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The fear of running out of money often results in an overly conservative retirement plan. The flat-line spending model doesn't properly reflect the math behind a typical retirement spending glide path. Here's what the research suggests we do instead.  Open up almost any retirement planning tool, run a projection, and 99% of the time you’ll see a flat withdrawal rate (usually 4%) from 65 to 90, adjusted for inflation. It’s predictable and tidy. It's also entirely oversimplified. The problem with the flat withdrawal rate is that it implies you, at 65, will have the same spending behavior as you at 85. Do you think you’ll have the same appetite for life, same desire to travel, same interest in a new car, same urge to go out for a drink at these vastly different ages? Probably not, right? Aging is dynamic. Every stage of life looks very different at its beginning versus its end. When your financial plan is built on a flat line, the math often tells you there's a crisis looming at 90 that demands significant restraint today. The result is a scarcity mindset that isn't entirely reflective of your evolving financial wants and needs. A 2022 National Bureau of Economic Research (NBER) working paper tracked real household spending data across thousands of Americans and came to this conclusion about retirement withdrawal projections: spending naturally declines with age at roughly 1–2% per year in real terms. The decline is consistent, spans all educational backgrounds, and holds for both singles and couples. Take a look at the below chart from the study.  Many of the participants’ spending patterns either decreased or stayed the same. However, even if you spend the same amount over time (or even slightly more), it equates to a decline in spending once adjusted for inflation. This small implication can make a substantial difference for financial plans. If you follow the norm and plan for a flat line, but life follows a declining spend glide path, you're accumulating for a level of consumption your 80-year-old self won't care to spend. In the process, you're constraining the version of yourself that could actually benefit from it. Utility Is a Moving Target A dollar’s utility has a contextual value based on what it can produce for you in any given moment. The NBER study asked respondents to rate how much their enjoyment of various spending-related activities had changed over a six-year period. The categories included eating out, traveling, leisure activities, new clothes, a new car, new appliances, and giving financial support to family. The pattern that emerged? Enjoyment of almost every category declined with age, with travel and leisure showing the sharpest drop. The decline accelerated the older the participants got. By the time respondents reached 85 and older, their reported enjoyment of travel had fallen nearly a full point on the rating scale compared to those in their early 60s. The researchers found that health outlook was the primary constraint, not finances. I want to reflect on this finding. The decline in marginal utility from travel wasn't because people couldn't afford it, but because they weren’t healthy enough to fully enjoy it. A trip to the Swiss Alps at 65 is a completely different asset than a trip to the Swiss Alps at 85. At 65, that trip represents a long-deferred dream: the energy to walk/hike, the mobility to explore, the physical capacity to fully inhabit the experience. In the 80-85 range, however, the trip may not even be physically feasible. The dollar amount is identical (adjusted for inflation), but the utility is not. This is why front-loading experiences in your prime retirement years is mathematically feasible and economically rational. You are deploying resources when they produce the highest return. Saving them for later erodes their value. The Satisfaction Safety Net If spending naturally declines with age and people are cutting back on the things they used to love due to depreciating health, you might expect older Americans to report feeling more financial stress as they age. Wrong. The research found the opposite. The study found that roughly 18% of those in their late 50s reported being completely or very satisfied with their financial situation. By the time respondents crossed 80, that number had climbed to around 43%. The fraction reporting dissatisfaction followed the mirror image, falling sharply with age. On the question of financial constraints, the same pattern was held. Older respondents were more likely to report feeling unconstrained or only slightly constrained, and less likely to report feeling "very constrained," compared to those nearing retirement age. In other words, your future self (the person your savings are protecting) will very likely be more satisfied with less. Their desires will have changed. The things they need to feel comfortable and secure will cost less, not more. The fear of being broke near the end of life is real and worth taking seriously; however, the data says the version of you that arrives there will almost certainly be happier with less. Practical Application: How to Adjust the Plan Instead of projecting flat inflation-adjusted spending from 65 to 95, model a 1–2% annual real decline in discretionary spending starting around age 75 (YMMV). Keep healthcare as a separate, potentially rising line item, as that category genuinely does increase significantly with age. But for everything else (travel, entertainment, dining, leisure, etc.) model it the way the data suggests. When you run that projection, two things happen: 1. The math substantially changes. A declining spending path requires meaningfully less capital to sustain over a 30-year retirement than a flat one. 2. There’s much clearer optionality. When your plan explicitly models lower discretionary spending in later years, you can see, with clarity, what's available to spend in the early years. These numbers are a general outline based on common age breaks. But individual health is the ultimate gatekeeper of how you experience retirement. A couple of weeks ago, I wrote about how biological aging happens in sudden bursts (one around age 44, another around 60). The NBER paper adds to that: enjoyment of travel and leisure declines most sharply with health deterioration as opposed to financial constraints. The practical implication is that spending on experiences sooner, while health allows it, is a reasonable hedge against capability risk, the one variable that no financial plan can fully protect. The Confidence Anchor Before hammering home some final points, I want to clarify the call to action here. I’m not advocating for reckless spending. This isn't a permission slip to blow your retirement savings on a whim and hope the math works out. The psychological freedom to front-load your retirement spending — to be more aggressive in your early years — depends entirely on having a plan that's been stress-tested for longevity, healthcare costs, and sequence-of-return risk. A good retirement plan is the infrastructure that lets you stop worrying. I’m not talking back-of-the-napkin numbers here. I’m talking about a well-laid-out and plan that allows you to spend with confidence. Without it, the fear of running out will always win, no matter how clearly the data suggests otherwise. Exceptions To These Rules The discussed glided path suggestion obscures the reality for people whose story looks different. Here’s a few scenarios where the proposed retirement glide path breaks down: 1. The 20% who don't follow the declining spending script. The NBER study found that while financial satisfaction increases with age for the majority, roughly 20% of those over 80 reported not being satisfied with their financial situation. For this group, the spending decline represented a significant constraint. Whatever combination of inadequate savings, adverse health events, or unexpected costs put them there, the outcome is real financial stress at an age when options are limited. This is exactly the risk a good financial plan is designed to prevent, and it's a reminder that the declining consumption glide path is only usable if the foundation underneath it is solid. 2. The long-term care wildcard. As I mentioned previously, healthcare spending is the one budget category that reliably moves in the opposite direction to most everything else. The average nursing home stay runs well over $90,000 a year, likely even more in population centers. A multi-year cognitive decline requiring memory care can exhaust even a well-funded retirement plan. My argument for spending more early in retirement assumes that healthcare is a separate, explicitly modeled line item rather than folding it into the general "spending will decline" assumption. 3. The people who genuinely enjoy watching the balance grow. For some people, watching the number grow is the utility. The security it represents, the optionality it preserves, the identity it reflects. For others, leaving a substantial legacy is their primary goal, and there isn’t anything wrong with that. 4. The people who just live simply. Some people arrive at retirement having already figured out that their deepest sources of satisfaction don't cost much. They cook at home because they love it. They keep the old RV because it takes them exactly where they want to go. Their idea of a great weekend is a couple of days camping with their grandchildren and a good book. No need to match someone else’s definition of a good retirement My point is: this article is not a mandate to spend more than you want or to take risks that aren't adequately backstopped. Know which category you're in before you decide what to do with the data. Conclusion: Don't Save the Best for Last There's a version of retirement that almost nobody plans for and that many people end up living/regretting: one where the best years of retirement were spent being overly cautious. For the majority of retirees, the arc of retirement reflects a shrinking footprint of desires, where satisfaction increases even as spending decreases. The take home? The window where your money and your body are both working in your favor is shorter than many financial plans acknowledge. If you focus on maximizing the years when intentional spending produces the most life utility, you’ll avoid paying the price for a risk that never materializes. Plan accordingly and your future self will be just fine. References: 1. Rohwedder, Hurd & Hudomiet, "Explanations for the Decline in Spending at Older Ages," NBER Working Paper No. 30460, September 2022.
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