Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
 
Rhonda pulled up a retirement calculator during our call and shared her screen.

She's 54, a permit supervisor for a public works department, 28 years in PERS 2. She'd like to retire at 57.

The calculator had given her a goal savings number. It was roughly double what she had saved.
She'd been looking at it for a week. Then she asked me a question.

“Am I behind.”

I asked her where she had entered her pension.

She hadn't. There wasn't a field for it.
 
The number was built for somebody else

Most retirement math starts from an assumption that doesn't describe you. It assumes the money you live on in retirement comes from one place, the pile you saved. When the pile has to do all the work, the pile has to be enormous.

Your pile isn't doing all the work.

If Rhonda leaves at 57 with 31 years of service, her PERS 2 benefit is 2% times her service credit years times her average final compensation, then multiplied by an early retirement factor. With 30 or more years and a hire date before May 2013, the 2008 early retirement factor at age 57 is 0.861.

So she takes a 14% haircut for going 8 years early, and keeps a monthly benefit for the rest of her life with a cost-of-living adjustment attached2.

That's not a small footnote to her plan. That's the floor her whole plan sits on, and the calculator never asked about it.
 
Where the pension changes the answer

There's a new piece of research worth knowing about here.

Vanguard published work in early 2025 identifying people who may benefit from claiming Social Security early, which cuts against the usual advice to wait as long as you can. One of the four groups they name is pension holders whose payments cover their spending needs3.

The logic is that early Social Security reduces what you have to pull from your portfolio in those first vulnerable years, which leaves more invested and lowers the odds you're selling into a bad market to pay the electric bill3.

I want to be careful here, because this gets misread fast.

Claiming at 62 with a full retirement age of 67 permanently reduces your monthly benefit by 30%4. That's forever, and it follows your survivor too. Vanguard isn't saying everyone should claim early. They're saying the calculation looks different when guaranteed income is already covering your essentials.

For a lot of the people I work with, that's a genuinely different starting point than the one the internet assumes.
 
Where I'd push back on the popular version of this

The common argument for retiring earlier with less goes like this: your spending naturally falls as you age, so you need less than you think.

The research on that is more specific than the way it usually gets repeated.

Researchers at the Center for Retirement Research at Boston College found that household consumption declines about 0.7% to 0.8% a year across retirement5.

Here's the part that gets left out. Households in the top third by wealth declined about 0.35% a year. Households who reported very good or excellent health at retirement declined about 0.65% a year. Wealthy and healthy together, roughly 0.3% a year, which is close to flat5.

The authors' conclusion was that the observed spending drop mostly reflects constraints rather than preference. People spend less because they run short or their health limits them, not because they wanted to5.

When I build plans, I don't count on a declining spending curve. I'd rather assume you keep living the way you like and be pleasantly surprised.
 
The bridge nobody tells her about

The years between 57 and 62 are the actual problem in Rhonda's plan, not the size of her nest egg.

That's the stretch with no Social Security, health coverage to buy on her own, and a reduced pension carrying part of the load.

Her DCP account is built for exactly that stretch. Once you separate from the employer you were contributing to DCP at, you can take withdrawals without a 10% early withdrawal penalty6.
 
What I'd do before touching another calculator

Request an official benefit estimate from DRS, which you can do within 12 months of your retirement date1. Then write down what you actually spend, separating what you must cover from what you'd like to cover.

Compare the essentials against the pension. Whatever's left is the number that matters, and it's the only one worth stress testing.

Rhonda may still not be able to leave at 57. I don't know yet, and neither does she.

But she'll find out from her own numbers instead of somebody else's.
 
Sources

​1. Washington State Department of Retirement Systems. "PERS Plan 2." https://www.drs.wa.gov/plan/pers2/
2. Washington State Department of Retirement Systems. "Cost of Living Adjustment (COLA)." https://www.drs.wa.gov/life/retired/cola/
3. Vanguard. "Social Security: For some, early claiming is better." February 27, 2025. https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/social-security-for-some-claiming-early-better.html
4. Social Security Administration. "Program Explainer: Benefit Claiming Age." https://www.ssa.gov/policy/docs/program-explainers/benefit-claiming-age.html
5. Chen, Anqi and Alicia H. Munnell. "Do Retirees Want Constant, Increasing, or Decreasing Consumption?" Center for Retirement Research at Boston College, WP 2021-21. December 2021. https://crr.bc.edu/wp-content/uploads/2021/12/wp_2021-21.pdf
6. Washington State Department of Retirement Systems. "DCP – Deferred Compensation Program." https://www.drs.wa.gov/plan/dcp/
​

Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.

Cheryl is 57, has 31 years in PERS Plan 2 with a county public works department, and she brought a spreadsheet to our first call.

​One tab. A single number for annual spending. Then 35 rows of that number growing 3% a year until she turns 92.
She built it herself over a couple of weekends, and she should be proud of it. Most people never get that far.

But when I asked what she actually spent last year, she said something I hear all the time. “Roughly that. Except we put on a new roof, so that year was weird.”

Every year is weird. That's the part a single row can't hold.

Six in ten

J.P. Morgan had a way to check. They pulled anonymized transaction data from more than 280,000 Chase households and watched what left the accounts1.

Then they compared each household's spending in the 12 months before retirement to each of the first three years after.

Six in ten landed in what the researchers called volatile spending. Their spending temporarily rose or fell by 20% or more compared to that final working year1.

Only 18% stayed within 20% of their old number all three years1. The researchers nicknamed that group the Steady Eddies, and they're the only ones who spend the way a plan assumes.

It doesn't calm down as fast as you'd hope. Among retirees between 75 and 80, about half were still seeing volatility in their spending1.

Cheryl's average was probably fine. The shape was the problem.

Nobody clocks out on a Friday and never works again

The finding that surprised me most had nothing to do with spending.

More than half of the households in the study, 53%, didn't retire all at once1. One spouse stopped and the other kept going. Or someone left a career and picked up part-time work while a pension started.

I see that constantly with public employees, and Cheryl is one of them. Her husband is staying another two years.
The study also found that the post-retirement spending surge showed up in households with pre-retirement income under $150,000 and disappeared entirely above that1. Cheryl and her husband are above that line, so I'm not going to sit on a Zoom call and warn her she's about to blow through her budget.

What I'd watch for her is the lumpiness.

The bill that climbs faster than your COLA

Then there's healthcare, which runs on a different clock than everything else.

If Cheryl retires next year at 58, she has seven years before Medicare. If she carries PEBB retiree coverage, the 2026 rate for Uniform Medical Plan Classic covering her and her husband, neither of them on Medicare, is $1,935.11 a month2. That's about $23,200 a year before dental, vision, deductibles, or anything she uses.

It's one of the largest line items in her plan, and it doesn't behave like the rest of her budget.

For planning purposes, J.P. Morgan suggests assuming roughly 6% annual increases on Medicare-related costs1. Healthcare has a long history of outrunning general inflation.

Her PERS 2 pension carries a cost-of-living adjustment capped at 3% a year3. When inflation runs higher than that, the excess gets banked for a future year when inflation comes in lower3.

The biggest expense of her early retirement can climb at roughly twice the rate of the only automatic raise her pension will ever give her. That gap doesn't appear anywhere in a spreadsheet built on one growth rate.

What we changed

Her spending number barely moved. The average was close.

What we did was pull the lumps out of the average and give them their own lines. The truck is on borrowed time. Her daughter's wedding is coming whether it's in the plan or not. And there's the trip to Ireland she's been putting off since that daughter was in high school.

Each one got a year and a dollar amount instead of being smeared across three decades at 3%.

Then we built liquidity to cover them.

Because the danger in a year where you spend $40,000 more than planned isn't the $40,000. It's selling investments to fund it while the market is down 18%. That's how a temporary spending bump turns into a permanent loss, and it does the most damage in the first few years, when the balance is highest and there's the least time to recover.

Start with your bank statements

If you're within five years of retiring, give this an hour.

Pull your last three years of real spending. Whatever cleared the account, however uncomfortable that number turns out to be.

Then write down every expense over $5,000 you expect in your first five years of retirement, with the year you expect it.
If your plan can absorb all of them landing in a bad market, you have a plan. If it only works when they land in a good one, you have a forecast.

Sources

​1. J.P. Morgan Asset Management. "Three new spending surprises: Additional insights into retirement spending behaviors." 2024. https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/retirement-insights/ri-3-spend.pdf
2. Washington State Health Care Authority. "2026 PEBB Retiree Monthly Premiums, Effective January 1, 2026." https://www.hca.wa.gov/assets/pebb/51-0275-retiree-monthly-premiums-2026.pdf
3. Washington State Department of Retirement Systems. "COLA: Cost of Living Adjustment." https://www.drs.wa.gov/life/retired/cola/
​

Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.

The spreadsheet that grows forever

Doug shares his screen and pulls up the retirement spreadsheet he has been building since March.

He's 54, a public works supervisor with 29 years in PERS Plan 2, and he's clearly put real hours into this. Color coded tabs. Formulas stacked on formulas.

I scroll down to the spending column and stop.

Every year from 58 to 95, his expenses grow by 3 percent. Groceries at 87 cost more than groceries at 68. So does travel at 91.

"That's what inflation does," he says.

It is. But that isn't quite what happens to retirees.

Doug built the same assumption almost every retirement calculator builds. I've built it into plans myself without thinking twice about it.

The spending peak comes before retirement

The simplest version of the evidence comes from the Bureau of Labor Statistics, which tracks household spending by age. Spending peaks for households headed by someone between 45 and 54, then declines for every older age group after that1.

Doug is sitting in the highest spending decade of his life right now.

You might expect the opposite. Healthcare takes a bigger bite as people age, and prices there have a long history of rising faster than everything else. The government even maintains a separate research inflation index built around households 62 and older to reflect that2.

So the raw ingredients point one direction and the actual spending goes the other.

A snapshot by age group has limits, though, because it compares different households at a single moment. Maybe today's 80 year olds simply grew up more frugal.

​Researchers went further and followed the same households for two decades. A study published this year in the Financial Planning Review by David Blanchett, using the Health and Retirement Study, found that inflation adjusted spending declines steadily through retirement for the typical household3. Stretch the window to ten years and as many as 85 percent of retiree households were spending less in real terms than they had a decade earlier3.

That doesn't mean fewer dollars leave the checking account. Most retirees still spend more actual dollars each year. Their spending just doesn't keep full pace with prices.

They aren't all cutting back because they have to

This is the part I kept thinking about after I read it.

If retirees spend less because the money ran out, then building declining spending into a plan is a mistake. You'd be planning to fall short.

But the study sorted households by how well funded they were, from badly underfunded to very overfunded. The underfunded households cut hard, which is what you'd expect. The adequately funded households still trimmed their real spending. So did the overfunded ones3.

Only the most overfunded group increased spending at all, and barely. Nowhere near what their resources allowed3.

There's also a pattern worth noticing if you're reading this. Households spending $80,000 or more per year reduced their real spending regardless of how well funded they were3.

Diligent savers with comfortable plans, still pulling back.

Why your DRS pension changes this math

That pattern lands differently when you have a pension.

Your Plan 2 or Plan 3 benefit receives an automatic COLA each July once you've been retired a year, and that COLA is capped at 3 percent, with anything above the cap banked for future years4 5. Social Security adjusts annually as well6.

Members raise that 3 percent cap with me constantly. What happens in a year like 2022?

It's a fair concern and I'm not waving it off. But the research changes the size of it. If your real spending drifts down over time instead of climbing with inflation for 35 straight years, a capped COLA has less ground to make up than the worst case in your head suggests.

There's a second piece. Your pension and Social Security tend to cover the essentials, which are the most inflation sensitive part of your budget. Your DCP and personal savings fund the flexible spending. Travel, hobbies, the camper, the grandkids.

Flexible spending is exactly the category that fades with age.

What I told Doug

I didn't tell him to delete the inflation column. The fix is to stop applying it uniformly out to 95.

If he retires at 58 and his most active decade runs from 58 to 68, the plan should show higher spending in those years and lower spending later, rather than a smooth line that overstates 85 and understates 60.

The healthcare tail needs its own line. Most retirees never face a catastrophic late life medical event, but a meaningful minority do, and it's expensive3. That risk belongs in the plan as a funded item, whether through long term care coverage or a dedicated pool of assets. It shouldn't sit there as a vague fear that quietly shrinks every year of spending.

None of this touches the bridge, either. Doug retires seven years before Medicare, and PEBB continuation or a marketplace plan is a real cost in exactly the years his other spending will be highest. Lower spending at 82 does nothing for the premium at 59.

Where to start

Open your own projection and find the spending column.

Ask what growth rate it uses, and whether that rate changes anywhere between 60 and 95. If it grows at a constant rate for three and a half decades, you're looking at an assumption rather than a forecast.

Then ask a harder question. What would you do differently at 60 if the plan gave you room to?

Doug's answer was a fly fishing trip he'd been putting off for six years. Nothing in this research says he has to take it. It just takes away one of the reasons he wasn't.

​Sources1. U.S. Bureau of Labor Statistics. "Consumer expenditures vary by age." Beyond the Numbers. https://www.bls.gov/opub/btn/volume-4/consumer-expenditures-vary-by-age.htm
2. U.S. Bureau of Labor Statistics. "Research Consumer Price Index for Americans 62 Years of Age and Older (R-CPI-E)." https://www.bls.gov/cpi/research-series/r-cpi-e-home.htm
3. Blanchett, David. "How Spending Evolves in Retirement: A Smile, a Smirk, or Something Else?" Financial Planning Review, 2026. https://onlinelibrary.wiley.com/doi/full/10.1002/cfp2.70032
4. Washington State Department of Retirement Systems. "COLA: Cost of Living Adjustment." https://www.drs.wa.gov/life/retired/cola/
5. Washington State Legislature, Office of the State Actuary. "Cost-of-living adjustments." https://leg.wa.gov/studies-audits-and-reports/actuarial-reporting/pensions/funding/cost-of-living-adjustments/
6. Social Security Administration. "Cost-of-Living Adjustment (COLA) Information." https://www.ssa.gov/cola/

Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. I am a CPA and financial advisor, not an attorney, and this article is educational and not legal advice. Documents like powers of attorney should be drafted or reviewed by a licensed estate planning attorney.

A phone call about her father

Wendy calls me on a Tuesday morning, and I can tell right away this one is different.

She's 54, a county employee, PERS Plan 2, planning to retire at 59. Usually we talk about her pension timing and her DCP balance. Today she wants to talk about her dad.

He had a small stroke over the weekend. He's going to be okay. But the bills keep coming, and when she called his bank to help, they wouldn't talk to her.

She's his only daughter. She has a key to his house. None of that mattered to the bank.

"I thought being family was enough," she says.

It almost never is.

Love and trust are not the same as legal authority

Here's the part that surprises people. You can be the most trusted person in someone's life and still have no legal right to manage their money.

The tool that fixes this is a durable power of attorney for finances. It lets someone you choose (your agent) step in and handle bills and accounts while you're alive.1

"Durable" is the important part. A regular power of attorney generally stops working the moment you become incapacitated, which is often the exact moment help is needed. A durable one keeps working through it.2

Some of these documents take effect the day they're signed. Others "spring" into effect only after a doctor certifies incapacity.2 Springing sounds safer. In practice, getting that certification during early memory loss can be slow and frustrating, right when a family is already stretched thin.

Wendy's father, it turned out, had signed a durable power of attorney years ago. We just had to find it and get it to the bank.

What happens when the document doesn't exist

Plenty of families never get there. One national study found that only about 41 percent of parents expect their children to hold financial power of attorney for them.3 A common reason is simple: spouses name each other and never name a backup.

When there's no valid power of attorney and someone loses the capacity to sign one, the path forward usually runs through the courts. In Washington, that means a conservatorship under Chapter 11.130 RCW, where a judge decides who can manage the person's finances.4

It works, but it's a different experience. It becomes public record. It can take months. And the conservator often has to file an annual accounting with the court for as long as it lasts.4

A power of attorney signed ahead of time avoids most of that. The only thing that decides which path a family takes is whether the document got signed while it still could be.

Then Wendy asked the better question

We sorted out her dad. Then she got quiet for a second and asked the question I was hoping she'd ask.

"Wait. If something happened to me, could Mark even touch my accounts?"
Mark is her husband. And this is where it gets specific for public employees.

Your DRS accounts don't work like a joint checking account. For your agent to act on your pension or DCP, DRS requires two things: a valid power of attorney and a notarized Affidavit of Attorney in Fact. The power of attorney also has to meet Washington's requirements under Chapter 11.125 RCW.1

Being married doesn't override that. Without the right documents on file, even a spouse can hit a wall.

The powers people forget to include

There's one more layer, and it's easy to miss.

Washington law treats certain powers as "hot powers." Things like making gifts or changing a beneficiary designation only work if the document specifically grants them. A general power of attorney doesn't cover them automatically.5

Why does that matter for you? Because so much of your retirement passes by beneficiary designation, not by your will. Your DRS benefits go to the people you name, and if you name someone other than your spouse, state law may still require DRS to pay your spouse.6

If nobody can legally coordinate those designations when you're unable to, a small oversight can become a permanent one.

A few measured steps

None of this needs to happen this week. But here's where I'd point Wendy, and where I'd point you.

Find out what you already have. Pull the actual documents. Are they durable? Immediate or springing? Nobody remembers until they read the fine print.

If you have an immediately effective power of attorney, consider getting it to your institutions now, including DRS, so you learn about any problems while they're still fixable.

Look at your beneficiary designations on your pension, your DCP, and any IRAs, and make sure they still match your life today.

If you're the agent for a parent, keep clean records and sign as the agent, not as yourself. The format is their name, by your name, as attorney-in-fact.7

And when it's time to actually draft or update these documents, work with an estate planning attorney. I'm a CPA and financial advisor, not a lawyer, and this is one place where the right document, drafted correctly, is worth it.

The real point

None of this is really about paperwork.

It comes down to whether the person you'd want helping you, or helping your parents, is actually able to when the time comes.

Wendy got off that call with a short list and a lot less worry. That's how most of these end once someone can see the whole picture.

​Sources
1. Washington State Department of Retirement Systems. "Power of Attorney.." https://www.drs.wa.gov/sitemap/poa/
2. American Bar Association. "Power of Attorney.." https://www.americanbar.org/groups/real_property_trust_estate/resources/estate-planning/power-of-attorney/
3. Fidelity Investments. "2025 Family and Finance Study.." https://institutional.fidelity.com/app/literature/view?itemCode=9922495&renditionType=PDF
4. Washington State Legislature. "Chapter 11.130 RCW: Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act.." https://app.leg.wa.gov/RCW/default.aspx?cite=11.130
5. Washington State Legislature. "RCW 11.125.240: Authority that requires specific grant.." https://app.leg.wa.gov/RCW/default.aspx?cite=11.125.240
6. Washington State Department of Retirement Systems. "Beneficiary information.." May 23, 2024. https://www.drs.wa.gov/beneficiary/
7. American College of Trust and Estate Counsel Foundation. "Guide for Agents Acting Under Durable Financial Powers of Attorney.." https://www.actec.org/wp-content/uploads/2023/08/Guide_for_Agents_Acting_Under_Durable_Financial_Powers_of_Attorney.pdf