The Retirement Spending Smile: Why Your Costs Will Not Be Flat on the Emerald Coast

Most retirement calculators ask you for one number. How much do you spend? They multiply it by 25 or 30 years, adjust for inflation and hand you a result. That answer is wrong in a predictable way. Real retirees do not spend the same inflation adjusted dollars every year. They spend more in the first decade, less in the middle and more again at the end. The curve that traces this pattern is the retirement spending smile, and ignoring it is one of the most common sources of overplanning and underplanning in retirement.

What the Research Actually Shows

The smile was named by David Blanchett, then at Morningstar, who studied actual spending patterns of retiree households rather than assumed ones. His research found that real, inflation adjusted spending tends to decline by roughly 1 percent a year in the middle years of retirement and accelerates to as much as 2 percent annually during the slow years. The decline reverses in late retirement as healthcare costs accelerate.

The net effect is meaningful. Blanchett's analysis found that an average household experiences a 26 percent real decline in spending from the start of retirement through age 84. That is not a small adjustment. A linear projection that assumes constant inflation adjusted spending overstates the cost of the middle decades by more than a quarter.

Three Phases of Spending

Practitioners often break the smile into three phases, sometimes called the Go-Go, Slow-Go and No-Go years.

The Go-Go years are roughly the first decade. Health is good, energy is high and the bucket list is long. This is when retirees take the big trips, buy the boat, upgrade the kitchen and finally finish the screened porch in Navarre. T. Rowe Price research has found early retirement spending often runs 20 to 30 percent higher than later phases.

The Slow-Go years often start in the mid to late 70s. Big trips give way to short drives. Replacement cycles slow for cars, electronics and furnishings. Spending on travel, dining out and entertainment shrinks. Total spending often settles around 70 percent of go-go peak levels.

The No-Go years typically arrive in the 80s. Mobility narrows. Daily life centers on home, family and health management. Healthcare spending rises sharply. A common shorthand is the 80 to 70 to 60 framework, in which planned spending steps down from roughly 80 percent of pre retirement income to 70 percent and then 60 percent across the three phases.

Healthcare Is the Upturn in the Smile

The reason the smile curves back up at the end is not lifestyle. It is medical and care costs. Fidelity's 2025 estimate puts lifetime healthcare costs for a 65 year old retiring today at $172,500 for a single individual and $345,000 for a couple, and that figure does not include long term care. Long term care is the wild card. According to the federal Administration for Community Living, roughly 70 percent of people turning 65 today will need some form of long term care during their lifetime.

For Northwest Florida retirees, the late spending spike is shaped by local realities. Florida nursing home and assisted living costs are below the national average in many Panhandle counties, which softens the blow somewhat. The state's no income tax treatment of pensions, Social Security and retirement account withdrawals also helps. But the spike is real, and the planning question is whether the portfolio still has capacity at age 82 when the bills start arriving.

Why the Smile Changes Your Plan

If you plan for flat inflation adjusted spending across 30 years, you will likely make one of two mistakes. You will overshoot, building a portfolio larger than you need and trading freedom in your 60s for surplus your heirs will inherit. Or you will undershoot in a more subtle way, by not front loading enough capacity for the Go-Go years and not reserving enough for the No-Go years.

A smile aware plan does three things differently. It plans for higher real spending in the first 10 years. It expects a real spending decline in the middle years and uses that decline as a buffer for sequence risk and inflation shocks. It reserves a dedicated bucket for healthcare and long term care risk in the later years, separate from the general portfolio.

For retirees on the Emerald Coast, the Go-Go bucket looks different than for retirees inland. The travel category may include grandkid visits to Pensacola Beach, Gulf fishing trips, a season pass at the Florida State Parks system and the occasional Caribbean cruise out of Mobile or Tampa. The local cost base is forgiving in the early years. Pensacola's overall cost of living runs about 5 percent below the national average and Panama City about 11 percent below, according to Salary.com 2026 data. That headroom is exactly what funds the Go-Go phase without forcing portfolio withdrawals to spike.

How to Build a Smile-Aware Cash Flow Plan

Start with a three phase budget rather than a single annual number. Estimate Go-Go spending at full bore including all the things you actually intend to do, not a sanitized average. Estimate Slow-Go spending at roughly 80 percent of that figure in real terms. Estimate No-Go spending at roughly 70 to 75 percent of Slow-Go, with a separate line for healthcare and potential long term care.

Pair the budget with three buckets. A short term cash and bond bucket of one to three years of expenses, refilled from a balanced portfolio over time. A balanced growth bucket that funds the bulk of retirement. A healthcare and long term care reserve, often funded with hybrid LTC insurance, a dedicated HSA balance or a designated portfolio sleeve.

Stress test the plan against three scenarios. A bad market in the first five years. An above average inflation environment for a decade. The loss of one spouse, which often means the loss of one Social Security check and a shift to single filer tax brackets.

The Bottom Line

The retirement spending smile is one of the most consistent findings in retirement research. Real spending is not flat. It is higher early, lower in the middle and higher again at the end. A plan that ignores the smile is not just imprecise. It is making predictable errors in both directions. For Northwest Florida retirees, building the plan around the actual shape of retirement spending, and around the Panhandle's structural cost advantages, is the difference between a plan that funds the years and a plan that survives them.

Sources

• David Blanchett. "Estimating the True Cost of Retirement," Morningstar, and "The Retirement Spending 'Smile': Estimating Changes in Retirement Expenditures."
• Kitces.com. "How Total Spending Declines Over Time In Retirement."
• T. Rowe Price retirement spending research.
• Kiplinger. "Forget the 80% Rule for Retirement Budgets: Think 80-70-60."
• Fidelity Investments. "2025 Retiree Health Care Cost Estimate."
• Administration for Community Living. "How Much Care Will You Need?"
• Salary.com. "Cost of Living in Pensacola, FL 2026" and "Cost of Living in Panama City, FL 2026."