Spending in retirement is not straightforward and based on my personal experience working with hundreds of retirees there are actually 3 phases of retirement spending. 

No longer is it a case of retiring and receiving the same amount of income every month for the rest of your life.   

You have far more choices these days. Choices that can fit with your planned lifestyle rather than your lifestyle having to fit your finances.


What are the 3 phases of retirement spending


In my experience there are 3 phases of retirement spending. Michael Stein, author of “The Prosperous Retirement labels these: 

1. The Go Go Years 

  • The period just after retirement.  
  • Where you try to maintain similar spending levels as before retirement with a few extras thrown in like more travelling and eating out. 
  • This is your active phase where your health and energy are at their peak.

2. The Slow Go Years 

  • Where you start to slow down. 
  • Your health and energy start to decline. 
  • You don’t travel as much. 
  • Things start to become a bit more routine.

3. The No Go Years 

  • Towards the end of your life. 
  • Most discretionary spending has stopped and you just spend on the core things like housing costs.

There are no exact time frames on when these 3 phases of retirement begin and end as everyone’s retirement is different. It will depend on your health and wealth as to how long each phase runs.  

There is a caveat to the 3 phases of retirement spending and that’s if you require long term care in the later stages of your life. If this is the case then your spending pattern will actually be a ‘U’ shape where you spend more in the early years of your retirement, then spending declines before increasing again to pay for care costs.

Why it’s important to plan for the 3 phases of retirement spending


In retirement you are ultimately trying to find a balance between not spending too much early on so you run out of money but at the same time you don’t want to spend too little and leave too much behind. 

Understanding and thinking about how your retirement spending might look is really important as it could mean you don’t need as much income as you previously thought and this unlocks a number of potential benefits. 

For example: 

  • Retire early. By factoring in a reduction in retirement income during the ‘Slow Go’ and ‘No Go’ years your retirement pot might now last longer than you think meaning you already have enough now. 
  • Benefit from higher spending now. You could actually enjoy yourself more now and spend more knowing that you will reduce spending in later life. This helps to ensure you are not too frugal whilst still healthy and full of energy which then means you don’t leave too much behind on death. 
  • Defined benefit pension transfers. Defined benefit pensions, whilst great that they give you some security of an income in retirement, they are rigid and you will find your pension income grows over time meaning you get the most the year before you die. By considering a transfer of your defined benefit pension into a personal pension it means you can get more of the income in the early years to suit your flexible lifestyle. A note of caution though, you should always seek a professional analysis of your defined benefit pension as a transfer is not going to be right for everyone and there are lots of factors involved. 

One of my clients Ian (aged 65) will be retiring before the end of this tax year. We have been working together for a number of years now planning his retirement.  

His retirement plans include quite a high income from his pension pot for the next 10 years, plus he wants to buy a camper van and do quite a bit of travelling.  

On first analysis, his pension pot was struggling to cover Ian’s retirement plans but over a period of time we worked together on the plan to tweak it and make it more realistic to what Ian wanted.  

This included a transfer of Ian’s defined benefit pension. Ian is single with one child so apart from the lack of death benefits for his daughter the defined benefit pension just didn’t suit his planned lifestyle. The transfer allows him to receive more income now plus a lump sum to buy his camper van. If something goes wrong there is a large pot for his daughter to inherit.  

We also factored into his plan the ‘Slow Go’ and ‘No Go’ years which was a more realistic spending pattern for Ian in retirement. 

Finally we have designed an investment strategy to ensure Ian’s pension pot continues to grow and support his income needs over the long term and is able to weather the economic storms that will inevitably appear every now and then. 

Overall, Ian now has a stress-tested retirement plan giving him confidence, he gets the full benefit of his lifetime savings whilst also never running out of money. 

Of course this type of planning requires knowledge and experience of all the factors and evidence involved in retirement as well as sophisticated software to model lots of different scenarios.  

We have it all so we can ensure we always build robust retirement plans for our clients so you can maximise your retirement income and live the retirement of their dreams.  

If you would like help ensuring you never run out of money in retirement and don’t leave too much behind then please schedule a no obligation free 15-minute call 


Risk warning:

Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.