When to Stop Saving and Start Spending for Retirement

Most people don’t retire the day they hit a number. They retire the day they finally believe the number is real.

That gap between “I have enough” and “I believe I have enough” is where a lot of good years get spent unnecessarily at a desk. Years you could’ve spent figuring out when to stop saving and start spending instead.

In our latest video, we walk through a simple calculation that tells you where you actually stand. Here’s the short version, and what it means if you’re the kind of person who’s done everything right and still isn’t sure it’s enough.

The Question Behind the Question

We hear a version of this from almost every client in their early-to-mid 60s: are we okay? Not how much we have, but whether we can stop worrying now. Those are different questions, and most financial advice answers only the first.

Here’s a way to answer the second.

The Calculation: Your Funded Ratio

Start with what you’ll actually spend each year in retirement. Say that’s $100,000. Subtract whatever shows up no matter what — Social Security, a pension. If that’s $40,000, your savings only need to cover the remaining $60,000.

Multiply that gap by 20. That gives you your target — in this case, $1.2 million. Then divide what you’ve actually saved by that target. That’s your funded ratio.

If you’ve got $1.6 million against a $1.2 million target, you’re at about 130%. That’s a healthy cushion. Enough to absorb a bad year without changing your life.

One caveat: if most of your savings sit in pre-tax accounts, shave off 10 to 20% for taxes before you do the math.

What the Number Doesn’t Tell You

A ratio over 100% means you’re likely in a position to stop saving as aggressively. But we’ve watched people sit on 150%, 200% of what they need, and still never spend the surplus. The extra years they worked to build that cushion bought them almost nothing they actually used.

That’s the real cost of not trusting the number isn’t a financial risk, but years you don’t get back.

The Three Fears That Keep People Working Anyway

Even with a good number, three worries tend to surface. Each one has a real answer.

“What if I live to 100?” This is what the cushion above 100% is for. And research shows retirees actually spend less as they age — not more — moving through what’s sometimes called the retirement spending smile. Healthcare is the exception worth planning for specifically, but the expensive, long-duration kind is rarer than people assume. Most care needs are shorter than people fear, and there are ways to plan proactively for the rest.

“What if I’m drawing too much?” The 4% rule everyone’s heard of was built around the worst retirement start in modern history: 1968, stagflation and a falling market all at once. Almost nobody retires into that. For most people, a rate closer to 5% likely holds up fine, especially with a diversified portfolio and a plan to adjust if markets turn. And the data actually points the other direction: most retirees could safely spend more than they do.

“What if the market crashes right after I retire?” This is solved with rules set in advance, not more savings. A simple example: if your withdrawal rate creeps too high in a bad stretch, you trim spending slightly. If your portfolio grows well past target, you loosen up. Having that plan in place before you need it is what keeps you in your seat. 

Knowing When to Stop Saving and Start Spending

The funded ratio is a good first read. It’s not the whole plan. It doesn’t account for your personal situation: changes in your cash flow, taxes, or portfolio drawdowns. That’s where a real plan comes in. At Sensible, we build every plan assuming you live to 100— not average life expectancy — because the number you walk away with should hold up no matter how many years you actually have ahead of you.

If you’re within ten years of retirement and want a straight answer on when you can stop saving and start spending, that’s a conversation worth having.

Book a time to talk with us.

Sources:

Blanchett, David M. “How Spending Evolves in Retirement: A Smile, a Smirk, or Something Else?” Financial Planning Review, 2026. (Funded ratio framework; spending patterns of overfunded retirees.)

Blanchett, David M. “Exploring the Retirement Consumption Puzzle.” Journal of Financial Planning, 27(5), 2014. (Real retiree spending declines through retirement, the “retirement spending smile.”)

Bengen, William P. “Determining Withdrawal Rates Using Historical Data.” Journal of Financial Planning, 7(4), 1994. (Origin of the 4% rule; derived from the worst-case historical retirement start.)