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Can I Retire Now? The Right Spending Plan May Be The Difference

RL093 – Can I Retire Now? The Right Spending Plan May Be The Difference

Today on the Retirement Lifestyle Show, Roshan Loungani, Erik Olson, and Adrian Nicholson go through several dynamic retirement spending strategies. They break down the retirement spending smile, the guardrails approach and explain why most people are defined by their spending habits.

[03:34] Dynamic Retirement Spending Strategies

[06:02] The Retirement Spending Smile

[13:50] Predicting Expenses During Retirement

[16:30] Reasons Why You Need a Retirement Plan

[19:30] The Guardrails Retirement Strategy

[24:40] The Floor and Ceiling Approach to Retirement

[37:10] The Three Common Types of Expenses During Retirement

[41:58] Why Most People are Defined by Their Spending Habits

[43:01] Calculating the Probability of Success of a Retirement Plan

[53:00] Planning for Adjustments and Why You Need Regular Updates

[55:10] The Safety First Approach to Retirement Planning

[59:58] Parting Thoughts

For more links and the full show notes keep scrolling down!

Roshan Loungani can be reached at or at 202-536-4468.

Erik Olson can be reached at or 815-940-4652.

Adrian Nicholson can be reached at or at 703-915-8905.

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Full Show Notes:

What is the Retirement Spending Smile?

For the most part, retirees approach retirement planning thinking they'll just implement one plan and then spend the same amount throughout their retirement. Of course, this assumption makes the retirement planning process notably simpler, but it's not practical. Most people's spending desires, needs, and priorities change over time. So, it's rare to find a monotonic retirement plan that remains constant throughout the retirement period. This brings in the retirement spending smile.

Most people take full advantage of the first few years of their retirement to travel, make up for lost time, or even just partake in their slightly expensive hobbies. So, spending is relatively high the first few years. Interestingly, as retirees get older, they tend to slow down and spend less as the years go by. But then the curve goes up again towards the end of their lives when several medical expenses start popping up. This up, down, and up again movement is what we call the retirement spending smile.

The Guardrails Retirement Withdrawal Strategy and Monte Carlo Simulations

The guardrail retirement withdrawal strategy has gained a lot of traction in the past few years due to its theoretical effectiveness. First, the technique involves withdrawal frameworks that set thresholds that could trigger an increase or decrease in retirement spending. Most experts agree that the formula can be effective because of the advantages of managing retirement spending expectations. For example, the guardrails strategy can tell a client when a spending change should occur and how much of a spending increase or decrease would result from the shifts in spending. However, the approach is primarily built upon portfolio withdrawal rates, which rarely capture a lot of retiree-specific results that could trigger a change in spending habits.

On the other hand, in the Monte Carlo simulations, their ability to incorporate retiree-specific practices into a simulation reflects much better outcomes to a given retiree's goals and preferences.

All opinions expressed by podcast hosts and guests are solely their own. While based on information that they believe is reliable, neither Arete Wealth nor its affiliates warrant its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only, and should not be regarded as specific advice or recommendations for any individual. Before making any decisions, consult a professional.

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