Paul Mitchell | Financial and Retirement Planning Coach
Find him here at: Your Smart Retirement Coach
Most people picture retirement spending as a neat, flat line. It isn’t. For many UK retirees, spending follows a curve that’s higher in the early years, dips in the middle, then rises again later in life—often due to health and care costs. This shape is known as the Retirement Spending Smile.
If you’re 55–75 and trying to decide how much you can safely spend (and when), understanding this pattern will help you design an income plan that’s realistic, flexible, and resilient to shocks. In this guide, I’ll explain the Spending Smile, show how to map your own pattern, and outline practical ways to match your pension withdrawals, ISAs, and other assets to the different stages of retirement—without losing sleep.
Along the way, I’ll flag the traps that can quietly erode your pot (sequencing risk, tax drags, and the proposed 2027 IHT change on unused pensions) and when a coaching-first conversation can save you regret—before you lock into irreversible choices.
What is the Retirement Spending Smile?
The Spending Smile is a simple idea with profound implications:
- Early retirement (“Go-Go” years, roughly 55–70): Spending is typically higher. You’ve got energy and time: travel, hobbies, home projects, family help (e.g., deposits, weddings), and larger discretionary outlays.
- Mid retirement (“Slow-Go”, 70s): Spending often drifts lower. Fewer long-haul trips, less gear and “stuff,” more local living. Day-to-day costs may stabilise even as inflation ticks along.
- Late retirement (“No-Go”, 80s+): Spending can rise again—not on cruises, but on healthcare, support, adaptations, and possibly care costs. Even if you stay in good health, you may pay for convenience and help.
Plotted over time, you get a shallow “U”: high → lower → high. Not everyone will follow the smile exactly, but the pattern is common enough that planning as if spending is flat can lead to mismatches—spending too little early (fear) or too much early (risking later shortfalls).
Why a flat spending assumption fails
- Lifestyle phases are real. Early retirement is when many people want to “use their good years.” That front-loads spending.
- Inflation hits categories differently. Travel rises faster in some periods; later-life services (care, support) can outpace general CPI.
- “One number” planning ignores timing. You don’t need the same income at 62 as you will at 82. Averages hide the truth.
Takeaway: Your plan should be time-based (what you spend and when), not just a single annual number.
Map your personal Spending Smile (simple 3-step sketch)
Step 1: Split your retirement into three phases.
- Phase A: “Go-Go” (e.g., 58–70)
- Phase B: “Slow-Go” (e.g., 70–80)
- Phase C: “No-Go” (e.g., 80+)
Step 2: Sketch the lifestyle and costs for each.
- A: Long-haul trips? Home improvements? Helping family? New hobbies?
- B: Fewer big trips, more local leisure, stable day-to-day.
- C: Support at home? Adaptations? Possible care costs?
Step 3: Put ballpark monthly figures against each phase.
It’s fine to start rough. The point is to acknowledge different spending levels at different times, then refine.
Want help turning that sketch into a living plan? Book a free 15-minute discovery call:
https://yoursmartretirementcoach.co.uk/contact
Aligning income to the Smile: practical frameworks
1) Time-segmented “buckets”
- Now/near bucket (0–5 years): low-volatility cash & short-dated fixed income to fund Phase A reliably.
- Medium bucket (5–15 years): a balanced mix to outpace inflation for Phase B.
- Later bucket (15+ years): growth-oriented assets for Phase C (you won’t spend this for a long time).
This helps reduce sequencing risk—the danger of selling investments at low prices early in retirement—because near-term spending sits in safer assets while long-term money can keep compounding.
For a deeper dive on constructing the defensive side of the mix, see:
Should UK Investors Hold Gilts in Their Personal Pension and Investment Portfolios?
https://yoursmartretirementcoach.co.uk/should-uk-investors-hold-gilts-in-their-personal-pension-and-investment-portfolios
2) “Floor & upside”
- Floor income to cover essentials (housing, utilities, food) via State Pension, any DB pension, and secured income (e.g., annuity).
- Upside from drawdown/ISAs for discretionary spending (travel, hobbies), flexed up or down as markets and life change.
Explore the mechanics of drawdown vs. annuity (or blending both):
Pension Withdrawal Options UK: Drawdown vs Annuity
https://yoursmartretirementcoach.co.uk/pension-withdrawal-options-uk/
3) Dynamic guardrails (the “flex and protect” rule of thumb)
- Increase spending when portfolios are strong; trim when returns are weak.
- Use withdrawal “guardrails” (upper/lower % bands) to auto-adjust rather than guessing emotionally.
Key point: A Spending Smile plan isn’t a one-and-done spreadsheet—it’s a living system with rules you can actually follow under stress.
Tax, timing and the 55–67 “bridge”
Two ages matter:
- Personal/workplace pensions (DC): Access from 55 (rising to 57 in April 2028).
- State Pension: Currently 66, rising to 67 by April 2028.
That creates a potential 10–12-year bridge. If you stop work at, say, 60, how do you fund the gap to State Pension without overspending?
A few pointers:
- Sequence income tax-efficiently. Consider using tax-free cash (PCLS) strategically, mixing ISA withdrawals (tax-free) and pension income to stay in lower tax bands.
- Mind the MPAA. Taking taxable pension income (beyond PCLS) can trigger the Money Purchase Annual Allowance, capping future pension contributions significantly.
- Avoid “tax cliffs.” Large one-off withdrawals can push you into a higher marginal rate; consider smoothing withdrawals across tax years.
To avoid common timing errors in the years before SPA, read:
Simplify Your UK Pension Options
https://yoursmartretirementcoach.co.uk/simplify-uk-pension-options
The proposed 2027 change on IHT for unspent pensions
Under current rules, unspent DC pension funds are often attractive for legacy, especially if death occurs before age 75 (and even after, beneficiaries usually face income tax rather than IHT). The current UK government has proposed applying Inheritance Tax (IHT) to unspent pension funds from April 2027.
What this could mean for planning (if implemented):
- Less incentive to leave pensions untouched purely for IHT reasons.
- More emphasis on structured withdrawals earlier in retirement (coordinated with ISAs and other assets).
- Legacy planning might shift towards gifting strategies, timing of withdrawals, and using non-pension wrappers more deliberately.
No one should panic; proposals can evolve. But it’s a timely nudge to stress-test your plan and avoid defaulting to “leave it all in the pot” without a reason.
Investment risk & behaviour: don’t let markets steal your smile
Two risks derail Spending-Smile plans more than any others:
- Sequencing risk: Negative returns early in retirement can permanently dent long-term sustainability if you’re selling into a falling market. Mitigate with cash buffers/near-term buckets and spending guardrails.
- Behavioural risk: Panic-selling. The best plan fails if you abandon it when markets wobble.
If market swings make you anxious, this will help:
Investment Market Volatility – How to Manage and Stay on Course
https://yoursmartretirementcoach.co.uk/investment-market-volatility/
Should you front-load, level, or back-load your income?
Front-loading (more early, less later) matches the Smile and can be deeply satisfying—if you’ve ring-fenced money for later-life needs.
Level income is simpler and suits those who value routine, but may underfund the “go-go” years or overfund middle years.
Back-loading is rare but can suit those expecting to sell a business/property later or who plan to retire “twice” (step back, then fully stop).
A coaching session can model these choices against your pot size, risk, tax, and personal priorities—before you commit to a path.
Where annuities fit into a Smile-based plan
Annuities have quietly improved alongside interest rates. They can:
- Secure a lifelong floor for essentials (reducing anxiety).
- Free the drawdown pot to flex with markets and life.
- Be bought in stages (“laddering”), delaying some purchases to hedge interest-rate risk and changing needs.
Learn more about the trade-offs here:
Pension Withdrawal Options UK: Drawdown vs Annuity
https://yoursmartretirementcoach.co.uk/pension-withdrawal-options-uk/
A quick Spending Smile example (for a couple)
- Ages 60–70 (Go-Go): £44k/yr – three big trips, help adult children, home upgrades.
- Ages 70–80 (Slow-Go): £36k/yr – fewer trips, higher local leisure, stable bills.
- 80+ (No-Go): £42k/yr – support at home, convenience services, potential care fees.
Funding outline (illustrative only):
- State Pensions from 67 cover ~£22k.
- Modest annuity covers ~£10k essentials from age 70.
- Drawdown & ISAs fill the rest, flexed by guardrails; cash bucket protects 2–3 years’ spending.
Why this works: It matches the shape of life and gives peace of mind that today’s joy doesn’t torpedo tomorrow’s security.
How coaching helps (and what it costs)
Many people tell me they don’t want to be sold products; they want clarity, a plan, and confidence they’re not missing something. That’s exactly what coaching is for.
- £250 for a 90-minute session
- No retainers, no contracts, no ongoing % fees
- You leave with a clear picture of your Spending Smile, your income map, and your next steps—including when regulated advice is appropriate.
Ready to see your numbers clearly—before making irreversible decisions?
Book your free 15-minute discovery call:
https://yoursmartretirementcoach.co.uk/contact
Call to Action
Planning your retirement income is too important to leave to guesswork. Book your free 15-minute Zoom consultation and start building a plan that works for your life — not just the averages.
About the Author
Paul Mitchell is a Financial and Retirement Planning Coach with over 35 years of experience, including achieving Chartered Financial Planner status. Through Your Smart Retirement Coach, he helps DIY investors and those underserved by traditional IFAs navigate complex retirement challenges with clarity and confidence.
Disclaimer:
This article is for educational purposes only and does not constitute regulated financial advice. Tax treatment depends on individual circumstances and may change. Pension rules can change, and investments can fall as well as rise. Past performance doesn’t guarantee future results. For regulated financial advice, consult an authorised IFA.
Related Reading:
- Pension Withdrawal Options UK: Drawdown vs Annuity
https://yoursmartretirementcoach.co.uk/pension-withdrawal-options-uk/
The pros, cons, and hybrid strategies—so your income fits your life, not the other way round. - Simplify Your UK Pension Options
https://yoursmartretirementcoach.co.uk/simplify-uk-pension-options
De-jargon your choices and avoid easy-to-miss pitfalls in the run-up to retirement. - Should UK Investors Hold Gilts in Their Personal Pension and Investment Portfolios?
https://yoursmartretirementcoach.co.uk/should-uk-investors-hold-gilts-in-their-personal-pension-and-investment-portfolios
How high-quality bonds can support the defensive “buckets” in a Spending Smile plan. - Lifetime Retirement Income Plan (UK)
https://yoursmartretirementcoach.co.uk/lifetime-retirement-income-plan-uk
Join the dots from today to your 80s and 90s with a plan that adapts as life changes. - Retirement Wake-Up Call (UK)
https://yoursmartretirementcoach.co.uk/retirement-wake-up-call-uk
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