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You need to track your spending to get an idea of what you need to retire on. Those 70-80% figures might be workable for those who aren't self employed, but I know what I save a year for retirement and pay out a year for self employment and other taxes, and I may "make" 125K a year but we live on less than 50K.
You need to track your spending to get an idea of what you need to retire on. Those 70-80% figures might be workable for those who aren't self employed, but I know what I save a year for retirement and pay out a year for self employment and other taxes, and I may "make" 125K a year but we live on less than 50K.
That's become my budget amount for retirement.
Yup and the larger the gap the greater the margin of error in your favor. On the other making 125k and living on 50k may change after awhile in retirement. You could reach a point of why are we not spending more.
work off expenses not income and you will get a better idea. what income was may mean little.
with many time cost money and one thing you will have plenty of in retirement is time.
for most retirement spending will look like a smile. the early years can take more than you even earned as you take trips and do things . then by 70 things can taper down decreasing spending. by 80 things ramp up again with health care costs.
it really is not a good idea to plan based on what your income was .
I agree. When we retire we will not have a mortgage payment or kids to support. We will no longer have to save for retirement and our medical coverage cost will likely be lower (though one can debate this). We will pay less for things like transportation since we no longer will be commuting and clothing (no need for business clothes). Our leasure expenses will likely go up but I doubt it will be a lot more. Still we will have to deal with inflation and a flat income but as we get old I doubt we will be able to travel as much. Jay
if you have the money you will find a use for it regardless of age. give any 85 year old a million bucks to spend and i guarantee you they will have no problem finding what to spend it on.
spending just shifts in many cases from themselvbes to kids and grandkids.
the problem is we never had a study that followed folks through as they age so we really do not know if spending falls as we age because choice or of lack of money , fear of lack of money or just social reasons.
today's 85-95 year olds were great depression children . when compared to 65 year olds of today like the BLS study compares age groups it may not be they cut back spending. they may have just been more frugal all their lives.
older folks had smaller pensions , smaller social security and generally less savings so it follows they spend less than the 65-75 year group because many have less.
so at this point we really don't know if spending will fall all that much if the money is there . the spending may just shift to medical and on others.
one other point about trying to base retirement on a salary.
your income from a salary can be pretty solid as long as you have a job and if not and you can work you can just get another job. but if you are going to be counting on the whims of the markets, inflation and interest rates you have a lot more variables that can happen to that income stream than from your job.
you may actually have to over plan the income you will need to have some slack in the plan for the awe crops and surprises in life.
it is like fighting a war. you plan and you plan and when the big battle happens you can never have to much in the way of resources on your side. even if you do not need to utilize all of it you want that feeling of having a comfort zone..
Last edited by mathjak107; 06-01-2014 at 04:09 AM..
After six years of retirement especially with solid fixed income streams there is no difference from working. The most important takeaway is that if you are not spending all that you bring in or have earned from ROI you are still saving. I still consider us saving for retirement just another stage or time. The fear that engulfed us at one point of having retired January 1 2008 has been replaced by the rewards of having retired six plus years ago. You can say it is only because of easy money fed policy but it is still a retirement reality for many. So depending on the target audience the/any article is written for doesn't make it true for another audience.
odds are though with no pension few are really growing assets unless they retired post 2000.
little old money has seen any growth since then if you were retired and spending down. it looks like you are gaining but you are really just re-tracing where things were with older money. the only way to pull 4-5 % from savings and grow that older money was to cut withdrawals and spending to less than that,.no help from markets there.
in fact as i pointed out in another thread:
The average safe withdrawal rate based on 111 30 year rolling time frames going back to 1926 has beeen 6.5% if you eliminate 2 of the worst time frames which drag it down to 4%.
If you retired in march 2000 and was invested 100% in an s&p index fund , by march 2014 you would have gained 63% with all dividends included.
Had you retired and took a 5% withdrawal with NO INFLATION ADJUSTING, by 2014 you would have only 336k left. That is a drop of 66% while earning 63%.
HAD YOU INFLATION ADJUSTED THE ABOVE THE RESULTS WOULD HAVE BEEN FAR WORSE..
that really does make investing on your own a whole lot different then a pay check.
odds are though with no pension few are really growing assets unless they retired post 2000.
little old money has seen any growth since then if you were retired and spending down. it looks like you are gaining but you are really just re-tracing where things were with older money. the only way to pull 4-5 % from savings and grow that older money was to cut withdrawals and spending to less than that,.no help from markets there.
in fact as i pointed out in another thread:
The average safe withdrawal rate based on 111 30 year rolling time frames going back to 1926 has beeen 6.5% if you eliminate 2 of the worst time frames which drag it down to 4%.
If you retired in march 2000 and was invested 100% in an s&p index fund , by march 2014 you would have gained 63% with all dividends included.
Had you retired and took a 5% withdrawal with NO INFLATION ADJUSTING, by 2014 you would have only 336k left. That is a drop of 66% while earning 63%.
HAD YOU INFLATION ADJUSTED THE ABOVE THE RESULTS WOULD HAVE BEEN FAR WORSE..
that really does make investing on your own a whole lot different then a pay check.
And if you are drawing down at a one or two percent rate with no pension? You could draw down at a two percent rate and still find a comfortable retirement. Within all of the who doesn't have a pension numbers is the reality that those 55-75 years old have a much greater chance of having one than a thirty year old. As I noted who the article or post is targeting/referencing doesn't mean it is for everyone nor is every shoe. That is why my post started out defining the population referenced. The thread title also narrows the thread discussion population to those with high working year incomes.
well it will all be based on what your drawing. but i tend to think very few with no pensions will be in the 2% or under camp.
more typically around 3%- 3.5% is what you see as real world numbers from surveys as far as what folks are drawing to supplement ss.
could it be done with less? of course it can. but the point i was making is that involves a pay cut less then what you were earning in work unless you have a ton of dough saved. do you think many can take ss and less than 2% of their savings and beat 2 pay checks coming into a household? very unlikely i would think uynless they were very low wage earners .
they could cut expenses to compensate but then again it goes back to why you do not want to base things on income levels while working.
that is why generating your own paycheck based on markets and interest rates is a lot more variable then a pay check and you need to plan that fact into your budget. .
well it will all be based on what your drawing. but i tend to think very few with no pensions will be in the 2% or under camp.
more typically around 3%- 3.5% is what you see as real world numbers from surveys .
That is spread over a broader population than just high income earners per the thread title. Reality is that once you exceed a certain income level living on 66, 75 or 8 percent of it is still a chunk of change. Thus the OP inquiry especially not in NYC of San Fran etc.
well it will all be based on what your drawing. but i tend to think very few with no pensions will be in the 2% or under camp.
more typically around 3%- 3.5% is what you see as real world numbers from surveys as far as what folks are drawing to supplement ss.
could it be done with less? of course it can. but the point i was making is that involves a pay cut less then what you were earning in work unless you have a ton of dough saved. do you think many can take ss and less than 2% of their savings and beat 2 pay checks coming into a household? very unlikely i would think uynless they were very low wage earners .
they could cut expenses to compensate but then again it goes back to why you do not want to base things on income levels while working.
that is why generating your own paycheck based on markets and interest rates is a lot more variable then a pay check and you need to plan that fact into your budget. .
Many or those with incomes well in excess of 100k per the OP? Take your 120k away from NYC and would you still be saving in South Carolina?
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