The four stages of retirement spending. Planning for change

Retirement is rarely the single, steady chapter people imagine. In reality, it unfolds across four distinct phases, each with its own rhythm, priorities, and costs. Getting your head around this shift is one of the most powerful things you can do to protect your lifestyle and avoid running out of money at the wrong moment.

Stage 1: The active years (approximately ages 65–74)

This is the “go-go” phase. You’re healthy, energetic, and ready to do everything you may have postponed during your working life, which may include travel, dining out, hobbies, and family experiences. Spending here often exceeds pre-retirement levels.

The ASFA Retirement Standard (December quarter 2025)  estimates that homeowners aged 65 and over now need $77,375 annually for a comfortable retirement as a couple, with single homeowners requiring $54,840 per year for a comfortable lifestyle[1]. This is the stage to spend intentionally.

Stage 2: The passive years (approximately ages 75–84)

Activity naturally slows. Travel becomes less frequent, big-ticket discretionary spending eases, and the focus shifts to comfort and connection. Discretionary costs naturally decline as retirees move into the passive stage, and while health costs increase, for most, these are offset by government subsidies and reduced spending in other areas.

This is often where retirees underspend, haunted by the fear of running out of money, a mistake that can leave hard-earned savings unenjoyed.

Stage 3: The care years (approximately ages 85+)

Spending patterns shift again as health and care needs rise. Home modifications, allied health services, and potentially residential aged care costs come into focus. With Australians living well into their 80s, on average, 81.1 years for men and 85.1 years for women[2], retirement income often needs to stretch far longer than many initially plan for. Residential aged care involves both a means-tested daily care fee and accommodation costs, which require careful advance planning.

Stage 4: The legacy years

This is the often-overlooked fourth dimension: what you leave behind. Estate planning, superannuation beneficiary nominations, and tax-effective wealth transfer strategies become critical here, including the tax treatment of super death benefits for non-dependants.

How a financial adviser adds value

A great adviser doesn’t just model how long your money will last, they help you spend it confidently across each stage. Specifically, advisers can help:

• Build a stage-by-stage cashflow plan that matches income drawdown to spending patterns.
• Boost the outcomes from the interactions between superannuation, various income streams, the Age Pension or government concessions and any other income sources.
• Model aged care costs before they become urgent.
• Review beneficiary nominations and ensure super is distributed tax-effectively on death.
• Recalibrate your plan as deeming rates shift, which can affect Age Pension entitlements.

The retirement spending journey isn’t a flat road; it’s a changing landscape. The good news? With the right map, every stage can be navigated with confidence.

How spending evolves across retirement:

Stage 1 – Active years

• ~65–74
• Travel, leisure, and lifestyle spending are at their peak. The “go-go” years.
• Spending: high

Stage 2 – Passive years

• ~75–84
• Slower pace and reduced discretionary costs. Comfort and connection matter most.
• Spending: moderate

Stage 3 – Care years

• ~85+
• Health and care costs increase. Home support or residential aged care may be needed.
• Spending: rising again

Stage 4 – Legacy years

• Ongoing
• Estate planning, super nominations, and tax-effective wealth transfer take centre stage.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional.  We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

[1] https://www.superannuation.asn.au/consumers/retirement-standard/

[2] Life expectancy, 2022 – 2024 | Australian Bureau of Statistics