Retirement planning often starts with decades of saving, followed by a plan for how much to withdraw each year. That plan usually assumes that spending will remain fairly steady throughout a 30-year retirement.

The Schwab Center for Financial Research recently flagged changing spending needs as one of three retirement challenges that catch most people off guard.

Spending needs can shift meaningfully across a 30-year retirement, the firm cautioned, driven by longer-than-expected retirements, unexpected healthcare costs, or stronger portfolio returns. 

A Financial Planning Review study suggests that the flat-spending assumption can be costly for retirees who follow it without adjustments.

The gap between what plans assume and how retirees tend to spend creates risks on both ends, from unnecessary belt-tightening to avoidable shortfalls.

What Schwab’s spending warning gets right and what it leaves out

Rob Williams, Senior Wealth Management Executive & Strategist and Former Head of Wealth Management Research at Schwab Center for Financial Research, framed the core challenge in direct terms. 

“You can make educated guesses, but they’re just that — guesses,” Williams said. “And that makes it difficult to know if your money will last long enough.”

The firm’s February 2025 analysis details how those same forces can upend initial spending projections over a multi-decade retirement.

Williams recommends updating a comprehensive retirement income plan at least every few years, if not annually, so small misalignments get caught before they become costly.

The firm’s framework flags that spending will change, but it does not map the specific direction or shape those shifts tend to follow over 30 years.

That dimension is what the Financial Planning Review study now provides, with data challenging the flat-budget models that most retirement plans still use.

Blanchett’s research maps the spending curve retirees tend to follow

David Blanchett, Head of Retirement Research at Prudential Financial, published a study in the Financial Planning Review in June 2026.

Using data from the RAND Corporation’s Health and Retirement Study, the paper found that average retiree spending follows a U-shaped “smile.” Median spending, however, follows a “smirk,” declining without a late-life uptick.

Financial Advisor Michael Stein popularized the three phases behind the curve. The first is the “go-go” years, when retirees spend freely on travel and hobbies.

During the mid-retirement “slow-go” years, which is the second, activity levels and discretionary costs both decline, pulling total spending well below the early-retirement baseline.

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In the third “no-go” years, rising medical costs push total spending back up, creating the upward turn that completes the shape of the smile.

U.S. Bureau of Labor Statistics data from the 2024 Consumer Expenditure Survey reinforce this pattern, showing that consumer units with a reference person 75 or older spent about $55,800 in 2024.

That compares with roughly $100,300 for the 45-to-54 age group, according to the Federal Reserve Bank of St. Louis 2025 data. 

“…Spending tends to decline in real terms, even among those who have the resources to potentially spend more,” Blanchett concluded in the study.

How the spending curve changes the withdrawal math

The withdrawal rate implications of planning around a spending curve instead of a flat line are considerable, the study found.

Blanchett tested three models, each assuming a moderate level of income risk aversion, and the differences were significant across all three.

Both the smile and smirk models supported initial withdrawal rates roughly 20% higher than the flat-line assumption, the study found.

Morningstar’s retirement income research reaches a similar conclusion from a different angle.

Christine Benz, Morningstar’s Director of Personal Finance and Retirement Planning, said retirees who adopt flexible withdrawals can afford a higher starting rate.

“Don’t just take that 3.9% and run with it,” Benz said. “You probably can and should enlarge your spending if you are willing to be flexible.”

For a retiree with a $1 million portfolio, that gap translates to roughly $10,000 to $12,000 in additional first-year spending from the same savings.

Healthcare costs anchor the late-retirement spending spike

Blanchett acknowledged in his study that healthcare expenses remain a “clear wild card” when projecting income needs during the final stretch of retirement.

A 65-year-old retiring in 2026 can expect to spend $185,500 on healthcare and medical costs over the full span of retirement, Fidelity reported.

That estimate rose 7.5% from the prior year’s figure of $172,500, underscoring the pace at which late-life medical costs continue to climb.

Shannon Benton, Executive Director of The Senior Citizens League, has warned that Medicare Part B premiums consistently outpace Social Security cost-of-living adjustments. 

The gap, she said, gradually erodes seniors’ quality of life, with members reporting that their benefits are failing to keep up.

The late-life medical surge forms the right edge of Blanchett’s spending smile and highlights a gap in flat-budget planning that most traditional models overlook.

What spending-curve planning means for retirees

Blanchett’s findings point to two areas where flat-budget plans misalign with actual spending.

The go-go years support a higher withdrawal rate than most models permit, and the late-life medical surge Fidelity projects at $185,500 demands a dedicated reserve that flat budgets never carve out.

The annual plan reviews Williams recommends at Schwab become more pointed when retirees know which phase of the curve they are entering.

Planning around the curve rather than a fixed line can support a higher starting withdrawal rate, Blanchett’s data shows, but the math only holds when early spending freedom and the late-life cost spike are treated as two sides of the same budget.

Related: Schwab warns of a retirement risk easy to overlook