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In looking at retirement planning, I've become ever more convinced that consumption is the key component that needs to be looked at.
Total Dollars Spent - Savings - Debt Payment Extinguished By Retirement Take Home Pay
This becomes the basis of what you'll need in retirement and can be multiplied by an inflation rate to arrive at your costs. It can then be compared to your estimated invested savings/growth rate at the time of retirement to see what amount you'll need to retire at a given date.
I'll pick on a hapless relative of mine who saves nothing, but does have a contribution made each year of a very nice 10% of pay. When I look closer at their expenditures, I see nearly 50% of their pay is going towards a mortgage, student loans and an auto loan. Assuming these are gone when she retires as expected, her consumption that will keep going up each year is quite low, and she'll likely be able to retire on time.
Does anyone else look at retirement in this manner?
I look at cash flow. I know what it costs to run the house, the ski condo, the boat, car, health care, and the spending I push through my credit card in a year. That's what my retirement income is going to have to be or I'll need to start unloading luxuries like the ski condo and the boat and dial back general spending.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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Cash flow is a more sustainable way to plan / survive retirement (same with a business).
You can do that numerous ways..
1) reduce spending
2) have a bundle of cash / interest bearing assets
3) have optimized investment income
4) Have 'other means' of contributing to income
5) Have assets that you periodically plan to sell over time... (proceeds contributing to your cash flows / investments)
---> Consider your spending / life habits
What will it take to support that?
What may change? (health / travel / activities)
One thing is for sure... you have LOTS of free time and opportunities to spend dough when retired - be prepared for that (discipline or BIG bucks).
In looking at retirement planning, I've become ever more convinced that consumption is the key component that needs to be looked at.
I agree
Quote:
Total Dollars Spent - Savings - Debt Payment Extinguished By Retirement Take Home Pay
This becomes the basis of what you'll need in retirement and can be multiplied by an inflation rate to arrive at your costs. It can then be compared to your estimated invested savings/growth rate at the time of retirement to see what amount you'll need to retire at a given date.
I'll pick on a hapless relative of mine who saves nothing, but does have a contribution made each year of a very nice 10% of pay. When I look closer at their expenditures, I see nearly 50% of their pay is going towards a mortgage, student loans and an auto loan. Assuming these are gone when she retires as expected, her consumption that will keep going up each year is quite low, and she'll likely be able to retire on time.
Does anyone else look at retirement in this manner?
Why would you go into retirement while not fully owning your home?
It seems to be contradictory to retire while still making payments [from your income] on your home.
I retired with a mortgage, yet I had rental income that exceeded my mortgage. My salary income was never required for any of the mortgages I have had.
if we buy next year we will take a mortgage in retirement . we are generating more on our own money leaving it where it is .
I prefer to take the more conservative approach. My worst case is that my Social Security check will cover all my living expenses in my paid-for house. The rest can vaporize and I'll still have a roof over my head and food on the table.
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