Are We Spending Too Much to Retire?

In Articles, Articles: Kansas City Office, Articles: Salt Lake City Office by Scott Dougan

It’s one of the most important – and frustrating – questions to answer as you approach retirement: “How much will I actually spend?” It seems like something we should all know, but many people realize as they near the finish line that they’re just guessing.

This question sits at the core of retirement planning. Your expenses, now and in retirement, determine how much income you’ll need and how sustainable your savings will be. And yet, despite how basic it seems, the answer varies widely from person to person.

Why It’s So Hard to Answer

Each retiree’s spending story is unique. Some plan to travel extensively and explore the world, while others look forward to simplifying life and enjoying time close to home. Some are single, others married. Some have kids and grandkids to support, others don’t. But beyond lifestyle, personality plays a big role too, especially how we view and interact with money.

I’ve had conversations with people who admit, “If it’s in my account, I’ll spend it.” For them, it’s smarter to keep retirement income distributions low and let the rest of the money remain invested until it’s truly needed. On the flip side, another client said she’d prefer a little more income each month just to see her savings account grow – it gives her peace of mind, even if she doesn’t spend it. Same financial starting point, totally different emotional drivers.

These attitudes don’t determine how much you’ll need to retire, but they do shape how you spend once you’re there. And those behaviors need to be factored into a retirement income plan.

The Psychology of Spending

It may sound cliché, but it’s technically possible to retire on very little if you live simply enough – say, in an old camper van, with no travel, ramen noodle dinners, and no health insurance. But most of us aren’t looking for a minimalist survivalist retirement.

Instead, what you’ll spend in retirement is a mix of fixed costs (like housing, insurance, and utilities) and variable ones (like travel, hobbies, and gifts). Your mindset toward money, whether you’re a spender, a saver, or a little of both, helps shape how those variables play out.

A Few Planning Principles

So how can you plan for retirement spending when there’s so much uncertainty? Here are some key thoughts to guide the process:

  • Start with your current expenses and add anything new you plan to do in retirement. Are you taking more trips? Picking up new hobbies? Hosting more family dinners? Add those in. Then subtract any expenses that are going away, like saving into a 401(k) or commuting costs.
  • Health insurance is often the biggest wildcard. Until Medicare kicks in at 65, premiums can be a major budget item – and they’ve been increasing faster than most other costs. One strategy: set aside a dedicated ‘health fund’ before retiring to help cover unexpected jumps in coverage costs. Consider doing this in an HSA if you have one available to you.
  • Spending usually declines with age. Most retirees go through phases. The ‘Go-Go’ years are active and often more expensive – think travel, golf, and time with grandkids. Then come the ‘Slow-Go’ years where travel slows and routines become simpler. Finally, the ‘No-Go’ years often see spending shrink, except in cases where long-term care becomes necessary. We typically adjust retirement plans by assuming lower inflation in spending during later years, while accounting for the possibility of care expenses.
  • Flexibility is key. Your spending, and your plan, should be allowed to evolve. Retirement isn’t static. You’ll shift gears, make new choices, and encounter surprises along the way. Having a plan that adapts is more valuable than trying to create a perfect one upfront.

What’s the Right Number?

Unfortunately, there’s no one-size-fits-all answer to how much you’ll spend in retirement. But asking the right questions and having honest discussions can bring remarkable clarity. Each person is different, each couple has unique values, and each phase of retirement brings its own priorities.

The key is to start with a thoughtful plan, allow for some financial margin, and commit to revisiting the plan regularly. That way, you’re not just hoping you’ll have enough; you’re planning to have enough for the life you want to live.

Because in retirement, the goal isn’t just to stop working – it’s to start living on purpose.