Retirement Spending
Key Takeaway
Plan spending by category for a realistic picture, and account for healthcare costs that often exceed expectations.
Beyond a Single Number
Many people think of retirement spending as a single monthly figure. But real retirement spending involves many categories: housing, healthcare, travel, food, insurance, gifts, emergencies, and more. Planning at the category level gives you a much more realistic picture.
Healthcare Costs
Healthcare is often the most underestimated retirement expense. Medical costs tend to rise faster than general inflation, and needs typically increase with age. Building in a specific healthcare inflation assumption is important.
Spending Patterns Change
Many retirees spend more in early retirement (travel, hobbies) and less in later years. Some have a period of higher spending again in very late retirement due to care needs. Planning for these phases can improve your projection accuracy.
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