If I had a dollar for every time I heard the expression that you need to make sure your money outlives you, I would probably be retired 15 times over by now. It seems that this is the big signpost in front of all clients’ eyes.

However, there are a number of financial planners out there who aren’t so sure about that conundrum. For example, a highly reputable and pretty smart investment advisor named Ty Bernicke, head of Bernicke & Associates in Eau Claire, Wisconsin, completed a study about 18 months ago, which was published in the Journal of Financial Planning, and which concluded that Americans apparently are overestimating how much they really need in retirement. Bernicke may just have touched a very important button.

He believes that there may be wrong assumptions floating about. He says that many of his older retiree clients actually spend less than the younger ones. For instance, he notes that when you are in your 50s or 60s, you often travel more and eat out more while those in their 70s and 80s travel much less and eat out much less. Why? Because many of these people have health problems, not to mention lower energy levels. Besides, how many elderly people have you heard who have trouble driving at night? I see plenty of that in Florida.

Actually, a 2005 U.S. Bureau of Labor Statistics survey shows that people ages 55 to 64 spend an average of almost $50,000 a year while those 65 and older are down to $33,000 and those 75 and older are roaming around the $27,000 mark. In fact, if you look at certain categories such as, for example, housing, you’ll find that the 55-64 age group spends on average an annual sum of $15,769 while those 65 and up spend $11,058, a change of minus 30 percent. With food, there is a decrease of 34 percent. Only in health care do we see an increase, going from $3,410 for the 55-64 age group to $4,193 for 65 and up. That’s a 23 percent increase in spending change.

It’s well known that traditional planning usually involves withdrawing three to four percent of savings in the first year of retirement and then increasing it on a yearly basis to keep in step with inflation. The problem is that doesn’t really reflect how people spend their money as they get up in years. Basically, if people would note that the spending level declines as they age, then, in keeping with the U.S. Bureau of Labor Statistic’s Consumer Expenditure Survey, the individual would not run out of money.

So, what Bernike suggests is to consider withdrawing six percent of savings in the early retirement years when there may be more traveling or pursuing of hobbies, and then deceasing the withdrawals as the retirees drop or minimize such activities. Not a bad idea, eh? Makes a great deal of sense.

There is a caveat here. Bernicke stresses that health-care expenses must be seriously reviewed because the biggest threat to keeping retirement plans on track are those medical bills.

The bottom line, as he says, is for clients to sit down with their financial planner and run various scenarios based on the idea that spending may actually decrease.

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