Hello,

I am reading Fred Vettese - Retirement Income For Life. One of the chapters in his book covers spending/expenses as retirees age. The summary of numerous studies indicates that " spending of most seniors keeps up with inflation until age 70, and then after that it will fall at the rate of 1% a year throughout the 70's, and 2% a year in the 80's, and 0% from age 90 on". This falls in line with my own thinking, and what I have observed as my my parents and in-laws aged.

I currently have my expenses set to decrease by 10% at age 75 which I guess provides me with the total expected expense reduction in my 70's, albeit all in one year. But reducing each year would provide a much smoother transition over the 10 year period and beyond. I know I could manually create expenses for each year in my 70's and 80's with the reduced targets. However, I was wondering if there was any way you could implement this kind of automatic reduction in expenses with the programming?  Perhaps allowing us to select the age it starts at and the amount per year to decrease spending?

Thanks

I've been asked that before, because of that book.  You have the option to enter multiple expenses, and you can start and end them at whatever dates you want.  I find the 1%, 2% a year reduction a great rule of thumb that works when looking at an average over many people, but not so easy to do in practice for an individual.

I think it's more reasonable and useful planning to set an EXPENSE entry for your basic non-discretionary living expenses. You may need more than one if you are thinking of moving into a retirement home at some point or think you will need additional elder care. And then have entries for discretionary expenses, for which you can vary the amounts for different date ranges as you envision your life's circumstances and goals. For retirees, that's often the travel budget, and it's not easy to reduce that in 1% increments.

Edited: See my response below on how you can also adjust the growth rate of any expense.

What I do that I find works for me is to split my expenses into two categories: Core (food, shelter, utilities, etc.) and Lifestyle (Go-Go -> for travel, fun money, early inheritance giving).  I've set up the Core expenses to continue as is until I plan to sell my house and move to a retirement home (at which point I expect them to substantially increase), so I end the core expenses and setup a new expense category for it.  At this time I end my Lifestyle expense and set up a new one (Slow-Go) with a new amount and a declining percentage of -1%, as Elisabeth suggested above. 

It seems to work well so far. 

I remembered this morning that you can actually already  set any EXPENSE to decrease (or increase) smoothly with the years by adjusting how you set that expense to be indexed (or not) with inflation.

You can set how the EXPENSE grows in time between the start and end dates. We ask if the EXPENSE is indexed, a multiplier (default is 1), and an addend rate (default is 0% and can be negative).  If you check "Index to inflation", the EXPENSE will grow with inflation multiplied by the multiplier, plus the specified addend rate. Essentially: 

growth rate = inflation x  multiplier +  addend

If not set to be indexed with inflation, you can still set an alternate rate to grow it. In that case:

growth rate = addend.

For your example of reducing the expense by 2% a year, you would set the addend to -2.

You can see what that amounts to in today's and future dollars in the graph below your list of EXPENSES.