[From Bob's Library]
An important simplifying assumption in William Bengen’s research is that retirees
spend constant inflation-adjusted amounts throughout retirement. This may be at
odds with the spending patterns of many retirees. An exploration of the data
should give us an idea of how people actually change their spending during
retirement.
A well-known early example of spending changes over time for retirees can be
found in Michael Stein’s 1998 book, The Prosperous Retirement: Guide to the New
Reality. Stein says retirement happens in three phases, popularly known as the
Go-Go, Slow-Go, and No-Go years of retirement.
He found retirement spending to be greatest in the early active phase of
retirement through age seventy-five. In these Go-Go years, discretionary
expenses for things such as travel and restaurants are high, and retirement
spending tends to keep pace with inflation.
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