The Retirement Spending Wedge — by Chuck Rutledge
By Chuck Rutledge
A good friend of mine spent his career as VP of HR for a manufacturing company. He was older than me, and over the years he watched hundreds of colleagues retire. He also watched what happened to them afterward. He told me their stories often: people who fell ill unexpectedly and passed away within a few years of leaving work, and people who became disabled and saw their retirement plans shrink to almost nothing. From watching so many people move through this stage of life, he made an observation that stuck with me — the older people get, the less active they become, and the less money they spend on their lifestyle.
I've seen the same pattern up close. My father-in-law retired and immediately built an active life with his wife: they joined a country club, traveled constantly, and stayed busy with friends. Years later, the travel stopped. His spending shifted almost entirely to the country club, and his days centered more on family than on adventure. More recently, I lost a friend close to my own age who had retirement plans full of trips he never got to take.
These stories point to something most retirement advice overlooks. The traditional 4% rule tells you to spend a steady share of your savings every year of retirement. But that assumes your capacity and desire to spend stay flat over time, and they don't. Health and energy are highest early in retirement and decline from there, so spending should follow the same shape.
I call this the Retirement Spending Wedge: spend more in the early, active years of retirement, when you're best positioned to enjoy it, and taper down as you naturally become less active. Just leave room at the narrow end of the wedge for healthcare costs, which tend to climb again at the end of life. A lifetime of saving doesn't undo itself the day you retire — the wedge is a plan for spending when spending matters most.
Questions this Key Learning answers
Should I spend more money early in retirement?
The author’s Retirement Spending Wedge supports spending more during the early, active years, when health and energy make travel and other experiences possible. Spending can then taper as activity naturally declines. The aim is not to exhaust savings early, but to avoid postponing meaningful experiences until they may no longer be available.
How should my retirement spending change as I get older?
The author suggests replacing a flat spending plan with a wedge: higher lifestyle spending early in retirement, followed by lower spending as health, energy, and activity decline. Our analysis describes retirement as changing seasons rather than one uniform lifestyle, while recognizing that healthcare costs may rise again near the end of life.
How do I enjoy retirement now without neglecting later healthcare costs?
The author’s approach balances both needs: use more discretionary money when health and mobility make it valuable, then taper lifestyle spending while preserving room at the narrow end of the wedge for healthcare. As our analysis puts it, protect later-life reserves without postponing every meaningful experience.