There are several different spending strategies you can use when you reach retirement. Some include lump sum payments others include a steady stream of distributions and then there is the spending smile approach.

What is the spending smile in retirement?

The spending smile approach was coined by David Blanchett in an article titled, Exploring the Retirement Consumption Puzzle. This spending strategy states a retiree might spend more in the early years of retirement as they travel, eat at restaurants and embrace different hobbies with their free time. Then, as the years pass, spending slows down as the retiree slows down. The final upward curve of the smile is attributed to the increase in healthcare expenses as retirees age.

Creating your smile: How to build a smart spending plan

When discussing how to spend your retirement dollars, a few common items might come up that you’ll want to thoroughly think through and see how they can apply to your lifestyle:

Vacation home and travel

Do you have a favorite place you like to visit? In retirement, it can be enticing to consider purchasing a vacation home, but you want to discuss with your financial team how often you will realistically visit a second location. Are there factors such as family or health that might keep you in one place? What will you do with the second home if you experience a health issue that impacts mobility?

In addition, many retirees take trips with their newfound free time. Make sure your adventures are captured in your budget and something you discuss regularly with your financial team. You might want to be prepared for tours that take a lot of planning or you might want the flexibility to take a last-minute cruise after seeing a good deal!


After working for decades, you might not have had a lot of time to focus on your hobbies and passions. There is a lot more free time in retirement that can lead to exploration of new activities; however, these interests can cost money. It is important to discuss with your financial team if you want to have funds available to invest in restoring antique cars or sewing garments. Hobbies can quickly become expensive, and you’ll want to have this built into your spending smile.


For some, it is important to have some money set aside for gifting, whether that is gifting to family and friends or to causes. Discuss with your financial team how you want to structure your giving, if this important to you. There can be tax implications that you’ll want to be mindful of and plan for as you set aside certain money from your retirement funds.


This expense can creep up on you in retirement. For some, the beginning of retirement is a time of good health and lots of movement, but this can quickly change, and you’ll want to be prepared for this in your retirement spending smile. Do you have enough money to cover long-term care? Do you have family history of different medical conditions you’ll need to plan for? Did your parents live well into old age? All of these factors can greatly impact how you allocate funds in your spending smile.

Putting this strategy into practice

As you research whether this spending idea is right for you, start by discussing your goals with your financial team. Your team can also support you with different tax strategies and understanding how your distributions and funds are impacted by taxes.

A common practice is to have 80% of your current income as a starting point for your retirement. Talk with your team about what this number is for you and how the idea of smile spending can best support your goals and needs in retirement.

Communication is key

The best thing you can do as you approach retirement and discern how to spend your funds is to communicate. Share your hopes and dreams with your financial planner so they can support your decisions and help make them become a reality. Communication is the best tool to creating a plan that is going to encompass your values and vision for your golden years.

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Financial planning services are offered by UMB Private Wealth Management, a division within UMB Bank, n.a. that manages active portfolios for individuals, fiduciary accounts, employee benefit plans, endowments and foundations. UMB Bank, n.a., is a subsidiary of UMB Financial Corporation. 

This material is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities or engage in any specific investment strategy. Statements in the presentation are based on the opinions of the author and are subject to change at any time without notice. You should not use this presentation as a substitute for your own judgment, and you should consult the appropriate financial professional before making any tax, legal, financial planning or investment decisions.

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