Financial experts constantly sound the alarm that people are saving too little for retirement. What they rarely talk about are the effects of spending too little.

How do you know if you’re underspending in your retirement years? One likely sign: you're spending so little that you have a near 100% chance of never running out of money. Nobody is advocating going on an irresponsible spending spree but – unless you truly have millions or are determined to leave a huge estate behind – if you're that heavily resourced you probably can spend more than you are.

Underspending isn't necessarily a problem, but if it results in excessive thrift, it can produce some unpleasant and unnecessary side effects. Each of the situations below is a sign that you not only can afford to be more generous with yourself; you probably need to be.

1. You're settling for substandard medical care.

You can buy generic green beans and maybe a used bicycle, but skimping on medical care isn’t an option. You saved all those years for situations like these so get the best and most appropriate care regardless of cost. Nothing is more valuable than your health and your life.

2. You have insufficient insurance.

Studies show that Medicare will pay an average of half your medical expenses. As you age, spending on healthcare will likely become a significant portion of your budget. Paying an extra premium to receive Medigap coverage or other supplemental insurance is money well spent. (To learn more, read Medigap Vs. Medicare Advantage: Which Is Better?) Long-term care insurance is another product to investigate, though it would have been better to have bought it when you were in your 50s. See What's The Best Time To Get Long-term Care Insurance? Don’t be cheap when it comes to appropriate insurance.

3. You're sleeping on a subpar mattress, etc.

If you or your spouse have a bad back, shell out a couple of thousand for a better mattress. And that’s only one example. How about a personal trainer to keep you mobile and healthy longer or treating yourself to something you've always fantasized about? Continue scrutinizing your expenses, but just because an item is expensive doesn’t necessarily mean buying it will make you run out of money in a few years. If an object or experience can improve your quality of life, write the check if you can afford it. Even if it’s not a necessity.


How Much Should I Save for Retirement?

4. You live like a recluse.

Retirement is supposed to be about visiting friends and grandchildren, traveling, going out to eat – all those activities you couldn’t do when you were working all the time. If you’re not doing the things you love because you’re afraid of spending the money, you might be saving too much. Remember, the earlier you are in retirement, the more likely you're healthy and able to travel – and still enjoy spicy food and wave-surfing. That may not always be true.

5. Your savings withdrawal rate is below 4%.

Most financial advisers agree that the standard withdrawal rate, assuming you’ve adequately saved, is between 4% and 6%. If you’re taking out less than that amount, it’s time to reap the benefits of making disciplined financial decisions for so many years. Spend more. See Strategies For Withdrawing Retirement Income for some techniques to investigate.

6. You never give yourself a raise.

Inflation is the great enemy of almost everything, but for a retiree, it’s a friend. Why? Because inflation allows you to give yourself a raise each year. Let’s say you withdrew 4% of your $500,000 the first year and inflation was 3% going into your second year. You can give yourself another $600 in year two. If you’re not, you are able to spend more.

7. You're still operating in saving mode.

There’s no doubt that our 401(k) world encourages living frugally; you need to ensure you've saved enough to retire comfortably. See Retirement: What Percentage Of Salary To Save? But when you actually reach retirement, your attitude should move from saving and frugality to reward. Much like finishing a giant project that took a lot of hard work and sacrifice, you've reached the time to splurge a little. If you’re still in accumulation mode, it’s time to start living the life you deserve.

The Bottom Line

Nobody would advise you to spend without good financial sense, and no wise person would tell you how to spend your money. What they will tell you is that one day you will pass away and you can’t take your money with you. You deserve to enjoy the fruits of your labor.

If you want to give money to others, do it now and enjoy their pleasure. If you want to take a trip around the world, get on the plane – and if you want to purchase the car you’ve always dreamed of driving, now is the time. (Especially that car; you can't drive forever.) Being too cheap is no wiser financially than spending too much.