Should you spend all your money in retirement?

You’ve spent decades doing exactly what every financial expert told you to do.

You saved diligently. You invested sensibly. You resisted the temptation to spend money you didn’t have. Then one day you retire, and everyone starts telling you the opposite. Stop saving. Start spending.

After a lifetime proudly growing your savings and investments, you’re suddenly expected to feel comfortable watching your pension pot shrink every year.

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You tell yourself you’ll spend more next year. You’ll book the nicer holiday, upgrade the hotel, take the taxi instead of waiting for the bus in the rain and finally pay someone to do the jobs you no longer enjoy doing yourself. But somehow you never manage it. Selling investments feels wrong. Living off the income alone feels safer.

This is such a common problem that an entire book has been written about the dangers of falling into this under-spending trap: Die With Zero by Bill Perkins.

His argument isn’t simply that we should spend more. It’s that many lifelong savers become so good at building wealth that they never give themselves permission to enjoy it.

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I’m only 31, so retirement is still a long way off. But I can already see the mindset taking hold. I’ve always found saving much easier than spending. Heck, I even feel a weird satisfaction from not spending money.

But reading Perkins’ book made me wonder whether the same habits that help us build wealth could eventually stop us from enjoying it.

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The principles of dying with zero

According to Perkins, there are several reasons why he recommends aiming to “die with zero”:

1. Dying with loads of money left is not a sign of good financial planning. As Perkins would say: don’t be the richest sucker in the graveyard.
2. You enjoy money and experiences much more at certain times of your life. Spend it when you’re healthy enough to enjoy it.
3. Experiences often deliver much more value than possessions and can provide memories to cherish when you’re no longer active enough to make new ones. Invest in them.
4. Give money to loved ones and charities while you’re alive. Select exactly how much you want them to get, rather than randomly leaving “whatever’s left”.

I don’t necessarily agree with all of these. And there are certainly risks in following this philosophy. But the concept does intrigue me, so I decided to explore how I might “die with zero” in practice.

Although the book was written by an American author, the UK may be quite a good place to live out these principles, as we have certain safety nets that could reduce some of the risks of running your savings down to almost nothing.

The NHS means most of us won’t face catastrophic healthcare bills in the way Americans can. The state pension provides a baseline income even if you outlive your personal savings, and means-tested social care support provides a fallback option if your health deteriorates. Although the quality of care might not be what you want and your spending choices could be scrutinised for signs of deliberate deprivation of assets.

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How dying with zero could work in practice

Let’s say I’m able to retire at age 60 with £500,000 (this isn’t necessarily my actual forecast, but it’s a nice round number).

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For simplicity, this – and all the following figures – are in today’s money, based on someone who is currently 60 and will get a full state pension from age 67 (though, under current legislation, I’ll get mine later).

The essentials

The biggest risk of the “die with zero” strategy is that you live longer than expected and run out of money too soon.

To manage this risk, I would look to buy a lifetime annuity that, combined with the state pension, would give me enough guaranteed baseline income to cover my essential spending, no matter how long I live.

With a lifetime annuity, you use some or all of your pension pot to buy a guaranteed income for life. Think of it like an insurance policy against outliving your savings.

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Say I want a guaranteed baseline income of £20,000 after tax (around £22,000 before tax). Once the state pension is factored in, I’d need to buy a lifetime annuity paying an annual income of approximately £9,500.

As of July 2026, that could cost around £208,500 – although annuity rates change constantly and would probably look different by the time I retire. This is for a policy that doesn’t include any death benefits, but whose income is guaranteed to increase each year in line with inflation. The state pension is also protected by the triple lock, so my income should maintain its purchasing power over time.

The luxuries

That would leave me with £291,500 in my pension to fund non-essentials: things such as holidays, fancier meals out and hobbies.

According to government figures on healthy life expectancy, I may have only around seven healthy years in retirement after I turn 60. I therefore want to front-load my spending into the years when I’m statistically most likely to be healthy and active, before gradually relying more heavily on my guaranteed income later in life.

Using a financial modelling tool, I estimate that I could afford the following additional spending each year, on top of my £20,000 baseline income, without running out of money before age 90:

• Age 60-67: £26,000
• Age 67-70: £5,000
• Age 70-80: £2,000
• Age 80-90: £1,000

With the annuity and state pension, that could give me a total post-tax income each year of:

• Age 60-67: £46,000
• Age 67-70: £25,000 (assuming the state pension kicks in at 67)
• Age 70-80: £22,000
• Age 80-90: £21,000

By 90, I would have essentially no money left, so if I survive beyond that, I’d have to live off my state pension and annuity income alone.

These numbers assume that:

• I’ve invested my pension in a medium-risk portfolio returning 5.7% a year
• My ongoing pension charges are 1.5%
• Inflation is 2% per year
• The state pension goes up by at least 2.5% per year.

The shortfall

Housing is the elephant in the room. In Perkins’ view, dying with a £500,000 house is still leaving money on the table, which should be spent. Whether I’d feel comfortable releasing housing equity rather than leaving the property to my family is another question entirely.

There are other major risks. I haven’t set aside any money for care costs or potential home adaptations I might need as I age.

• Read: Later-life care costs: 6 stats you need to know

Government-funded care is a backstop, but I’d need to have depleted my own wealth and probably sold my home to pay my care bills before I qualified.

The numbers also don’t factor in any major stock market volatility. If there were a significant downturn during my retirement, my money could run out much faster. I’d also have much less spending power if inflation were higher than 2%, which is very possible.

The biggest irony would be reaching 90 feeling healthier than expected. I’d have successfully followed the philosophy, but I’d also have to accept a much lower standard of living for what could still be many years.

And, although mathematically I can see the numbers make sense, I’m not sure how comfortable I’ll feel in practice spending £46,000 in my early 60s knowing that will need to decrease dramatically as the years go on.

So, would I really do this? Not exactly.

I’d almost certainly spend more in my 60s, tapering that as I age. That’s when I’m most likely to enjoy travel, adventure and time with family.

But I don’t think I’d aim to die with literally nothing. I’d want a meaningful safety margin against poor investment returns, unexpectedly high care costs, and simply living much longer than average. Fortunately, I’m still young enough to adjust my saving and spending plans with that goal in mind.

Of course, spending or gifting more during your lifetime could also reduce the value of your estate for inheritance tax purposes. But I wouldn't let the tax tail wag the dog. The primary goal should still be making the best use of my wealth while I’m alive.

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And, if I have a reasonable sum saved, I’d also plan to work with a financial adviser. They should be able to help me develop a personalised plan for enjoying my money while maintaining a good margin of safety and giving me the confidence to spend it.

Bill Perkins did persuade me of something important, though. After a lifetime spent measuring success by how much money I’ve saved and invested, perhaps retirement success should instead be measured by how well I use it.

Maybe the goal isn’t to die with exactly zero. It’s to avoid dying with regrets. That’s a very different calculation.

The government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at www.moneyhelper.org.uk or over the telephone on 0800 138 3944.

Our retirement specialists can provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge.

This article was originally published in The Telegraph.

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.