Retired and Afraid of Spending Money? Here's How "Die with Zero" May Change the Way You Think.

Key Points

• A phenomenon called the "retirement consumption gap” occurs when you have the financial means to spend more but feel frozen in place.

• "Die with Zero" dares you to challenge yourself to spend money on experiences you’ll never forget.

• If your goal is to overcome the fear of spending, you may want to begin with small changes.

• The $23,760 Social Security bonus most retirees completely overlook ›

I recently came across a book called Die with Zero by Bill Perkins, published in 2021. As someone deeply involved into retirement planning, I found it an interesting take on an old hypothesis. Whether you're building a healthy retirement fund or counting on Social Security benefits, a pension, or a combination of several financial sources in retirement, the book reminds you that no one lives forever, and it's important to create life experiences while you can.

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Spending paralysis

Many of today's retirees are baby boomers born between 1946 and 1964. The oldest boomers were born shortly after the Great Depression, and the youngest boomers came of age when mortgage rates averaged 18.63%. As ideal as the past may look through the rearview mirror, each generation had financial obstacles to overcome.

That may help explain why older adults were raised to save, and why today, many struggle to spend. After decades of saving, they're nervous about spending the money they've accumulated. Experts call it the retirement consumption gap.

A recent study from the life insurance company Allianz found that 64% of Americans worry more about running out of money than death. But as the Hartford Fund points out, "The habits and fears formed over a lifetime don't simply vanish at retirement."

If you find yourself paralyzed at the thought of spending -- no matter your age -- perhaps your early experiences are at the root of the issue. What if you could change the paradigm and turn your spending habits around so that you can live your dreams while you still can?

Never too young to start

Die with Zero is a new take on the Life-Cycle Hypothesis, developed in the 1950s by Nobel Prize-winning economist Franco Modigliani. Modigliani's hypothesis states that people should manage their spending and saving habits to get the most out of their money throughout their lives.

Modigliani's advice was to consider the maximum age a person can live. Based on that age, spread your wealth across all the years up to the oldest age you might live.

Whether you're 22 or 72, proponents of Die with Zero emphasize balance. That means saving for retirement while doing the things you enjoy, creating priceless experiences you'll carry with you through life. Perkins' rules for dying with zero involve starting young, but if you're not so young anymore, his ideas may still resonate with you.

Die with zero: 9 rules

Here's a boiled-down, (significantly) simplified version of Perkins' nine rules for dying with zero.

1. Maximize positive life experiences: While saving for retirement is essential, don't wait until retirement to live your dreams. Do things you enjoy today and have real-life experiences now while you can. For example, if you dream of relocating to a new area (either now or in retirement), start making plans.
2. Invest in experiences early: Your life will ultimately be the sum of your experiences. If there's something you want to do, start now.
3. Aim to die with zero: Ideally, you'll have spent your money on great personal experiences, taking care of your family, and leaving a legacy. To do so, you'll need to map out a plan that allows you to live now while building a retirement fund.
4. Use planning tools: Tools are available that will give you a rough idea of your life expectancy. Naturally, no one knows how long they'll live, but these tools can be used as you plan how to spend money.
5. Give money to those you care about: Perkins' book suggests handing out inheritances before you die, when it can have the greatest impact on your beneficiaries' lives.
6. Don't live on autopilot: Let's say you devise a plan for spending money for the remainder of your life. Don't set it and forget it. Instead, be prepared to make constant changes as your life changes. Your plan is likely to require continual tweaks and retweaks. For example, don't be afraid to change your retirement withdrawal strategy when needed.
7. Plan for the different seasons of life: While everyone dies, you'll pass through several vital seasons before that time. In some, you may feel like a million dollars. In others, you may be tired or unwell. Do your best to plan for each of those seasons, even if you're unsure exactly what they'll look like.
8. Know when it's time to stop working: It's possible to blow right past your ideal retirement time because you're so busy trying to earn or accomplish more. According to Perkins, nobody lying on their deathbed wishes they'd spent more time in the office.
9. Take big risks earlier rather than later: The younger you are, the more room you have to recover from slip-ups. If you discover an opportunity that poses a little risk, do it before you're too old.

As I continue to consider the points made in this book, I appreciate the reminder to make the most of my adventure on this Earth while I still can. However, I've found it impossible to forget the millions of Americans ages 65 and older who live in poverty or the 4 in 10 workers with no retirement savings.

While the reminder to create priceless experiences is important, the financial realities of life push me back into the camp of people who are driven to squirrel away extra money. My suspicion is there's a balance. Maybe I just haven't found it yet.

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