Previous research has suggested that your spending tends to balloon in the “go-go” years just after retirement as you cram travel, eating out, and all kinds of new leisure adventures and experiences into that free time on your calendar.
Your spending drops back a little in the “slow-go” years midway through retirement, as you travel and go out less, the novelty of retirement wears off, and you settle into a comfortable but less active routine.
When you reach the final years of your retirement, the ones we dub the “no-go” years, your spending picks up again, not because you are out having fun, but because your healthcare, prescription, and long-term care costs start climbing.
Put it all together and it looks an awful lot like a “smile,” as seen in the accompanying graphic.
Understanding how you spend throughout the different stages of retirement is important, so we can help you to stay on a sustainable spending path. Spend too much, and you run out of money too early. Spend too little, and you miss out on valuable experiences and opportunities.
This latest data from investment research firm Morningstar and others suggests that you may be able to spend more in the early years of retirement, knowing that your spending will taper off down the road. The results also encourage you to think ahead about how you’ll pay rising healthcare costs in the future. Paying for long-term care coverage, Medicare supplement plans, and an HSA (Health Saving Account) during your working years are all good options.
The Takeaway: Next time we review your retirement projections, let’s talk about what the retirement spending “smile” might mean for your sustainable spending pathway, and also explore realistic options to cover potential healthcare costs down the road. For us, it’s all about making sure your retirement years are fulfilling, stress-free, and give you the freedom to realize your dreams.