Spend More in Retirement? Here's What The Data Says

Retirement spending patterns: what most Americans get wrong

In Episode 1 of the Decoding Your Money Podcast, FinStream’s Bob Powell interviews David Blanchett to explore a critical question: What if the biggest retirement planning mistakes are not about saving more — but about misunderstanding retirement spending patterns?

Most Americans are worried about retirement. But Blanchett’s research suggests the real issue may be how households think about saving, investing and spending over time.

Rethinking retirement assumptions

Blanchett challenges several widely held beliefs about retirement.

Many people assume they need to maintain or even increase spending steadily throughout retirement. Others assume conservative investing is always the safest path.

In reality, those assumptions often miss how people actually behave.

Understanding real-world retirement spending patterns — and how they evolve — can lead to more realistic and sustainable financial plans.

The “retirement spending smile”

One of the most important concepts discussed is the “retirement spending smile.”

This pattern shows that:

• Spending is often higher in early retirement

• It gradually declines through mid-retirement

• It rises again later in life, often due to health care costs

This challenges the traditional assumption of flat, inflation-adjusted spending throughout retirement.

Blanchett’s research indicates that many retirees actually spend less than they expect, especially in the middle years.

Are Americans saving and investing the wrong way?

The episode highlights a surprising tension:

• Many Americans are saving too little for retirement

• At the same time, they may be investing too aggressively

• Or in some cases, not spending enough once retired

This disconnect can lead to inefficient outcomes — either running out of money too early or unnecessarily restricting spending and quality of life.

A better way to plan retirement

Blanchett suggests shifting the framework for retirement planning.

Instead of focusing only on probability of success, households may benefit from focusing on goal completion — whether their plan supports the life they actually want.

He also emphasizes:

• Calibrating realistic spending assumptions

• Adjusting for longevity risk

• Accounting for market volatility and health care shocks

These factors are often underestimated in traditional plans.

New ideas: lifetime income and tontines

The conversation also explores emerging and underused strategies.

Blanchett discusses:

• Lifetime income annuities as a way to create stable income

• Innovative concepts like tontines, which pool longevity risk

These tools can help retirees manage uncertainty and potentially increase confidence in their spending decisions.

Why retirement spending patterns matter

Failure to understand retirement spending patterns can lead to:

• Underfunded retirement plans

• Overspending early in retirement

• Running out of money later in life

Blanchett’s research shows that aligning plans with real behavior and risks can improve both financial outcomes and peace of mind.

The bottom line

Retirement planning is not just about accumulating assets. It is about understanding how money is actually used over time.

By rethinking assumptions about spending, risk and longevity, households can build more flexible and realistic plans — and ultimately create a more secure financial future.