Constant Spending and Variable Retirement Age

This is a guest post by Robert, who lives in Calgary and works as a financial advisor retired at 34. He is married, has three kids.  Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.

Thinking back two years or five years or ten years, how did your earnings then compare to your earnings now? Due to improving skills, seniority and inflation, many of us earn a larger income over time.  In my experience, as people earn more, they choose to spend more.

For example, I worked with a young couple who were both employees of the provincial government. As we reviewed the information about their benefits, it quickly became apparent that they would be able to retire between age 50 and 52 with a full pension. After that conversation, they decided to increase their spending, buying a rental property, buying a vacation property and buying a new car. If they’re going to be able to retire early anyway, the thinking seemed to be that they might as well spend their excess income.

For the people that I advised, the retirement age of 60 or 65 seemed to be a constant. When they earned any extra money, they chose to use it for additional spending. In this way, once they were on track to retire at age 65, the variable was how much they spent on their lifestyle in the meantime.

When I began earning an increasing income at work, I chose to hold constant my present spending. As I earned more, I started by paying down more debt. Then I used more money to invest (given the market opportunities). Because my additional income went to increasing my net worth, my retirement date moved ever closer. For me, the variable was when I would be financially prepared to retire.

Everyone in our society has the ability to be creative with how they use their money. Many of us are lucky to earn more than we need to survive. That excess money can either be used to increase spending and current enjoyment, or to bring forward the time of retirement (while holding spending constant). Do you make a conscious choice of how to handle additional income? If so, how do you choose where to allocate it?

3 thoughts on “Constant Spending and Variable Retirement Age”

  1. If retirement is only 5 years away and will last 30-50 years, then every $10k stashed into my brokerage account is $100/mo of income that I will have in retirement. Why would I want to delay that retirement by spending the money now?

  2. My partner is very close to finishing school and most likely getting a job that pays significantly more than my job. Combined, we’ll make more money than we need, which is where lifestyle inflation comes in. I don’t understand why it is not more common for people to realize spending less equals earlier ‘retirement’ (or as I like to call it, time to do what I want instead).

    Perhaps we need an outsider opinion?

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