How Much Can I Afford to Spend in Retirement?: Front-Loading Spending in Retirement

As discussed in our previous post of September 28, 2025,
there are lots of levers in the Actuarial Financial Planner (AFP) that
can be pulled to make your spending plan in retirement more or less
conservative. In that post, we indicated that we thought most retirees
would prefer to err a little on the conservative side by spending
somewhat less initially to avoid future spending reductions. Subsequent
to releasing that post, however, we came across a Think Advisor article
by Michael Finke entitled, “Most Retirees Want to Front-Load Their Spending.” Since we aren’t researchers, we aren’t going to fight Dr. Finke over what most retirees actually want. In
his article, Dr. Finke says that “Advisors need to help clients enjoy
their savings during early retirement while protecting against inflation
and other long-term risks.” Therefore, in this post we will briefly
discuss how the AFP can be used to help households front-load their
discretionary spending in retirement while at the same time protecting
their essential spending.AFP Modifications to Front-Load SpendingMove
budgeted expenses from “recurring” to “non-recuring.” If you don’t
expect to incur certain expenses for the rest of your life, treat them
as non-recurring. For example, if you want to travel for the next ten
years, fund this expense as a non-recurring expense for only the next
ten years rather than for the rest of your life. Use more
aggressive assumptions. Instead of using the default assumptions, use
higher investment return assumptions or shorter lifetime planning
periods. Be sure to follow the assumption override process outlined in
the AFP for changing default assumptions.Assume recurring
discretionary expenses increase at a rate below assumed inflation. For
example, if you enter an increase rate of 0%, it means that you expect
to spend the same dollar amount each year in the future. Target a lower Funded Status (lower Rainy Day Fund). This will enable you to develop a larger current year spending budget.SummaryAs we indicated in our previous post, Ifyour risk tolerance is relatively high,you prefer increased spending early in retirement, andyou aren’t overly troubled by the thought of decreasing discretionary spending in the future,you
may wish to use more aggressive assumptions and/or lower funding
targets. If not, you can stick with the default assumptions, knowing
that if these assumptions are indeed too conservative, your spending
will likely increase in the future (assuming your assets are not
unexpectedly reduced and you have accurately captured all your future
expenses, including future taxes, medical expenses and long-term care
expenses, etc.).