One of the most common mistakes retirees make is how they approach spending, especially early in retirement. After working with clients for over two decades, we have seen firsthand that poor spending strategies can lead to regret later in life. Many retirees look back in their 80s and 90s wishing they had spent their money differently during their early retirement years.

At Parallel Wealth, we focus on helping clients develop retirement spending strategies that maximize enjoyment and minimize financial stress. Here is what you need to know about spending patterns in retirement — and how to avoid the most common mistake.

What Most Retirees Get Wrong About Spending

Recent studies from BlackRock highlights several key insights into retirement spending patterns:

• Only 16% of retirees plan to spend more in the early years of retirement.
• 43% plan to spend a consistent amount throughout their entire retirement.
• 25% of retirees have no spending plan at all.

Planning to spend a consistent amount throughout retirement might seem logical. However, real-life data and client experience show otherwise. Most retirees spend more in their early 60s, less in their 70s, and even less in their 80s. Yet many retirement plans assume steady spending over decades, which often leads to an unnecessary buildup of unused assets later in life.

Why a Level Income Plan Can Create Regret

Spending the same amount each year does not align with the reality of aging. Retirees often find that travel, hobbies, and major discretionary spending decline significantly by their mid-70s. Health changes, lifestyle shifts, and natural slowing down mean fewer opportunities and desire for large expenses.

Clients who follow a flat income strategy frequently find themselves with significant unspent assets late in life. While leaving an inheritance can be a positive outcome, many retirees regret not using more of their resources to enhance their own experiences earlier.

The most common feedback we hear from clients in their 80s and 90s is, "I wish I had spent more when I was younger."

Introducing the Laddered Income Strategy

At Parallel Wealth, we use a laddered income strategy to better match retirement income with real-life spending patterns. Here’s how it works:

• Go-Go Years (Early Retirement, 60s to mid-70s):
  Higher income to support travel, hobbies, and active lifestyles.

• Slow-Go Years (Mid-70s to mid-80s):
  Moderate spending as activity naturally declines.

• No-Go Years (Late 80s and beyond):
  Reduced spending primarily focused on essentials and healthcare.

Rather than assuming flat spending, we design plans that allow clients to spend more when they are healthiest and most active, while ensuring they remain financially secure later in life.

For example, a client who could sustainably withdraw $54,000 per year under a flat plan might instead withdraw $60,000 per year during their active years, then reduce to $54,000 and eventually $40,000 per year later in retirement — all while maintaining a safe and sustainable plan.

Addressing the Concern: What About Healthcare Costs Later?

A common concern with spending more early is the potential for high healthcare or long-term care costs later. Here’s how we address it:

• Real estate assets: Most clients can tap into the equity in their home if significant healthcare costs arise.

• Prudent planning: We account for potential care costs in the later stages of retirement, adjusting plans where necessary.

• Data-backed decision-making: Statistics show a relatively small percentage of retirees require long-term care for an extended period.

For most, worrying excessively about possible future care expenses results in unnecessarily limiting their lifestyle for decades. Smart, flexible planning can provide peace of mind without sacrificing the quality of early retirement years.

The Consequences of Not Planning Properly

Clients who rely on a level income plan without adjustment typically end up with:

• Excessive unused assets in their 80s and 90s.

• Missed opportunities to travel, experience life, and enjoy their retirement.

• A psychological barrier to spending that limits fulfillment.

The goal should not be to accumulate wealth indefinitely, but rather to enjoy a fulfilling retirement while remaining financially secure.

At Parallel Wealth, we specialize in building customized retirement income strategies that reflect the real needs and goals of each client.
Our laddered income approach is just one part of a comprehensive plan designed to maximize lifestyle enjoyment, reduce taxes, and create financial peace of mind.

If you want to ensure your retirement plan truly supports the lifestyle you envision, visit parallelwealth.com/planning to learn more about our fee-for-service retirement planning options.