Don’t Outlive Your Money: The 4 Phases of Retirement Spending

“How much can I safely spend in retirement without running out of money?”

It’s the most common - and often most anxiety-inducing - question I hear from retirees and pre-retirees. And rightly so. Outliving your money is one of the greatest risks you face in retirement.

But here’s the problem: most people treat retirement spending as a straight line. They assume they’ll draw the same monthly amount for 30 years - adjusting only for inflation.

In reality, retirement spending is anything but linear.

Spending tends to follow a pattern - what we call the four phases of retirement. Understanding these phases can help you plan more realistically, reduce the risk of running out, and align your money with your lifestyle.

Let’s explore each phase.

Phase 1: The Go-Go Years (Ages 65–75)

“You have time, health, and money - spend intentionally.”

This is the most active (and often the most expensive) phase of retirement. You’re still relatively young, healthy, and energetic. You finally have the freedom to do the things you’ve postponed for years: travel, hobbies, golf, grandkids, and those long-overdue home upgrades.

Many retirees underestimate how much they’ll spend during this phase - especially in the first 5 to 7 years. In fact, it’s common for spending to increase after retirement, not decrease.

Key risks during the Go-Go Years:

• Overspending early, leading to a portfolio shortfall later

• Ignoring investment growth and becoming too conservative too quickly

• Failing to plan for future medical and care costs

Planning tip: Create a front-loaded drawdown strategy. Know that it’s okay to spend more now - but be intentional and build a plan that adjusts over time.

Phase 2: The Slow-Go Years (Ages 75–85)

“You still want to do things - just closer to home.”

By this stage, your lifestyle may start to slow down. Health limitations, energy levels, or the loss of a spouse might shift your priorities. You’re less interested in global travel and more interested in local experiences, community involvement, or family time.

Spending often declines during this phase - especially on luxury and discretionary items - but medical costs may start to increase. You may also face higher inflation in categories like food, utilities, and private healthcare.

Key risks during the Slow-Go Years:

• Underestimating medical costs and care-related expenses

• Not updating your budget to reflect lifestyle changes

• Becoming too risk-averse in your investments, reducing long-term growth

Planning tip: Adjust your spending expectations. Review your portfolio allocation to ensure it still supports moderate growth while covering rising health care needs.

Phase 3: The No-Go Years (Ages 85+)

“Spending drops - but care costs rise.”

This is typically the lowest-spending phase for lifestyle items - but not necessarily the cheapest. While travel, entertainment, and large purchases taper off, costs related to assisted living, frailty care, or estate management may increase significantly.

If you or your spouse require full-time care, these costs can range from R20,000 to R50,000+ per month in South Africa, depending on the level of support required.

Key risks during the No-Go Years:

• Failing to plan for long-term care or frailty expenses

• Outliving your capital due to poor planning in earlier phases

• Not having a clear estate and legacy plan in place

Planning tip: Ensure your retirement plan includes provisions for frailty care, estate liquidity, and potential medical aid shortfalls. Consider a separate sinking fund or endowment for these specific costs.

Phase 4: The Legacy Years (Variable Timing)

“Your final act is to protect and pass on your values - not just your wealth.”

This phase is less about spending - and more about intention. It may begin at any point when one or both partners pass away, or when significant cognitive or physical decline occurs.

Your focus shifts from enjoying your wealth to ensuring that what remains is passed on responsibly - to children, causes, or future generations.

Key risks during the Legacy Years:

• Poor estate planning, leading to unnecessary taxes or family conflict

• Lack of liquidity to cover executor costs and estate duties

• Failing to prepare your heirs for the responsibility of inheritance

Planning tip: Work with a Certified Financial Planner to create a comprehensive legacy strategy - including wills, trusts, liquidity provisions, and education for your beneficiaries.

Bonus Insight: The Rule of 4%... Is a Rule of Thumb, Not a Guarantee

Many retirees cling to the “4% rule” - the idea that you can withdraw 4% of your capital per year (adjusted for inflation) and never run out. But this rule assumes a flat drawdown and a U.S.-based context. It doesn’t reflect the phased reality of South African retirees, our unique inflation pressures, or variable exchange rates.

Instead, I recommend a more dynamic approach - one that considers:

• Which phase you’re in

• Your actual spending needs

• Market conditions and inflation

• Adjustments over time based on health and lifestyle

Final Thoughts

Retirement isn’t a one-size-fits-all journey - and neither is retirement spending. If you’re still working with a flat monthly withdrawal number, you’re missing the bigger picture.

By understanding the 4 phases of retirement, you can:

• Spend more confidently early on

• Adjust intentionally as your life evolves

• Prepare for the high-cost realities of later life

• Leave a lasting legacy without sacrificing your own peace of mind

At Family Wealth Custodians, we help you plan for each phase - not just for “retirement” in general. Because the goal isn’t just to retire. The goal is to retire wisely - and never outlive your money.