The Retirement Spending Myth Most Calculators Get Wrong
Planning for how retirees actually spend, not how calculators assume they spend.
If you’ve ever plugged your information into a retirement planning calculator, you’ve probably seen a projected spending chart that looks like this:
In the hypothetical scenario above, if your expenses start at $100k and increase annually at the inflation rate, 25 years from now, you’ll spend between $164k and $266k per year, depending on whether inflation averages 2% or 4%.
But that isn’t how things work.
In the real world, spending tends to decline, and what we spend money on changes as we move through different stages of life.
The following charts are from JP Morgan’s 2025 Guide to Retirement. For those with investable wealth between $250 and $750k, spending peaks early in retirement at around $75k and declines to $51k per year as they get older.
For those with investable wealth of $1m-$3m, the trend is very similar, with spending starting at $132k/year, declining to $90k over time.
Of course, you still must account for inflation, but the numbers aren’t nearly as severe.
For example, if your expenses start at $132k at age 60 and you experience annual inflation of 3%, a straight-line assumption would have them reach $371k by age 95. However, in the real world, we would expect actual expenses at age 95 to be closer to $253k / year. A discount, in future dollars, of $118k / year.
Every situation is different, and averages tell us nothing about the individual. However, by correctly framing what your expenses may look like in retirement, you can hopefully create a better plan that gives you confidence to spend more money earlier on and maybe realize you don’t need as much retirement savings as the basic calculator may have suggested.
People love knowing how they stack up compared to others. Below are the 2024 spending averages from the Bureau of Labor Statistics’ 2024 data.
Personal Note:
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