How much do you REALLY need? (55, pension, vacations, social security)
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Every time I read an article about retirement, the amount you are "going to need" seems to change. The last one I read said 80% of current income, plus five times that in "cash" (CD's, cash etc.) Lets do a little math...if current household income is $150,000...that means you need an annual income of $120,000 and $750,000 "cash" in the bank. This just seems high, as we wouldn't be spending $10,000 a year on a vacation.....$900 a month on car payments.....use less gas because you don't drive to work anymore. Most of insurance is covered through retirement pension (we would pay a small premium). Currently we put away 40% of our income to savings. I totally understand that things come up financially that you don't plan on. To those that are retired or are retiring soon, "what am I missing"
Pete
You might be missing..lots of people do not have any pension. Lots of people don't have medical insurance coverage prior to age 65, Medicare, covered through their ex employer, Gas may or may not be less, depending on what you actually end up doing in all that free time you now have since retiring. Vacations can be done much cheaper than $10,000/year but I have noticed that hotel prices have risen substantially recently. If you plan on doing short, local jaunts, then yes $10,000 is very high. We plan on doing extensive traveling while we are young retirees so, for us, that $10,000 is actually not unreasaonable to budget for.
The amount you need is enough to support whatever you spend.
There is no universal number.
So do a cash flow projection, i.e. imagine your checkbook that includes all expenses and all deposits going forward with enough income to maintain a reasonable balance.
Half the country is going to retire with nothing but their Social Security check, a bit of retirement savings, and some equity in their home. If they don't have children to do some kind of extended family housing, they have a big problem.
All the retirement financial planning articles are targeted at the top-third of the country to try to shock & awe them into increasing their savings/investing rate.
The reality is that everybody adapts to their retirement income stream whatever it is. There's no reason why you can't go from $150K to $50K. That's a heck of a lot easier than going from $60K to $20K that an awful lot of people face.
Right now we spend about 40% of our income on bills....mortgage/electric/cars/phone etc. We spend about 20% on frivolous ( hobbies/ dinner out /travel etc) The final 40% goes into savings / investments. I'm guessing that is how they calculate the 80%...lol...l would estimate spending about 10% less on each of these areas.....bringing our "needed" income to around 50% of our current income.
It depends on how you live, I have lived very frugally all my life and now I should spend more and I can't.
This is how we feel. We are not afraid to go for a nice bike ride instead of going to the mall and spending the extra money that we happen to have that week.
How much you "need" mentally is based on what you did in your life leading up to retirement, and what you may have been planning for the past 30 years of what retirement would be.
If you saved travelling for retirement, like cruises or maybe a big motorhome, then you need a lot more money than a simple person who enjoys just staying home and gardening. What you "need" is determined by your lifestyle.
No of course there is a floor, that floor being how much you need to have a house (is it paid for or stilla mortgage) or rent, food, medical, daily living. Budget what the necessities are and that's the floor. Maybe you might need to downsize. Maybe the house you currently have is too expensive to upkeep. The list goes on.
Unless you do a personal budget you will never know just reading about general statistics. It's your life, so take accountability with it, understand it, and it will guide you better into what you "need" for your retirement.
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