Won’t I Need Less Money Once I Retire?

Do retirees actually spend less?

Often, no. Many people keep the same lifestyle after work stops. Early years can include more trips and projects. Later years bring higher medical and care costs. Research refers to this as a “spending smile,” where spending is higher early on, dips in mid-retirement, and then rises again near the end of life.

Luke Rudolph, Stoic Wealth Advisor: Most clients want to keep the life they already live. His guidance is simple: “You’re going to need as much as you possibly can.” That is why our plans start with your real budget, not a stripped version.

Why the “I’ll need less” idea usually fails

Lifestyle habits stick

If you have lived at a certain level for years, you will try to keep it in retirement. We see this in plan reviews. Luke puts it this way: many clients “do not give up their core lifestyle,” so planning should reflect that reality.

Prices keep rising

Retirees feel inflation differently than workers. The Bureau of Labor Statistics publishes a research index for Americans age 62 and older, R-CPI-E. It helps show why a retiree's budget should include a yearly cost-of-living increase.

Health costs matter

Medical costs take a growing share of the budget over time. Fidelity’s 2025 estimate suggests that a 65-year-old retiring this year should plan for approximately $172,500 in lifetime medical expenses, on average. This excludes long-term care and varies by individual, but it serves as a useful planning anchor.

How much do you really need? Use the walk-back method.

Start with the life you want to live. Then “walk it backward” into savings, investments, taxes, and withdrawals. Luke’s line is right: once you know year one, “it is easier to walk that backward.”

Step 1 — Price year one

List today’s after-tax spending on housing, food, utilities, transportation, insurance, giving, and fun. Work from your actual bills.

Step 2 — Remove true work costs

Cut items that end or drop in retirement, such as commuting, uniforms or scrubs, grab-and-go meals, payroll taxes, and retirement contributions that stop.

Step 3 — Add retirement-only items.

If you expect to engage in more travel and hobbies early on, allocate those dollars intentionally in year one. That aligns with the findings of the spending-smile research.

Step 4 — Respect healthcare math

Add a line for premiums and out-of-pocket costs. Begin with a reasonable placeholder and update it annually. Use the latest 65-year-old estimate as your starting point.

Step 5 — Apply a yearly COLA

Add a cost-of-living increase that matches your own basket of costs. Review it against retiree-focused inflation research, such as R-CPI-E.

Step 6 — Connect it to your savings and withdrawals

With year-one spending defined, set a savings target and contribution rate, choose an investment mix with a sensible planning return range, and design withdrawals that fit your cash flow. That is the “walk-back.”

A simple example you can picture

• Today’s lifestyle after tax: $90,000
• Minus real work costs: –$10,000
• Plus early-retirement travel or hobbies: + $8,000
• Plus premiums and out-of-pocket health costs: + $9,000

Estimated first-year retirement spend: $97,000, then add your yearly COLA.

From here, subtract guaranteed income, such as Social Security or a pension. The remainder is the gap your portfolio must fund with a prudent, stress-tested withdrawal plan.

How to reduce “bad timing” risk

The order of returns around your retirement date matters. If markets drop early while you are taking withdrawals, the plan faces more strain. This is called sequence-of-returns risk. Use a cash buffer, flexible withdrawals, rebalancing, and a mix you can hold through declines. Morningstar’s explainer illustrates why early losses, combined with withdrawals, can result in a double hit.

History also shows the S&P 500 often has double-digit pullbacks within a year and still finishes with a gain. Plan for those drops so a normal swing does not force cuts you will regret. J.P. Morgan’s Guide to the Markets tracks this pattern across many years.

Why do many people expect to spend less, but often do not

• Some work costs disappear. Commuting and job expenses shrink or end.
• Three forces keep budgets firm. Lifestyle habits, active early years, and rising prices and medical costs. Together, they explain why spending does not always fall.

Luke’s summary: most retirees want to keep their current life, take more trips early, and face rising prices over time. Plan for that, then walk it backward into a budget and portfolio that can support it.

Your 10-minute action plan

1. Pull 12 months of statements. Tag each line work, lifestyle, or health.
2. Draft your first-year retirement budget. Add a line for travel and experiences.
3. Add a yearly COLA and a current healthcare placeholder. Review each year against updated data.
4. Book a planning session. We will size your gap, set contributions, choose a risk-appropriate mix, and build a withdrawal plan that works in good and bad markets.

Work with Stoic Wealth Advisors

We plan from your real life. We incorporate inflation the way retirees experience it, accurately reflect health costs, and utilize the spending-smile pattern to shape both early and later years. Then we back into savings targets, an investment mix that can be held through downturns, and a withdrawal plan that keeps monthly income steady. When you are ready, we will walk it backward to your number and put it in motion. Call (928) 224-3160 or reach us on our contact page.

FAQs

1. Won’t I need less money once I retire? Often no. We tend to keep our lifestyle, early travel raises spending, and inflation compounds. Evidence shows retiree spending is curved (a “smile”), not a cliff.
2. How should I think about inflation in retirement? Use a COLA. The BLS’s experimental R-CPI-E tracks price changes for older households, reminding us that the retiree basket can move differently from the headline CPI.
3. What healthcare number should I use today? A 65-year-old retiring in 2025 can expect to incur approximately $172,500 in lifetime medical costs on average (single; excludes long-term care). Update this placeholder annually.
4. Why do advisors talk about “sequence of returns risk”? The order of returns matters around your retirement date. A rough market early on can shrink portfolios faster because you’re withdrawing while assets are down—so we design buffers and dynamic withdrawal rules to reduce that risk.

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Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. Investing involves risk, including loss of principal. Past performance is no guarantee of future results.