Kiplinger’s recent published an article that is getting a lot of buzz about their description of three different phases of retirement. They are proposing that retirees plan on spending more early – during your ‘Go-Go Years’ – versus later in retirement, when your energy & desire to be very active may decline.
Calling the later two stages ‘Slow-Go’ and ‘Won’t-Go’, they propose people plan to front load their travel & entertainment spending. This advice aligns with the article I wrote in January showing that people spend less as they age.
Most people planning for FIRE get this idea conceptually, but I thought I would share how we have built it into our planning.
Our annual withdrawal rate since we retired 3 years ago has been about 5%. That’s a 1 percentage point above the 4% withdrawal rate you often see published as a planning rule of thumb.
There are a few reasons we are withdrawing more now, but most is due to outlays for our son’s college tuition & expenses. These will end next year, but I imagine we’ll still be above 4%. We have built extra into our spending plan to support travel and other ‘Go-Go’ activities.
Our ordinary income, which is close to nothing right now, will grow when my MegaCorp pension and Social Security kick in during our 60s. Our savings withdrawal rate drops dramatically at that time, but our spending stays aggressive. In our 70s, I’ve ratcheted down our spending by 5% at age 75, age 80, and age 85. That’s a 15% spending reduction over 10 years.
That’s the best sense I could put to spending a little more now, when we are more active. After all, the very idea of FIRE is buying yourself the time to go out and enjoy yourself. We’ve been traveling 5-6x a year since we reached FIRE, but I don’t see us keeping up that same pace later in life.
While our financial forecast ends at age 90, although that doesn’t mean we expect to have exhausted all of our assets at that time. We have plenty of cushion built in the model to ensure we don’t get caught short.
How have you planned spending for your ‘Go-Go’ years?
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