Retirement Spending Smile

The retirement spending smile describes an empirical pattern, documented in retirement-spending research, in which a retired household's real, inflation-adjusted total spending tends to decline gradually through the early-to-middle years of retirement and then rise again in the later years, producing a U-shaped, or "smiling," curve when plotted against age.

The research most associated with this finding is David Blanchett's work, published as "Estimating the True Cost of Retirement" in the early 2010s, which found that many retirees' real spending declines for a period and then increases again toward the end of life, rather than holding constant after adjusting for inflation, as many earlier retirement planning models had assumed. The decline through the middle years lines up with what is sometimes described qualitatively as the go-go, slow-go, no-go years framework: discretionary spending on travel, dining, and activities that require good health and energy tends to fall as retirees age and slow down, even before major healthcare needs arrive.

The uptick late in the curve is generally attributed to rising healthcare costs, and for retirees who need it, long-term care, which can climb sharply and are less discretionary than the categories that declined earlier. The result on a chart is a curve that dips in the middle and turns back up at the far end, the "smile" the name refers to.

The planning implication is that a model assuming flat, inflation-adjusted spending for the entire span of retirement may overstate what a typical retiree needs during the middle years, when spending is often naturally declining, while understating the specific risk of a late-life healthcare or long-term-care cost spike if that risk isn't planned for on its own terms. This doesn't mean every retiree's spending follows the curve exactly, and it isn't a rule for any one household; it's a pattern found across many retirees studied, and it should inform, rather than replace, planning built around a specific household's actual expected costs, especially the possibility of long-term care, which the smile's late upswing is partly describing.

The pattern is easiest to see as a shape rather than a formula. A purely illustrative example of that shape, not a finding from any specific study: suppose a retired couple's real annual spending starts at $80,000 in their first year of retirement, eases down to around $70,000 by their mid-70s as travel and discretionary spending slow, and then rises again to around $85,000 in their mid-80s as healthcare and care costs increase. That dip-then-rise shape, not the specific dollar figures, is what the retirement spending smile describes.

Pros

• Offers a more realistic default assumption than pure flat, inflation-adjusted spending, which likely overstates typical mid-retirement needs for many households.
• Highlights that healthcare and long-term care spending deserve their own planning attention rather than being blended into an average that hides the late-life spike.

Cons

• It's a pattern found across many retirees studied, not a guarantee for any specific household; a serious illness, a major purchase, or a change in family circumstances can override the general shape at any point.
• Relying on an assumed decline in the middle years could lead to under-saving if a particular household's actual spending doesn't ease off the way the average curve does.