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News Release

Approach Retirement with a Smile

January 20, 2015

CFP Board’s Consumer Advocate Explains How to Control Your Spending in Retirement

As millions of Americans prepare for and enter retirement, it’s natural for many of us to feel worried or concerned about how much money is needed to live comfortably. Despite all of the apprehension, CFP Board’s Consumer Advocate Eleanor Blayney, CFP
® explains that there are a few reasons to smile. 

In fact, recent research into retirement spending describes the “retirement smile”: retirees begin retirement at a higher than average spending level and end their retirement period with another higher expenditure level (the corners of the “smile”), but in between the two is the curve of decreasing then increasing spending.

“It’s normal to spend more liberally in early retirement – the time when healthy retirees travel, remain active and enjoy life,” says Blayney. “However, while the worry to spend later in retirement is indeed a reality, it does not result in overall overspending.”

In her latest contribution to, Blayney explains how each of us has more control of our spending in retirement than we may think:

  • There’s nothing “fixed” about retirement. We often think that the last phase of our lives is defined, if not confined, by the constraints of living on a fixed income. The reality is far more flexible. There will be years of more and years of less, years of having fun and years of taking care.
  • While planning for retirement is imperative to ensure you have the resources to support your spending, planning in retirement is critical, too. The ebb and flow of spending – which in turn dictates the amount of taxable income you need to withdraw from your retirement accounts – can create opportunities for creative tax planning. For example, keeping your adjusted gross income down in a low-spending year may allow you to take advantage of certain tax credits and deductions.

  • During the years of spending more, be sure to spend smart. At the beginning of retirement when you’re still healthy, energetic, and have an overflowing bucket list of things to do and places to see, it’s tempting to live large and enjoy life. That can be okay, as long as you plan carefully for that largesse and make smart spending choices. Use the free time afforded by your retirement to budget and price compare before you spend. For example, eliminate all those premiums you paid for convenience while working and time was short. Travel during the off seasons; fly through a connecting city, rather than direct; dine out at that new restaurant at lunchtime rather than dinner; get tickets for the matinee film or play.

  • Just because you are in retirement, does not mean you shouldn’t save for it. Use the lower expense years – that period between ages 70 and 75 – to start preparing for the higher expenses likely to come at the end of retirement. If you can, set aside any “leftover” income at the end of the month in a reserve account to hedge against future medical and personal care expenses not covered by insurance. 

  • Real spending is what really matters. Retirees should focus on maintaining the purchasing power of their sources of income. This means keeping a healthy allocation to equity investments, real estate and commodities in one’s portfolio, rather than trying to lock everything into guaranteed sources of income. Playing it too safe, investment-wise, can mean retiring sorry.

“If you’re still finding it tough to feel happy about retirement, consider hiring a CFP® professional,” says Blayney. “CFP Board studies have shown that those who do their financial planning with a trusted professional feel much more in control of their futures. And that is certainly something to smile about!”