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 Spending
- Move 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.
Summary
As we indicated in our previous post, If
- your risk tolerance is relatively high,
- you prefer increased spending early in retirement, and
- you 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.).
