Retirement Budgets Miss 2 of 3 Spending Phases, Underestimating Healthcare Costs in Later Years
Updated
Updated · 24/7 Wall St. · Aug 27
Retirement Budgets Miss 2 of 3 Spending Phases, Underestimating Healthcare Costs in Later Years
3 articles · Updated · 24/7 Wall St. · Aug 27
Summary
Most retirement plans model spending as a flat 70% to 80% income replacement rate or a 4% withdrawal path, even though retiree spending typically moves through three stages rather than one steady line.
The early “go-go” years are travel- and hobby-heavy, spending usually eases in the 70s, and late retirement shifts sharply toward medical bills that many calculators do not build in.
Healthcare costs are already rising: national healthcare spending reached $3.741 trillion in June 2026, while Medicare Part B premiums climbed to $202.90 a month in 2026 from $185 in 2025.
Those later-year pressures hit households with limited cushions—48% of retirement savers had under $100,000, 94% had under $1.5 million, and the U.S. personal saving rate fell to 2.8% in 2026 Q2.
The report argues for phase-based planning: keep flexibility early, expect a lower middle-year baseline, and reserve dedicated capacity for healthcare, taxes and Social Security decisions later on.