Most retirement plans start with a number, based on either a monthly budget, annual withdrawal rate, or a percentage of pre-retirement income. And that number, at least in the calculator, stays roughly the same from age 65 to 85, adjusted for inflation. It's a reasonable way to plan, but it's also not what reality looks like for most retirees. It won't necessarily derail your retirement. It's just more likely to cause you to live more cautiously than you need to, especially in the years when you're most capable of enjoying it.
What the research shows
Research by financial economist David Blanchett identified something called the retirement spending smile, and it tells a different story than the flat-line calculator. Actual retiree spending, adjusted for inflation, tends to follow a curve. It's highest in the early years of retirement, declines gradually through the middle years, and then rises again late in life as healthcare costs increase. The shape of that curve, when you draw it out, looks like a smile.
The data behind it is more specific than you might expect. Real spending tends to decline roughly 1% per year in the first decade of retirement, closer to 2% per year through the middle years, and then slows its decline again in the final decade as care-related costs climb back up. These aren't dramatic swings. But compounded over a 20- or 30-year retirement, the difference between planning for a flat line and planning for a smile is significant, both in how much you can comfortably spend early and how much you need to hold in reserve for later.
The three phases of retirement
The smile breaks retirement into three recognizable phases. The go-go years, roughly your 60s into your mid-70s, are when spending tends to be highest. Travel, experiences, hobbies, the things you spent decades looking forward to. This is when the money is most likely to get used, and most likely to be enjoyed. The slow-go years, generally mid-70s into the early 80s, bring a natural pullback. Not because something goes wrong, but because life simply gets quieter. Fewer long-haul trips, lower discretionary spending on things like home goods, clothing, and dining out. And then the no-go years arrive, when healthcare and long-term care costs can rise sharply, sometimes enough to offset the spending decline everywhere else.
Understanding which phase you're planning for changes everything about how you approach withdrawals, tax strategy, and what you actually give yourself permission to spend.
Here's where it gets interesting for people who have tried to do everything right. An EBRI study that tracked household assets over 30 years found that one in three retirees reached their mid-80s with their full nest egg intact or larger. Morningstar's Behavioral Insights Group confirmed the pattern, finding that retirees with at least median assets consistently underspend relative to what they could safely withdraw. For many high-net-worth retirees, net worth doesn't decline in retirement. It grows.
That might sound like a success story. For some people, if leaving a substantial inheritance is the goal, it is. But for many retirees, it represents something else: a life lived more cautiously than it needed to be.
The shift to spending can be a challenge
There's a reason this happens, and it has less to do with math than psychology. Most people who arrive at retirement with significant assets got there through decades of disciplined saving. Thrift wasn't just a habit. For many, it became part of their identity. And when retirement arrives and the direction is supposed to reverse, spending savings can feel less like enjoying the fruits of a life well planned and more like failure. So instead of spending, they fit their lifestyle into whatever Social Security covers plus a conservative withdrawal rate and leave the rest untouched.
We see this with our own clients. The temptation is to anchor to simple rules: the 4% withdrawal rate with Social Security income as a spending ceiling. Those rules feel safe. But they're averages, built for the average retiree, and they don't account for the fact that your go-go years may actually call for more than 4%, while your slow-go years may need considerably less.
One client put it more bluntly than we ever would: "I would be really mad if I ended up with millions of dollars in my 80s and didn't fly business class on my international trips in my 50s."
Spending plans year-by-year
This is where the way we plan makes a practical difference. Rather than building a retirement around a single withdrawal rate and hoping the averages hold, we model cash flow year by year for our clients. That means in your go-go years, we can show you specifically what you can spend, and in some years, that number may be higher than a flat 4% rule would suggest. In your slow-go years, it may be considerably lower. The plan reflects your actual life, not a statistical average.
Factoring market risk into retirement spending plans
It also changes how you think about market risk. When we run financial plans, we stress test them against hundreds of market scenarios. In most cases where a plan shows a lower probability of success, the culprit is a significant market downturn in the early years of retirement, or what financial planners call sequence of returns risk. That sounds alarming until you realize that the early years are precisely when you have the most flexibility. You can adjust spending, delay the family Disney cruise, or pull back temporarily without affecting the retirement you actually want. A year-by-year plan tells you exactly what to adjust and what the impact will be, so a bad market year becomes a recalibration, not a crisis.
Retirees whose plans fail due to sequence of returns risk typically didn't have a specific enough plan to know what to adjust, or didn't have enough margin to begin with. For well-prepared retirees, the bigger risk is usually the opposite. Their risk isn’t running out of money, it’s actually leaving too much of it behind.
If you're approaching retirement and your plan still looks like a flat line, let's talk about what a phased approach might look like for you. We’d love to give you permission to spend on the things that will make your retirement the dream you’ve been saving for.