The Retirement Income Analysis Most People Skip — and Why It Matters More Than Anything Else

In nearly three decades of working almost exclusively with retirees and pre-retirees, I've sat across the table from thousands of people at one of the most important financial transitions of their lives. And I've noticed something that almost nobody talks about.

Most people know roughly how much they have saved. Most have a general idea of what Social Security will pay. But very few have done a careful, honest analysis of what they actually need to spend in retirement — broken down by category, by phase of life, and by what's truly essential versus what's optional.

That analysis — a real, thorough retirement income analysis — is the foundation everything else is built on. Without it, any income plan is just guesswork.

Start With the Spending Analysis

Before you can build a retirement income plan, you need to answer one foundational question: what does your retirement actually cost?

This means going line by line through your expenses and sorting them into two categories. First, essential expenses — the costs that exist whether you want them to or not. Housing, utilities, food, healthcare premiums, insurance, medications, basic transportation. These are the expenses that have to be covered no matter what markets do.

Second, discretionary expenses — everything else. Travel, dining out, hobbies, gifts, entertainment, home improvements, helping children or grandchildren. These are real and important expenses that make retirement meaningful — but they can flex up or down depending on your financial picture.

The Income Floor: Using Guaranteed Income to Cover the Non-Negotiables

Once you know what your essential expenses actually are, the next step is matching guaranteed income sources to cover them. This is the concept of an income floor — a base of income that is guaranteed regardless of market conditions, longevity, or anything else life throws at you.

This is where a properly structured annuity can play a powerful role in retirement income planning. If your essential monthly expenses are $4,500, and Social Security covers $3,200 of that, you have a $1,300 monthly gap that needs to be reliable, guaranteed income. An annuity can fill exactly that gap — giving you the certainty that your lights stay on and your groceries are paid for, no matter what happens in the market.

Some clients go further — using an annuity to cover not just essential expenses but also a comfortable base above that, creating additional security. The more you can cover with guaranteed income, the less stress your investment portfolio carries — and the more freedom you have with the rest of your money.

The Three Phases of Retirement — And Why They Matter

Here is something I've observed firsthand over nearly three decades: retirement is not one long uniform phase of life. It evolves, and spending patterns evolve dramatically along with it. Understanding these phases is essential to building an income plan that works across a 25–30 year retirement.

Why the Traditional Projection Gets It Wrong

Open any retirement income projection from a large financial firm and you'll almost certainly see the same chart: a straight line showing spending increasing by 2–3% every year, from the first year of retirement to the last. Apply inflation, raise the line, repeat for 30 years.

I understand why planners use this model. It's simple, it's conservative, and it's defensible. But after sitting with thousands of real retirees across their actual retirements, I don't believe it reflects reality — and building a plan around an inaccurate model leads to real consequences.

Here's what I observe instead: spending is highest in the early Go-Go years, when retirees are most active and have the energy and desire to spend. Then it declines — often meaningfully — through the Slow-Go years as lifestyle naturally contracts. Then, in the later No-Go years, spending rises again — but driven almost entirely by healthcare costs, home care, and potentially long-term care facilities.

That pattern — high, then lower, then high again — looks like a wave. Not a straight line.

What This Means for Your Income Plan

Understanding the Retiree Spending Wave has real implications for how you structure your income sources:

Plan generously for the Go-Go years. These are not the years to cut back on income. If you have the resources, this is the time to spend — travel, experiences, time with family. Build your income plan to support this fully, not a reduced linear version of it.

Recognize that the Slow-Go years may naturally free up resources. The reduction in discretionary spending during the middle phase of retirement can provide a natural financial cushion — which is also a good time to continue building healthcare reserves.

Plan seriously for healthcare in the No-Go years. Long-term care is expensive and often underestimated. The Fidelity Research Institute estimates the average couple needs over $300,000 for healthcare expenses in retirement — not including long-term care. That cost doesn't arrive evenly. It arrives late, and it arrives hard.

Putting It All Together

A thorough retirement income analysis, done well, brings together everything we've discussed:

It starts with an honest accounting of what you actually spend — not what you think you spend. It separates essential expenses from discretionary ones. It matches guaranteed income sources — Social Security, any pension, and potentially an annuity — to the non-negotiables. And it plans for all three phases of retirement, recognizing that spending isn't a straight line. It's a wave.

This kind of analysis takes time and a willingness to look honestly at real numbers. But it is, without question, the most valuable financial exercise most retirees have never done.