Spending shocks can break plans

A retirement plan can fail even when the market does not crash, because one-time spending jumps can drain savings faster than expected. (morningstar.com) Christine Benz of Morningstar wrote on February 16 that her firm’s latest work tested two shocks in particular: retiring earlier than planned and paying uninsured long-term care bills late in life. In Morningstar’s model, stretching withdrawals from 30 years to 35 years cut the starting “safe” withdrawal rate to 3.5% from 3.9%, and a 40-year horizon cut it to 3.2%. (morningstar.com) The early-retirement problem starts with timing. Social Security says retirement benefits can begin at 62, but full retirement age is 66 to 67 depending on birth year, so workers who stop earlier lock in smaller monthly checks for longer periods. (ssa.gov) Morningstar cited MassMutual data showing the average retirement age is 62, and said nearly half of retirees surveyed reported leaving work earlier than planned. Charles Schwab separately said in November 2025 that nearly 6 in 10 retirees told Transamerica they retired sooner than expected. (morningstar.com) (schwab.com) Health costs add pressure before and after Medicare starts at 65. Morningstar said marketplace coverage for people ages 62 to 65 averaged about $800 to $1,200 a month in 2025, while Cobra coverage averaged about $700 to $1,500 a month. (morningstar.com) Even after 65, medical bills stay large. Fidelity said on July 30, 2025 that a 65-year-old retiring in 2025 should expect to spend an average of $172,500 on health care and medical expenses during retirement, and that estimate does not include long-term care. (newsroom.fidelity.com) Long-term care is the biggest late-life spike in many plans because it can arrive as a large bill over a short period. Genworth said its 2025 median annual cost figures were $74,400 for assisted living, $114,975 for a semi-private nursing home room, and $129,575 for a private room. (genworth.com) Broader research shows these shocks are common, not edge cases. The Center for Retirement Research at Boston College said in a January 6, 2026 brief that the typical retired household spends about 10% of income on unexpected expenses in a normal year, and two in five households lack enough cash to cover even one year of those costs. (crr.bc.edu) The center’s underlying study followed 3,427 retired households in the Health and Retirement Study and found 83% faced unplanned outlays in a given year, with average annual unexpected spending of $6,000 among households that had those bills. CNBC reported those figures on January 17, 2026 from the same research. (cnbc.com) The practical fix is not a single number but a tougher plan. Schwab said advisers often rerun retirement projections with new assumptions for early retirement, surprise expenses, or weak returns, using Monte Carlo simulations that model 1,000 possible market and inflation paths instead of one smooth forecast. (schwab.com) That leaves the core question less about whether a portfolio survives an average year than whether it survives a bad one. The planning work Morningstar highlighted says the answer often depends on whether a household has room for a medical bill, a move, or a family rescue without permanently raising withdrawals. (morningstar.com)