How Spending Needs Change Over the Course of Your Retirement

According to a recent article on, a retiree’s needs change over the course of their retirement. “Unfortunately, most financial planning programs look at retirement as one constant season, where spending remains the same year after year. In reality, the first five years of retirement look vastly different than the last five years.” For example, seniors are typically healthy and active early on, and are more likely to enjoy activities and travel. Over time, most retirees will start to slow down and won’t get around quite as much. Then as they start to enter their later years, they may begin to experience health problems and need assistance with household chores and caring for themselves. Most people don’t realize how much their spending will change, and as a result, end up underestimating how much retirement will truly cost them.1

Given all these changes, how do you correctly plan for how much you’re going need? “A good tool from a financial advisor or found online, will estimate how much each state of retirement will cost, and how much must be saved at a given return to get there.” However, it’s important to remember it’s just an estimate.  You should leave a reserve for your later years when health related expenses can be higher. For example, assisted living and nursing homes aren’t covered by Medicare and can be very expensive. You also want to stick to your budget rather than dipping into extra funds that flow into your investment accounts. The article goes on to list some key items to consider when it comes to developing an effective spending plan.1

College tuition

Use caution when considering tapping into retirement funds to help pay for children’s college. Young people have plenty of time to pay of school loans, whereas, their parents may not. If you have to tap into these funds, then think about taking the money out as a loan rather than a hardship withdrawal.

Savings plan

According to the article, the goal is to generate a retirement income equal to 75% of your pre-retirement earnings. People in their 40’s should stash away 15% of their gross income. For those in their 50’s that are behind on their savings’ goal, consider taking advantage of “catch-up” contributions to your 401(k) and IRAs.

Hold on to stock

Because people are living longer, there is an increased risk of outliving your nest egg. Therefore, the article recommends holding on to stocks, even after retirement, to keep up with inflation.

Have a fall back plan

The article also recommends going into retirement with little or no mortgage balance in case you need to sell your home to pay for assisted living or downsize to a less expensive home. Another option is a reverse mortgage loan. A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration insured loan. A HECM enables seniors to access a portion of their home’s equity to obtain tax free2 funds without having to make monthly mortgage payments.3

If you’d like to learn more about reverse mortgages or want to find out if you’re eligible, please use our Reverse Mortgage Calculator or call us at 800.218.1415.


1 How to Invest in Retirement –, By Jeff Brown, 8/8/16,

2 Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.

3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.

Author:  Meredith Manz