Weekend Reading: More Realistic Retirement Income Projections Require Dynamic Adjustments

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

he manner in which you spend throughout retirement isn’t static, nor is it always consistent with inflation. As past podcast guest, David Blanchett, has found, it’s much more complex than that.


Retirees tend to shift their spending patterns as needed throughout life, and will make cuts or increases if necessary.

The funded ratio: When retirement income projections are based on static spending rules, the result can lead to a significantly different withdrawal strategy than the reality of how that household might actually spend. Instead, Blanchett proposes utilizing funded ratio metrics to “estimate the overall financial situation of retiree consumption.”

The measurement is calculated by taking your total current and future value of assets, divided by all current or future expected spending. If the result is 1.0, you have just enough to fund your goal. Any more or less means you’re over or under-funded. Of course, there are considerations that play into income and spending, including duration of retirement, risk level and RMDs, but taking a more dynamic approach to how your spending could shift throughout your lifetime allows for a potentially more flexible, accurate withdrawal strategy.

If you need another sign that your retirement plan should be personalized to your unique situation, look no further. Don’t always believe rules of thumb; look inward.