How Retirees Turn $1 Million in Savings into $5 Million (and How That Might Be Holding Them Back)

Many retirees dream of reaching $1 million in savings, believing it will finally give them the freedom to relax and enjoy life.

Yet, according to certified financial planner Kevin Lum, many end up with sometimes $5 million or more by the end of retirement. While that might sound great, it usually isn’t the result of brilliant investing. In a recent video, Lum said it happens because many retirees simply don’t spend the money they’ve saved.

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Here’s how retirees turn $1 million in savings into $5 million and how that might be holding them back.

Lum calls this the “consumption gap.” It’s the space between what retirees could spend comfortably and what they actually do.

Even in tough market years, many see their nest eggs hold steady or grow. Lum has seen it firsthand: One client, with pensions and Social Security covering all expenses, resisted taking a dream trip despite having $4 million saved. His reminder was simple: “You are retired.”

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Lum said two forces drive this underspending.

The first is a lifetime of saving habits. After decades of delayed gratification, spending freely can feel almost irresponsible.

The second is uncertainty about the future. Retirees worry about living longer than expected, the rising costs of inflation or the possibility of market downturns, even when the math shows they’re financially secure.

He said another couple with $7 million at age 75, asking whether they could “afford” to buy a new front door. Their fear of overspending outweighed the reality that their portfolio would more than cover it.

While leaving a large inheritance can be meaningful, Lum said that overly conservative spending often comes at a hidden cost.

Retirees who cling to their savings may miss out on experiences like travel, hobbies or family celebrations. Some postpone spending until later years, only to discover that declining health limits what their money can actually buy.

Lum said that while heirs may eventually receive a larger financial gift, they often lose the chance to share in memories and experiences that could have been created along the way. For many retirees, he said, the fear of running out overshadows the reality that their money will likely outlast them.

Lum said retirees need financial planning and permission to enjoy what they’ve saved.

He said one of the best ways to build that confidence is to create a realistic spending plan that takes inflation and long-term needs into account. Retirees can also set aside money specifically for enjoyment, whether in a “fun fund” or a travel account, so it feels normal to use savings on meaningful experiences.

Lum said it also helps to plan explicitly for healthcare costs, since medical worries are one of the biggest reasons people hold back from spending. Above all, he said, working with a trusted advisor can provide the reassurance many retirees need to feel comfortable living more fully in retirement.

Lum said the biggest risk many retirees face isn’t running out of money; it’s never enjoying it.

Years of saving and fear of the unknown can leave people clinging to their nest eggs while missing the experiences those savings were meant to support. He encouraged retirees to ask a simple question: “If not now, when?”

Retirement funds aren’t just for preserving wealth. They’re there to create joy, memories and meaning while there’s still time.

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