pre-retirement; retirement planning / retirement income / retirement paycheck

Sequence of Returns Risk in Retirement

Many have heard that it is “safe” to spend 4% of one’s nest egg (adjusted for inflation) each year in retirement, expecting funds to last for a 30 year retirement.
Michael Kitces explains both the up and down side risk:
There are many reasons for adjusting one’s spending during a lengthy retirement rather than expecting to spend the same inflation-adjusted amount each year. First, most retirees spend much more in the first few years of retirement than they did while working because of pent-up demand for leisure. This often translates to extensive travel, purchase of recreational vehicles, and more time in costly leisure activities such as golf or other sports and hobbies.
Second, U.S. Consumer Expenditure Survey data documents the decline in spending with age as retirees transition from the Go-Go years to the Slow-Go years to the No-Go period at the end of life.
Source: Financial Planning for Women