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View Poll Results: What percent of current income are you trying to match?
More than 100% 18 14.06%
100% 18 14.06%
90-99% 5 3.91%
80-89% 16 12.50%
70-79% 25 19.53%
60-69% 17 13.28%
50-59% 11 8.59%
Less than 50% 18 14.06%
Voters: 128. You may not vote on this poll

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Old 02-04-2016, 08:38 AM
 
Location: Loudon, TN
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I agree that the best way to calculate your income needs in retirement is to use a zero based budget to determine your expected expenses. It takes a little time and research to develop the budget, but simply starting with your checking account statement and identifying where all your money is currently going and how that will change in retirement is a good starting point. Then be sure to include any annual expenses, and typical maintenance costs (new tires every x years, etc) and spread those over the 12 months to develop an accurate monthly budget. The next thing we did was develop an income "timeline", which is basically a stacked bar graph showing your income streams from all sources extended over the time of your retirement. This allows you to see the gaps in your income plan and use whatever flexibility you have to fill any income gaps, levelizing your income. It also allows you to visualize inflation adjustment over time. Taking the time to develop the budget and income data is how we determined when we would be able to retire and influenced us to move to a lower COL location, which allowed us to retire much sooner. Our post-retirement move saves us 20% on expenses per year, and we love our new area.

But the question was about percentage of working income, so that's how most people answered.
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Old 02-04-2016, 08:40 AM
 
Location: Denver CO
21,189 posts, read 11,814,728 times
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Quote:
Originally Posted by TheShadow View Post
I agree that the best way to calculate your income needs in retirement is to use a zero based budget to determine your expected expenses. It takes a little time and research to develop the budget, but simply starting with your checking account statement and identifying where all your money is currently going and how that will change in retirement is a good starting point. Then be sure to include any annual expenses, and typical maintenance costs (new tires every x years, etc) and spread those over the 12 months to develop an accurate monthly budget. The next thing we did was develop an income "timeline", which is basically a stacked bar graph showing your income streams from all sources extended over the time of your retirement. This allows you to see the gaps in your income plan and use whatever flexibility you have to fill any income gaps, levelizing your income. It also allows you to visualize inflation adjustment over time. Taking the time to develop the budget and income data is how we determined when we would be able to retire and influenced us to move to a lower COL location, which allowed us to retire much sooner. Our post-retirement move saves us 20% on expenses per year, and we love our new area.

But the question was about percentage of working income, so that's how most people answered.
Yes, that was the question I asked. Anyone who wants to ask a different question or create a different poll is of course free to create their own thread.
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Old 02-04-2016, 09:10 AM
 
71,737 posts, read 71,853,273 times
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Quote:
Originally Posted by Vasily View Post
Just like in a project plan you have to consider best case, most likely, and worst case scenarios. Worst case for most of us being something like living to a hundred with the last 30 being in a long term care facility.
worst case is we get a set of horrible conditions like those in 1965 and 1966 saw . that is really what we are protecting against .

having to much is never a problem and planning out to 100 is something you can calculate . i use 92 for myself and 95 for my wife .

2/3's of the time drawing 4% inflation adjusted left you 30 years later with more then you started with so living longer has not been a problem .

for very little money you can get a longevity policy to kick in at 85 today that pays quite a lot of money at a low cost
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Old 02-04-2016, 09:55 AM
 
Location: Idaho
1,455 posts, read 1,157,703 times
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Quote:
Originally Posted by TheShadow View Post
I agree that the best way to calculate your income needs in retirement is to use a zero based budget to determine your expected expenses.
...

The next thing we did was develop an income "timeline", which is basically a stacked bar graph showing your income streams from all sources extended over the time of your retirement.
....

But the question was about percentage of working income, so that's how most people answered.
Yes, I used the same approach to assess whether to retire a bit early last year.

Here is the recap of some calculations which I had posted in other threads.

1. Projected annual expenses: $40K ($24K non-discretionary and $16K discretionary spending)
2. Projected retirement income (SS+small pension+annuity - not including investment income and RMDs): $50K in <2yrs, $67K in <3 years and $93K in <7 years.

If I add say $5K to $40K to account for Fed/State tax, the needed pre-tax income will come out to be 90% then 67% and 48% of the expected 'fixed' income. This means that we are not likely having to touch our savings for any 'standard' needed expenses and can even spend more or save more down the road.

The ratio of this 'desired' pre-tax retirement income over pre-tax working income is much lower. It is at between 15- 20% of our income for the last 5-10 years.

We have been pretty diligent savers and quite frugal but are not misers. We do not plan to cut back on our discretionary spending and may even increase it in the early years of our retirement.

The above analysis was what made me feel confident about 'quitting' my job last October.

Last edited by BellaDL; 02-04-2016 at 10:27 AM..
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Old 02-04-2016, 12:49 PM
 
Location: Greenville, SC
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This is a good thread; it's helpful to see what others have done in their planning. I'll be revisiting my plan with some of these suggestions in mind.
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Old 02-04-2016, 02:35 PM
 
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I'm still a believer that one should think of net (after tax dollars) rather than gross (pre tax dollars). Doing so makes a huge difference, at least it does in my case.

In gross dollars my retirement income us 74% of my work income, however, my net retirement is 98% of my work income. That's because I had so much taken out of my salary (TSP, retirement, SS, higher federal and state taxes, medicare, etc) that I no longer have to pay. Particularly helpful is the fact that Ohio doesn't tax military retirement and SS, almost 2/3s of my retirement income!
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Old 02-04-2016, 04:02 PM
 
Location: Wasilla, AK
7,275 posts, read 4,158,066 times
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Quote:
Originally Posted by Mark bridge View Post
I'm still a believer that one should think of net (after tax dollars) rather than gross (pre tax dollars). Doing so makes a huge difference, at least it does in my case.

In gross dollars my retirement income us 74% of my work income, however, my net retirement is 98% of my work income. That's because I had so much taken out of my salary (TSP, retirement, SS, higher federal and state taxes, medicare, etc) that I no longer have to pay. Particularly helpful is the fact that Ohio doesn't tax military retirement and SS, almost 2/3s of my retirement income!

That's another way of doing it with hard numbers. I simply look at taxes as one more expense. But you'll find that most tax calculators are set up to give you an idea of your taxes based on gross income. For instance, if you have a 1099-R for $50,000 and it's just the two of you under 65 with no Schedule A and no other sources of income or adjustments to gross income, your taxable income is $29,400 ($50,000 minus standard deduction of $12,600 minus two personal exemptions of $8000 ($4000 each) equals taxable income) and your taxes are 3488. (50,000 - 3488)/12 provides you with a net income of 3876 a month. I majored in accounting and I could work it the other way, but I can tell you it's a whole lot easier going from gross income to net income.
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Old 02-04-2016, 04:54 PM
 
Location: Gilbert, AZ
3,186 posts, read 1,965,390 times
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Quote:
Originally Posted by GeoffD View Post
I'm fairly high income. My Social Security at FRA only replaces 19.85% of my base pay. I don't have a pension. No way I'm going to replace even 50% of my income. ...but I've already planned for that.
We're similar. Today it's approximately 1/3 going to taxes, 1/3 to savings, and 1/3 to consumption. The actual amounts a bit heavier on consumption and a bit lighter on savings, but the three equal portions is close enough for estimating. (The ratios were different many years ago when we were earning less.)

It's not easy to replace a high percentage of a high income, and really unnecessary anyway.

To the original question... there's really no standard answer, and the poll here shows that to be true. The histogram is pretty flat all the way from "<50%" on up to ">100%".
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Old 02-04-2016, 11:14 PM
 
Location: RVA
2,172 posts, read 1,270,292 times
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I assumed the question was gross income (projected, if not there yet) before retirement and gross income after retirement. Since the tax situations, as well as location, management of tIRA & ROTHs plus "when in retirement" are not discussed, plus when income is salary plus unknown overtime and bonuses, the percentage, as a useful number is meaningless.

I could use a least common denominator and assume only my guaranteed current base salary (happens about 20% of the time), assume no raises for the next 4 years, (possible, but very unlikely), and move to a lower COL area, collect pension and SS at 62, etc, etc and just say my fixed income from pensions, SS, and RMDs after I'm 70 will be around 90 % of my final (decent, low 6 figure salary). I've ANSWERED the poll question.

That is why I have oft expressed I'm not that concerned about retirement. But, that answers this poll. But for some odd reason, a bunch of posters here insist on posting "how much" they make in retirement, or "how to determine the amount needed" in retirement. The question, not as useful at all as some have expressed, is "what percentage", not how much. If you want to discuss how or how much, that's a different thread. Why is that so hard for so many to see? Not every question is correctly answered by "how much or how much is enough", for goodness sakes!!!! And people that tend to answer "how much", are often high income, like, say Alaskaerik and Mathjak, which patently and understandably irritates the lower "who needs more than $3k a month" group, where $3k/mo represents 90% of their past income!!! We may as well answer the question with "The correct answer is to move to Ecuador and live like a king on $3k a month, and why anyone would not do that is lunacy!" Irritating, right? But it's TRUE. Expat to any low COL country where plenty of Americans have safe compounds, and it would be true. But obviously that is NOT the answer to the question or the right answer for most Americans retirement dreams.

For me, 4 years out from desired retirement at 62, oft repeated here, sorry, this poll is meaningless. Once you get to a level of income, both pre and post retirement, where sustainable income covers all necessities and reasonable discretionary expenses, then the very real and hard question is "how much longer do you want to work, to increase the income stream to increase your comfort level of success, adjusted for assumed inflation and taxes and unknown future medical costs"!!! Since no one knows what future costs will really be, only you yourself can answer what your tolerance for what that percentage number will be!!

Not to be insulting or condescending, but if you lived your live in the lower half of the income tax arena and are comfortable there, then $5k a month sounds mighty dang comfortable. When I had a lower income, in the beginning of my career, that number seemed unimaginably high. Mansions and Porsches and trips to Europe for everyone. But it's just not the case at all. If you feel you've worked your butt off to finally get to the top say, 15%, then being told you should be "happy with $5k/mo, who needs more"? is frankly just as irritating. I didn't work my whole life to settle for having to live on $5k/mo. That would scare the crap out of me. Sorry, but it's very real and very true. There is some comfort in knowing that we would never starve or worry about having a roof over our head, but for many, that is not enough, and it's no ones place to insist it is or should be.

Last edited by Perryinva; 02-04-2016 at 11:43 PM..
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Old 02-05-2016, 02:09 AM
 
Location: Los Angeles area
14,018 posts, read 17,754,097 times
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Yep, the question of what percentage pretty much inevitably brings up the question of how much. Since the median household income is somewhere around $50,000 (I'm rounding off), that means half of households have less than that. So a given percentage means vastly different things to different people, as pointed out by Perryinva just above. For someone making $35,000 while working, 100% is needed to have any reasonable level of comfort, and that level would be quite modest, of course.

So while technically and narrowly framed, "how much" is off-topic in this thread, given how almost all threads wander off-topic, this particular wandering is less serious than the usual wandering and is really closely related.

It is part of the explanation of the wide distribution of poll answers (as already noted). I don't know what I expected the poll results to be in the beginning, but it wasn't such a wide and fairly even distribution of answers. So the "how much" answer is logically necessary to explain the "percentage" answer.
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