There is a standard assumption baked into most retirement income projections. It goes roughly like this: you will spend a fixed amount each year, adjusted upward for inflation, until you die. The math is tidy. The assumption is wrong. Research into actual retiree spending patterns consistently finds something different — a pattern that starts high, drops through the middle years, and rises again at the end. Financial researchers call this the Retirement Spending Smile. The framework that makes it most practical to plan with divides retirement into three phases: the Go-Go years, the Slow-Go yea
The opening decade of retirement is characterized by high discretionary spending. You are healthy. You are mobile. You have the time you spent forty years wishing you had. Travel, hobbies, family experiences, and significant purchases tend to cluster here. Spending in the Go-Go years often exceeds pre-retirement levels. This is not a planning error — it is the intended use of the money. Retirees who enter this phase with adequate resources frequently "front-load" experiences they deferred during working years. The spending is real and intentional. This is important to understand because conventional retirement income models that budget for constant or declining spending from day one may cause you to under-spend during the years when you are most capable of enjoying it. The fear of a future shortfall constrains present spending in ways that the actual spending curve does not require.
Physical mobility changes in the Slow-Go years, and spending changes with it. Long-haul travel becomes less frequent and more localized. Expensive hobbies give way to lower-cost activities. Consumption shifts from experiences toward home and routine. Blanchett's research found that real, inflation-adjusted spending typically declines by 1 to 2 percent per year during this phase. The cumulative effect is significant: a household that started retirement with a $100,000 annual budget may find its real spending has dropped to approximately $74,000 by the time it reaches the trough of the Slow-Go years around age 84. This is not a lifestyle failure. It is a documented behavioral pattern that reflects the natural rhythm of how people actually live. The spending decline is driven by genuine changes in activity level, not by financial hardship.
The final phase of the spending curve is where the "smile" turns back upward. Discretionary spending on travel and entertainment has largely disappeared — but it is replaced by something harder to budget for: escalating healthcare and personal care costs. Seventy percent of people who reach age 65 will require some form of long-term care during their lives, according to government data. The cost of that care — whether provided at home, in an assisted living facility, or in a skilled nursing facility — is not covered by Medicare for custodial needs. It falls to the individual and, in many cases, Medicaid, after assets have been largely depleted. The healthcare spike in the No-Go years is the right side of the spending smile. It is also the part that most fixed-budget retirement projections fail to model adequately. A plan that allocated generously for the Go-Go years without reserving for the No-Go healthcare spike may face a significant structural gap at the worst possible time. Slow-Go Years 7584 Declining Home, routines, 1%2%/year local activities No-Go Years 85+ Rising Medical care, (healthcare personal spike) assistance, LTC Spending patterns based on Blanchett (2014), Society of Actuaries research, and actuarial data.
The flat-line spending model is not just academically wrong — it creates practical problems in both directions. If you plan for constant real spending from age 65, you are likely to under-spend in the Go-Go years out of fear of a shortfall that the spending curve suggests will not materialize as projected. You sit on money during the years when you could most enjoy it. At the same time, the flat model underestimates the No-Go healthcare costs because it does not separate the spike from the preceding decline. A model that shows gradual spending decrease through age 90 may look adequate on a spreadsheet while completely missing the $50,000 to $150,000 or more that a long-term care need can cost in a single year. The 80 percent income replacement rule — the standard shorthand that says you should plan to live on 80 percent of your pre-retirement income — fails for the same reason. Research by the Society of Actuaries found that the actual required replacement rate ranges from 54 percent to over 87 percent depending on income level and individual spending patterns. The single-figure rule smooths away the variation that actually matters.