certified financial planner and certified public accountant based in Plantation, Florida, (2)told CNBC (2).

The EBRI number is based on 30 years of data — from the early 1990s through 2022 — tracking how households actually used what they’d saved. And in every wealth group, a good chunk of retirees kept their money intact, or even grew it. Among those who started retirement with the most, 31% still had everything, or more, two decades later.

Sitting on a big balance late in life isn’t always a mistake. It can be a smart cushion against living a long time or facing a stack of medical bills. But it can also be, in EBRI’s words, “unnecessary underspending” — money that did nothing, because its owner was too nervous to touch it.

Craig Copeland, director of wealth benefits research at EBRI, believes that’s what goes on often. “When you see so many people into their 80s still at 100%, you see people who are being way too conservative [with their spending],” he told CNBC.

Some of it is just a habit. “Some people spent all their life saving money, and it’s very hard to switch then to spending their assets down,” Copeland said. “It’s not a comfortable feeling.”

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The 4% rule wasn’t designed to tell you how much to enjoy life — it was meant to show a safe withdrawal rate. Financial planner William Bengen introduced it in 1994 in the Journal of Financial Planning (3). The rule says: take out 4% of your savings the first year, then raise that dollar amount with inflation each year after (4). Bengen’s research found that a 50/50 mix of stocks and bonds would last 30 years even in the worst stretch he could find — someone who retired in 1968, right before years of brutal U.S. inflation hit.

Planning for the worst case has a price. When the worst case doesn’t show up, and it usually doesn’t, you reach the end with a big pile of money you could have spent. Even Bengen has raised his own number over time, most recently landing on 4.7% as the safe maximum (5) to withdraw in your first year of retirement.

Morningstar also found that if you’re willing to adjust your spending year to year (taking more in good years and cutting back in bad ones) you can safely start as high as (6)5.7% (6). The catch is that the bigger number isn’t fixed: you take it on the understanding that you’ll trim the amount you withdraw in the years the market drops.

That flexibility is the whole point of dynamic spending. Instead of giving yourself the same inflation-adjusted check no matter what, you let the market set the pace.

“Overspending is risky. But underspending is risky too,” Zach Teutsch, founder of Values Added Financial and a member of CNBC’s Financial Advisor Council, told CNBC. In a good year, you might take out 7%. In a bad one, you pull back to 2.5%. You ease off the portfolio right when it’s down, and you can take a little more when it’s up.

It also matches how people really spend. Retirement spending tends to be U-shaped: bigger early on, when you’re healthy enough to travel; smaller through the slower middle years; bigger again at the end, when long-term care shows up (7). A flat 4% raise every year ignores all of that.

Dynamic spending comes with a catch: it only works if you really cut back in the bad years, and plenty of people find that just as hard as loosening up in the good ones.

A simple way to do it is to keep a careful rate like 4% as your floor, then put guardrails around it. When your portfolio runs well ahead, give yourself a raise. When it drops below a set line, trim.

Then, cover the basics first (housing, food and insurance) with guaranteed income rather than your investments. EBRI found that retirees with a pension or some other lifelong income drew their savings down more slowly and handled late-life surprises better, because they weren’t leaning on the market for the essentials. Social Security does the same job for most people. The more of your basics it covers, the more freely you can spend the rest.

The 4% rule is cautious by design — and that caution, baked into how we’re taught to draw down savings, is partly why so many people reach their 80s with money they were too scared to spend. Spending it on purpose turns out to be the harder skill.

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Employee Benefit Research Institute (1); CNBC (2), (4); Financial Planning Association (3); Yahoo Finance (5), (7); Morningstar (6)

This article originally appeared on Moneywise.com under the title: 1 in 3 retirees hit their 80s without touching their savings — and the 4% rule is partly to blame

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