Retiree Spending Doesn’t Track Inflation — and Why That Changes the Plan
Good to Know
Almost every retirement plan you have ever built rests on one quiet assumption: that a client’s spending will climb year after year, in lockstep with inflation. New research says that assumption isn’t merely conservative — it’s usually wrong, and it may be telling your clients they can’t afford a retirement they can comfortably have.
Writing in CFP Board’s own Financial Planning Review, David Blanchett analyzed spending data from the Health and Retirement Study and found that real — inflation-adjusted — retiree spending tends to decline over time. The pattern holds even for relatively well-off households, and is most pronounced among older retirees and those spending at higher levels, which suggests the decline is a matter of choice, not just constraint.[1] Because most planning tools assume spending rises with inflation for 30 years, correcting the assumption can support roughly a 20% higher initial spending rate.[1] Put bluntly, as the finding was summarized when it circulated this summer: inflation matters to a retirement plan, but not nearly as much as our models assume.[2]
Two failure modes, one bad assumption
The lockstep-inflation assumption drives two opposite mistakes. The first is a plan that overstates how much a client will need, which understates what they can safely spend — and frightens disciplined savers into a smaller life than their money supports. The second is the well-documented underspending paradox: financially secure retirees who won’t spend, often out of fear that costs will keep rising faster than their portfolio.[3] Both leave the client worse off, and both trace back to the same flat line on the same projection.
An advisor scenario
ADVISOR SCENARIO
A couple in their mid-60s comes in with $1.8 million and a specific fear: that inflation will grind their savings down to nothing. Their current plan reinforces it — it models spending rising with inflation every year for three decades and concludes they should tighten their belts now.
Rebuild the projection with an evidence-based declining real-spending curve, and the picture inverts. They can safely spend meaningfully more in their 60s and 70s — while they’re healthy enough to use it — without endangering the later years. The math didn’t get more generous. The assumption got more accurate.
There is a real caveat here, and it belongs in the conversation: averages describe populations, not the client in front of you. Spending tends to trace a “smile,” drifting down in real terms through the active years and ticking back up late in life, largely for health care. A plan that assumes decline and ignores a possible long-term-care event isn’t sophisticated — it’s naive in a different direction.
How to put it to work
Translating the research into a client conversation takes five moves:
1
Replace the flat inflation-growth line with a declining real-spend curve — and show both.
the client see the difference between the assumption they inherited and the one the data supports.
2
Separate essential from discretionary spending.
Inflation-protect the essentials deliberately; allow the discretionary layer to glide down the way real behavior does.
3
Give explicit permission to spend in the healthy years.
For the underspender, a concrete target for the go-go years is often more valuable than another dollar of safety margin.
4
Stress-test the tail.
Model a serious health or long-term-care event so a lower baseline isn’t mistaken for no risk. Confidence should survive the bad case.
5
Revisit it annually.
Spending is personal and path-dependent; the curve is a starting point to calibrate against real life, not a rule to set and forget.
The Bottom Line
The inflation-lockstep assumption is a modeling convenience that has outlived its evidence. Retiree spending, for most households, drifts down in real terms rather than climbing — and planning as if the opposite were true quietly hands clients a smaller, more anxious retirement than they’ve earned. Updating the assumption lets you give a truer and often more generous answer to the only question that really matters to them: what can this money actually do? That is what good planning is — not defending old defaults, but revising them when the data moves.
For those studying toward the marks, this is the habit worth building early: the best planners keep asking whether the assumptions still hold, not just whether the math checks out.
Sources
- Blanchett, D. How Spending Evolves in Retirement: A Smile, a Smirk, or Something Else? Financial Planning Review (CFP Board), 2026. onlinelibrary.wiley.com/doi/full/10.1002/cfp2.70032
- ThinkAdvisor. Retiree Spending Doesn’t Rise in Lockstep With Inflation, Blanchett Finds. June 30, 2026. thinkadvisor.com/2026/06/30
- Morningstar. Is Your Cautious Retirement Spending Doing More Harm Than Good? (retirement-spending research). morningstar.com/personal-finance
