One of the difficulties in planning for retirement is that we tend to think of it as one long, fairly uniform stage of life. We work out how much income we might need, compare that with NZ Super and our savings, and assume that the resulting budget will continue more or less unchanged.

Real life is rarely so tidy. Retirement may last 20 or 30 years, and the way you spend money at 65 can be quite different from the way you spend it at 75 or 85.

In fact, retirement spending often follows a recognisable pattern. It can be relatively high in the first years, decline during the middle years and then rise again later in life. Drawn on a graph, the pattern resembles a smile — hence the term “retirement spending smile.”

For many people, the first years of retirement are the ones they have been looking forward to for decades. At last there is time to travel, visit family, pursue hobbies, renovate the house or simply enjoy more lunches, coffees and outings with friends.

These are often active years when health is still good and retirees are keen to make the most of their freedom. Some people replace a car, buy a motorhome, take an expensive overseas trip or tackle projects around the house.

At the same time, some costs associated with working disappear. There is no longer a daily commute, fewer work clothes are required, KiwiSaver contributions stop and there may be less need to buy lunches and coffees during the working week. A paid-off mortgage can make an even bigger difference.

That is why the commonly quoted suggestion that retirees need only 70% or 80% of their previous income can be misleading. Your spending may certainly change when you retire, but it does not necessarily fall dramatically. You may simply spend the money on different things.

After the initial burst of retirement activity, spending often begins to settle.

The big trips may become less frequent, major renovations have been completed and many retirees develop a comfortable routine closer to home. They may still travel and socialise, but perhaps not with quite the same intensity.

This can become the least expensive phase of retirement. A couple may decide they need only one car. Clothing expenditure may decline. Entertainment may become simpler and cheaper, and there may be less desire to acquire possessions.

For some retirees, however, another expense appears — helping family. Adult children may need assistance with a house deposit, grandchildren may need help with education, or a family crisis such as redundancy or relationship breakdown may prompt financial support.

Generosity is one of the pleasures of having accumulated wealth, but it needs to be balanced against the uncertainty of your own future needs.

Later in retirement the composition of spending changes once more.

Travel and entertainment expenditure may fall, but health-related costs can rise. Doctor and specialist visits may become more frequent, while glasses, hearing aids, dental treatment, mobility equipment and other health expenses can add substantially to the household budget.

Health insurance premiums can also become increasingly expensive with age.

Housing may require further expenditure. A person intending to remain in their own home might need a more efficient heating system, improved access, bathroom modifications, handrails or other changes that make the house safer and easier to live in.

Eventually, some people may need home help, supported living or residential care.

The result is the upward curve at the other end of the retirement spending smile.

Of course, there is no standard retirement spending pattern. For some people the smile will be pronounced; for others it will be almost flat.

A keen traveller with substantial savings may spend heavily in the first decade of retirement. Someone who prefers gardening, walking and spending time with family may see relatively little change. Health, housing, family circumstances and personal wealth all affect the shape of the curve.

This is why retirement planning should not be based solely on a percentage of your pre-retirement income.

A better approach is to think about retirement in stages. What do you want to do while you are fit and active? Which expenses are likely to disappear? What might change ten or fifteen years later? And what provision should you make for increasing health, housing and care costs towards the end of life?

Your retirement budget should be a living document rather than something you prepare once and put away.

Knowing that spending is likely to change gives you permission to spend more at some stages and less at others. More importantly, it helps ensure that your savings are available when you most want — and need — to use them.

Understanding your own retirement spending smile may therefore be just as important as knowing how much you have saved.