When a Spending Decision Changes the Equation
How small changes in spending reshape the equation
It Looks Small at First
Spending an extra $20K per year in retirement might not seem like a big decision. But it can quietly reshape everything that comes after it.
That’s because financial independence (FI) is a series of decisions, tradeoffs, and assumptions played out over time. I’ve come to view it as an ever-changing equation. And small changes in one part of that equation can shift everything else.
Most people focus on the number itself. How much they need, whether they’re on track, and when they can get there. What gets less attention is how the assumptions behind that number are built. Specifically, what you’re assuming about how you’ll actually spend your time when you get there.
That’s where the equation starts to get personal.
The Slow-Go Years Are Real
I’ve had three back surgeries. Last year I had a flare-up of sciatica and back pain that lasted three months, followed by another that stretched to seven. There were stretches where doing much of anything was difficult.
I’m not sharing that for sympathy. I’m sharing it because it changed how I think about retirement timing and what I want to do with the time I have when I get there.
I’ve always wanted to retire early if I could. But the back issues have sharpened that instinct. I’ve told my wife that I need to prioritize my health, and part of that means not spending the best years of my life in front of a desk. Time has a cost too. And health has a way of reminding you of that when you’d rather not think about it.
You may have heard of the go-go, slow-go, and no-go years of retirement. You go hard early when you have energy, excitement, and hopefully good health. You slow down as the novelty wears off, priorities change, or getting around becomes less enjoyable. Eventually, some things just aren’t possible anymore.
I believe this. Not as an abstract concept but as something I’ve watched play out and something I think about for myself. The go-go years aren't guaranteed. My back has made sure I don't forget that.
Change the Inputs; Change the Outcome
Let’s walk through an example:
Tommy is 55 and spends about $100K a year. He’s planning to spend about the same when he retires at 62. Using a conservative 4% withdrawal rate—percentage of total investments needed to cover annual expenses—Tommy’s FI number is $2.5M.
But now let’s say Tommy discovered he loves to travel and wants to do more when he retires. He increases his annual travel budget by $10K. Tommy also learns he needs a new prescription that will cost another $10K each year.
Tommy’s expected spending has increased to $120K. His new FI number jumps to $3.0M.
The Tradeoff
If Tommy assumes that $120K holds every year, his FI number jumps to $3.0M. That likely means working longer or saving more today to make up for that extra $500K.
But future Tommy also gets something for it:
More travel and experiences
More time with family and friends
More of what he values
That may be worth it. It depends on what Tommy wants to prioritize.
The problem is this tradeoff assumes his spending stays constant throughout retirement. It won’t.
The Assumptions Behind the Tradeoff
Tommy’s taking a conservative approach and assuming a permanent $20K increase. Some expenses, like that prescription, will likely remain consistent. Others, like travel, tend to change over time.
There’s no way to know how long anyone will be healthy enough to travel or if that desire will fade with time.
So instead of assuming a permanent $10K increase for travel, we adjust for how it’s likely to play out over time:
$10K extra for travel in the first five years
$5K for the next five
Little to none beyond that
Tommy’s required savings may look more like ~$2.7M instead of $3M. That’s about $200K more than his original plan but $300K less than if we assumed the travel expense increase was permanent.
When the Assumption Goes Wrong
That $300K difference matters.
It’s several more years of work, more aggressive saving today, or both. And it doesn’t give Tommy anything he actually needs to enjoy the retirement he wanted. He could have done it all while giving up much less.
This is the result of a flawed assumption, not a conscious decision.
The biggest cost in FI isn’t running out of money. It’s building a plan around assumptions that were never true.
What This Looks Like in Practice
I’ve made adjustments to my own retirement spending assumptions because of this. My wife and I have updated our travel budget to allow for a little more. Things like booking nicer hotels, choosing direct flights over connections, or not having to think twice about a dinner reservation. Small changes that add up over a trip and over a year.
It’s not extravagance for its own sake. It’s a deliberate choice about what the go-go years should look like for us, while my back hopefully holds up. The math changes a little. The tradeoff is worth it.
The $200K increase in Tommy’s example is an intentional choice. The $300K on top of that is the cost of an incorrect assumption.
Have you put real thought into your assumed spending in retirement? Have you accounted for how it’s likely to change—not just the number, but the timing?
What This Shows
Your FI number goes up when spending increases. That part is obvious.
What’s less obvious is how much that depends on the assumptions behind it and the tradeoffs you’re actually making.
Some of those tradeoffs will be worth it. Some won’t.
The difference isn’t the amount. It’s whether you’re choosing them—or just accepting them.
Either way, the equation is still changing.
— Brad
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This is meant to help you think through financial decisions and tradeoffs—not tell you exactly what to do. It’s general in nature and not personalized advice (see full disclaimer).