Labor Day Gratitude

September 3, 2021


Labor Day is upon us, and as we celebrate the social and economic achievements of American workers, we also may ponder what happens in the so-called “golden years” after we finish working and reach retirement.


Labor Day is a holiday celebrated with barbecues, extended vacations, beach days, or just time for rest and relaxation. During the working years, clients save for retirement using different financial vehicles with the hope that their assets will outlast their life expectancies to achieve the end goal of a comfortable retirement.

Since hope is not a strategy, clients may benefit from understanding what happens during the spending and distribution phases in retirement.

We’ll focus on retirement spending and David Blanchett’s “retirement spending smile.” In 2014, Blanchett observed a retirement spending smile, which corresponded to a consumption pattern in his data. The pattern shows that during retirement, spending decreases. This makes sense because spending generally decreases as clients get older. During the Go-Go years of retirement, a retiree may spend more on vacations, entertainment, or a dream car; however, these expenses tend to decrease as retirees age. Ty Bernicke published an expenditure table showing that on average, those ages 75 and older spend less than those ages 55-64, supporting the idea that spending decreases as age increases. This coincides with Blanchett’s retirement spending smile, which shows that for those ages 65-85, spending decreases by approximately 26%. The decrease is a result of a reduction in discretionary costs for a retiree. Blanchett does, however, show that for those ages 85 and older, spending increases due to retirees’ costs for healthcare. As retirees continue to live, their costs for healthcare could potentially surpass the initial annual budget they planned for.

I know what you’re thinking: a retiree shouldn’t need to worry about continuously saving during the working phase, right? Not so fast. It’s a little more complex than that. Remember, once a client reaches the No-Go phase in retirement, retirement spending increases. During the gap, while spending decreases, a retiree can do the following:

  • Continue to Save. This stage of saving could include purchasing an annuity that offers an income benefit with a credit enhancement feature, for an additional cost. If healthcare costs increase, a retiree can turn on the income benefit to supplement spending. Discipline will be key as a credit enhancement feature applies only if there are no withdrawals from the contract.

  • Design a Legacy Plan. As discretionary costs reduce, a retiree can put money aside for future generations. This can be through the use of life insurance, 529 plans, or other savings vehicles. Consider different tax-efficient strategies because regulations have changed on beneficiary distribution options for qualified accounts.

  • Plan for Long-Term Care. To avoid long-term care risk in retirement planning, use the additional income to purchase long-term care benefits.

  • Take Investment Risks. As spending from ages 65-85 decreases, a retiree may consider taking a more aggressive investment allocation to reap the benefits of a higher return due to higher risk. To build confidence, an investment in an annuity with a guaranteed minimum accumulation benefit could be added, for an additional cost, to ensure the client will receive all or a portion of the premium back regardless of market performance.


As you relax and enjoy the extra time off during this Labor Day weekend, remember to reach out and congratulate clients on the hard work that has gotten them this far. Encourage them to plan for spending in retirement so that they can enjoy their comfortable post-labor golden years.



This material is educational and intended for an audience with financial services knowledge.


For more information on retirement-planning strategies, please contact the Retirement Strategies Group at (800) 722-2333, or email us at



Picture of Pacific Life Annuities

Pacific Life offers a broad and diversified range of products and solutions designed to help individuals and families achieve asset growth, sustainable retirement income, and long-term financial independence. We also help businesses manage and fulfill their long-term retirement plan commitments to employees.

Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. 

Variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA) and an affiliate of Pacific Life & Annuity Company. Variable and fixed annuity products are available through licensed third parties.

No bank guarantee • Not a deposit • Not FDIC/NCUA insured • May lose value • Not insured by any federal government agency

For financial professional use only. Not for use with the public.