Why you will need less money than you think for retirement

[Serious Conversation]

Originally Posted by Escort Rider

All these articles and guidelines represent averages which are totally meaningless to the individual. I spend about 110% of my pre-retirement expenditures, because I have more time to go places and do things. I derived almost no savings at all from the cessation of full-time work, other than union dues. I will address some of the points in the article plus other commonly made points on this topic.

1. Paid off mortgage: Since I paid off my mortgage several years before retirement, there was no difference in that department.

2. Putting kids through college: Well that's huge, of course, but I have no kids, so that one is meaningless to me.

3. Medical expenses: Lower after Medicare, so yes, I did derive some savings there.

4. Dental expenses: Way up after retirement, because I used to have excellent employer-paid dental insurance and now I have a crappy plan that doesn't pay for much.

5. Commuting and parking expense: I had no parking expense because I did not work in a dense urban core and I had a pretty short commute the last 20 years or so of my full-time employment. So I drive more now than I did while working because there is more time to go places and do things.

6. Clothing expenses for work: No savings for me, as I still wear the same kind of clothes I used to wear. I had very little dry cleaning then (was not an attorney) and I continue to have very little dry cleaning now. For women the dry cleaning thing may be more significant, but we men can have wash-and-wear dress shirts and dress slacks.

7. Union dues: Yes, that's something I no longer have, but it wasn't an arm and a leg.

8. Saving for retirement: That one is certainly a source of reduced expenses for most people, but my retirement savings (8% of gross salary) came from automatic payroll deductions from gross, and I never spent that money out of net income, so it didn't feel like an "expense".

9. Federal income taxes: I didn't make much while working, so it turns out my retirement income is actually a bit higher than my full-time working income, hence I pay more income taxes than before. Not all us are "successful" in the workplace in terms of being doctors, lawyers, CPA's, investment bankers, middle and upper management, Ph.D.'s, and so forth. Therefore my view may be skewed being that it's a view from closer to the bottom of the food chain (high school teacher).

This is one of the more thorough, and IMO, accurate, posts I've seen in awhile and provides a counterpoint to a lot of the prevailing wisdom out there.

I make a moderate to fairly good income for a single guy in a reasonable cost area - about $60k after my bonus. I have an auto payment and some other debt right now, but expect to be fully debt free by 31 (turning 29 next week) or 32 at the latest.

I don't make a ton of money but the dollar goes pretty far here in Indiana. I love to travel, and do when I have the chance, but I'm limited more by available PTO right now than by money. Granted, when I am able to travel, I don't pull out all the stops - my travel has mainly been limited around the Midwest and southern US, but it's generally not expensive. Once I'm debt free, I'll have more money to play with. If I was retired, I'd travel more, at least for a year or two.

During the week, I often bring in my lunch and make dinner at home because I can't really go anywhere. I'm actually more likely to eat out on the weekends when I'm not at home as much. Going back to the first point, I'd probably eat out more when retired, provided I was on the road and was healthy enough to do so.

I live six miles from my office and don't have any parking fees. One of the people who used to work at this office took a prestigious job in the Loop in Chicago. He pays $200 month in just personal parking fees at his condo alone, plus whatever he incurs elsewhere. Again, because I'd likely be travelling more and don't have much of a commute now, I'd probably spend more on transportation in retirement.

I also don't wear any special clothes for work I wouldn't otherwise buy. If I had to buy multiple suits or a uniform, maybe I'd feel differently.