If you’ve read about retirement planning at all, you’ve probably read an article discussing why low initial spending rates from savings are prudent, due to the facts that we don’t know how long we’ll live and we don’t know what investment returns we’ll get.
A point I’ve been trying to hammer home in my writing over the last year is that there’s a third reason why a low initial spending rate can be a good idea: spending in retirement isn’t entirely within our control, and a low baseline level of spending gives us more “wiggle room.”
T Rowe Price recently published a study that looks at the degree of spending fluctuation within households throughout retirement, as well as the sources of that spending fluctuation. (One point that will surprise many people: fluctuations in housing costs, rather than healthcare, are the primary source of spending variability.)
Other Recommended Reading
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