Americans are saving for retirement. But are they spending enough?

U.S. retirement accounts hold a lot of wealth. According to the Investment Company Institute, Americans hold nearly $11 trillion in 401(k)s alone. So, surely mom and dad are dipping in and finally living a little in their twilight years?

Well, not so much. In her latest report for The Atlantic, Jean Chatzky argued that it's not so great for the economy either.

“Marketplace” host Kristin Schwab spoke with Chatzky, an author, reporter, and founder and CEO of HerMoney, a digital media company focused on personal finance for women, about why. The following is an edited transcript of their conversation.

Kristin Schwab: So the piece you wrote starts off with a personal story. Tell me about your mom.

Jean Chatzky: Yeah, my mom passed away a couple of years ago, but way before that, my father died in 2005, and he left her very well-situated financially: She had a paid-off apartment in Philadelphia, she had his pension and a retirement account, and for 20 years in retirement, I watched her not spend the retirement account. She was very, very willing to spend the income that she had. She was willing to spend the Social Security and the pension, but she did not want to see the balance in the retirement account go down. And when she passed away, she actually had more in that retirement account than she started with.

Schwab: Well, yeah, it's not the case for everyone, of course. But how common is it for retirees to live frugally, even if they don't need to?

Chatzky: It's fairly common. EBRI, the Employee Benefits Research Institute, has done some looking into this, and when they looked at a group of retirees with about $500,000 in assets, not counting the equity in their homes, 20 years down the road they had only spent 12% of their money, and I think it's for two reasons. The first is that spending down is a fairly complicated math puzzle. By the time you get to retirement, you're likely to have money in taxable accounts, tax-deferred accounts, and maybe some tax-free Roth accounts. And figuring out how to get the money out of those accounts can all be pretty dodgy, but the emotional lift of it all is, I think, even more tedious and more problematic because we've spent such a long time working for many of us toward a particular retirement number, that when we start to spend and when we see the numbers start to dip, it doesn't feel like we're using the money. It feels like we're losing the money.

Schwab: Is this something people have always struggled with, or is there something else happening in the economy now that's made it more common?

Chatzky: It's a 401(k) phenomenon. If you think back a couple of generations, many more people had pensions, right? And pension checks came in every single month until you died, just like Social Security. The problem is, Social Security was never set up to replace people's spending 100% in retirement. On average, it replaces about 40%, and for people who make significantly more, it replaces far less.

Schwab: Let's zoom out for a second because there's a bigger economic question, right? I mean, what's the impact on the greater economy?

Chatzky: The economic impact is significant, too. There is a lot of money sitting in 401(k)s. There's $20 trillion in IRAs, another $15 trillion in 401(k)s. There was a study done by the National Institute on Retirement Security a few years ago, and they looked at the billions of dollars that retirees received in pension benefits, $680 billion, and figured that as those retirees used that money for the spending that they had to do. That $680 billion turned into $1.5 trillion in economic impact. And so, if you extrapolate that, every dollar sitting in a retirement account roughly equals a little over $2 in economic activity. You've got well over $50 trillion of potential consumption.

Schwab: What advice do you have for people who are listening to this, who are approaching retirement? Maybe they're already there. Any tangible takeaways to help them enjoy this period?

Chatzky: I think everyone should build what I call a “forever paycheck.” I just published a new book by that title, and essentially, it involves taking a chunk of your nest egg and converting it from assets to income, to a stream of income that you can count on for the rest of your life. It shouldn't be all your money. I think a forever paycheck should cover those things that you need, as well as the ones that you want so much that you're not willing to compromise on.