Retirement Talk Podcast Episode

157. A Framework for Assessing Variable Spending Strategies

May 24, 2023
Variable spending strategies

Being flexible with spending absolutely matters in financial planning and it often gets overlooked when people step into retirement. Most people look at their budget and the assets that they’ve accumulated and that’s where they stop.

In this episode, Laura Stover, RFC® and Michael Wallin, CFP® will examine an article by Dr. Wade Pfau that discusses variable spending strategies. Whether it’s inflation-adjusted fixed percentage rule, floor and ceiling rule, the ratchet effect, or others, we’ll provide a thorough explanation of most of the spending strategies included in the article, but we’ll keep it high level to help you take away the important aspects from what we want to convey.

This show might be a little more academic and in-depth than normal, but don’t tune out because this conversation is critical for investing and distribution. As inflation continues at a high rate and the debt ceiling issues continue to linger, you want to make sure you retirement foundation is on solid ground with the proper income plan.

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Timestamps (show notes):

5:18 – ROI becomes reliability of income in retirement

7:25 – Constant inflation-adjusted spending

11:41 – Keeping your spending constant can increase risk

15:46 – Why you might shift more distribution into the early years of retirement

17:24 – The fixed percentage rule

21:50 – Why can’t the government come up with a proper spending sstrategy?

28:29 – Income planning is the foundation of a purpose-based allocation


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