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Old 03-24-2016, 04:17 PM
 
29,789 posts, read 34,889,516 times
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Quote:
Originally Posted by hikernut View Post
Well, 80% seems high, for what I would consider a typical reader.

Let's say that during their working years they are able to cover the mortgage, kids, retirement savings, taxes, and all of their other expenses.

In retirement one no longer has to pay FICA tax, so that is going to subtract around 10%. Why 10% you say? I thought FICA was 7.65%? The reason it's more is because FICA is not tax-deductible.

Retirement savings? Let's say 15% pre-tax was going into a 401k. That "expense" is gone.

Mortgage principal+interest are gone if the house is paid off. Here I'm going to say let's leave this one in the budget and allocate the money toward discretionary spending. (If you are just going to watch TV and mow the yard, there's a lot of savings to be had here too.)

Kids. Hopefully one does not retire before the heavy financial lifting is over here. How much savings is here? I'm going to just toss out a number. Savings of 25%.

Medical will likely be higher, so let's add back in 10% for that.

So now in retirement we have 100% - 10% (FICA) -15% (savings) - 25% (kids) +10% (medical)= 60% replacement. That is MY typical reader. I'm not sure why financial planners push such a high number. Maybe they are trying to collect more assets under management? Many they are trying to be (too) conservative?
I understand all you are saying my point is that often the typical subscriber to the financial publications are often affluent with the intent to alter their spending habits in retirement and spend more on enjoying life including travel and recreational activities. We have progressed in our retirement and actually spend more on food, eating out and enjoying ourselves. Many of the subscribers to Forbes, money etc are seeking a recreational lifestyle that isn't cheap. Retirement frees up work related expenses and deductions but creates more time to spend more money enjoying life. Golfers free seven days a week can rack up a lot of green fees and related club and travel time etc. Chasing the beach can be expensive believe me.
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Old 03-24-2016, 04:22 PM
 
71,737 posts, read 71,853,273 times
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good explanation .
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Old 03-24-2016, 04:40 PM
 
29,789 posts, read 34,889,516 times
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Quote:
Originally Posted by mathjak107 View Post
good explanation .
I am sure we both know people who usually went on vacation during the summer and either took a trip out of the country or went on a cruise. Now retired they take several trips per year and may go on half a dozen cruises including European river boat cruises and they aren't cheap. My inlaw's will be here soon for a couple of day visit. They are on their annual Myrtle Beach golfing excursion playing multiple courses there on a daily basis. They have two homes one in New York state ski country and go there frequently in the winter along with trips to Colorado. My BIL has parents in Florida and I am sure they play golf when they visit there. They are now both retired and he loves cars and gets a new Mercedes, BMW or Cadillac every couple of years. They can easily afford it and have a paid off home in Ohio along with the one in NY state. He has his MBA and is use to running a business and we have great financial and retirement conversations. They never had any intention of a modest retirement and financially did what they needed to. Just going out to eat has taken on a new life in retirement and it is a lot more expensive. No more blue plate specials or before 5 specials. Unless it is intended to be lunch. We have been looking at new home communities and it is amazing how much near retirement and retirees are will to spend on a luxury well appointed home, especially in a community with or near a golf course.
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Old 03-24-2016, 05:30 PM
 
Location: Gilbert, AZ
3,186 posts, read 1,965,390 times
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Sure, and this just reinforces the point that some universal percentage of replacement income doesn't exist. Every person needs to figure out what it will take to fund their own retirement, and it may have very little to do with their working income.
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Old 03-24-2016, 05:42 PM
 
Location: On the road
5,965 posts, read 2,902,204 times
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Quote:
Originally Posted by TuborgP View Post
It is usually somewhat difficult to do long term planning or probabilbly or really any planning without a target. That being said there are ongoing efforts to help the uncertain determine what is probably a safe/working target for them. Others are fortunate to have the reference base to craft their own targets/goals and create a plan on their own to reach it. Flying blind into retirement is oh well .........
I'm not advocating flying blind, I'm advocating ignoring income and looking instead at living expenses, both current and anticipated.

There can be a significant divergence between income and expenses, the latter is what is important in retirement planning.
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Old 03-24-2016, 07:38 PM
 
Location: Cochise county, AZ
4,980 posts, read 3,466,540 times
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Quote:
Originally Posted by hikernut View Post
Sure, and this just reinforces the point that some universal percentage of replacement income doesn't exist. Every person needs to figure out what it will take to fund their own retirement, and it may have very little to do with their working income.
I have an emergency fund that I thought was quite adequate and was spending my social security check freely but, first was paying 1/2 for my son's cremation ($875) and then my car needed new tires, a sensor & oil change to the tune of $582+. I know that doesn't sound like much to some of you but it hit my emergency fund hard.

Yes, I have quite a bit invested, but really don't want to dip into that until it's absolutely necessary. I probably will have to though. I still have a few thousand in my emergency fund but will have to live month to month until I get that emergency fund built up.

It will probably bring me back to earth.
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Old 03-24-2016, 07:52 PM
 
Location: San Francisco Bay Area
4,723 posts, read 2,554,931 times
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Quote:
Originally Posted by capitalhockey View Post
I had an interesting conversation with someone who was 60. He told me that you don't need as much money as you think you do. His main premise assumed that you have your house/car paid off and only needed to cover property tax, insurance, food, etc. My old assumption was to try to replace 80% of our household income when we are retired.
Please consider the lifestyle you wish to lead in retirement.

If, like myself, you wish to improve your life in ways that require more money (e.g. you'd like a larger house rather than to downsize, you want to drive luxury vehicles, etc.) then you should factor that into your decision.
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Old 03-24-2016, 08:09 PM
 
Location: Los Angeles area
14,018 posts, read 17,754,097 times
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Quote:
Originally Posted by M3 Mitch View Post
...............................

There is an old Russian aphorism, "One's own rules don't carry over into one's neighbor's garden". I think this applies very much to "How much money do you need to retire". Two of my friends on here who I consider to be very successful retirees are Escort Rider and Submariner. But beyond both being successful at retirement, they are going about it in entirely different ways, one urban, one rural, etc.
Thank you. I was gratified to read your kind and generous words about me (and I agree about Submariner). Interestingly, you picked two people who have modest financial means but who have chosen a lifestyle which suits them and which is also within those means.

I never thought about my life in retirement in terms of "success", but since it is working well for me I suppose you are correct. It's kind of funny in a way. I had no written plan, no spreadsheets. I just followed my inclinations as far as activities, volunteer work, and other matters and decisions. I know what degree of structure suits me personally - it is a greater amount than for many folks on this board.

Again, I appreciate your kind and generous attitude.
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Old 03-24-2016, 10:22 PM
 
Location: North West Arkansas (zone 6b)
2,673 posts, read 2,018,040 times
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Quote:
Originally Posted by capitalhockey View Post

I am in my mid-30s but want to plan for a comfortable retirement for myself and my wife. We are about 25 years away from the finish line. Both of us are putting in maximum contributions to our 401k. I have a pension for my job that will cover about 35% of my salary when I retire. We also put away funds in a taxable investment account - I told my wife, this will be our "fun account" for travels when we are retired. My work allows me to keep my health insurance in retirement. That will keep health care costs down since we plan to retire before Medicare kicks in. Our house and cars will also be paid off before retirement.
Life is not constant.

do you expect your current car to last 25 years? more likely, you'll have purchased 3 or 4 different cars before you retire. A minivan or suv when you have your 2nd or 3rd child. Cars for your teenage kids and the insurance to pay for them. Weddings.

You could lose your job (or your spouse). Your new job will most likely not have a pension.

Your parents might become ill and burn through your retirement leaving you nothing.

Have you considered that coca cola and perhaps even Apple may not be the blue chips they are today? The soft drink market is in decline due to the increasing popularity of low sugar/low carb life styles and the well known negative effects of drinking soda.

Apple may be hot today, but so was Microsoft 20 years ago.

keep saving.
Buy a smaller house.
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Old 03-25-2016, 03:22 AM
 
6,353 posts, read 5,167,603 times
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Quote:
Originally Posted by lieqiang View Post
No offense but I find the any advice given to everyone that a certain number (70% is commonly thrown about) is a good target for post-retirement income needs fairly worthless advice.

There are far too many variables.
If you are an investment manager or consultant helping employers develop retirement plans for their employees, saying there is no answer to the question is also worthless. 70% is a pretty good target for large groups of middle income employees such as teachers, cops, etc. who depend on people like me for mass marketed advice.
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