Blown Away by Analysis of Take Home Pay Working versus Retirement (community, states)
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My spouse doesn't deal with the day to day financials and hears "people" talk about how much less you need for retirement spending just because you've got the mortgage paid off. So in his mind we should only need about 50% of what we are used to bringing home from work! (I am always curious as to what lifestyle they wish to have...)
He is shocked when I show him that we will need about $900 a month to cover our property taxes on our vehicles and home and insurance premiums for health, auto, home, and LTC. (and that these just keep increasing yearly and that $900 will go up to at least $1240 a month when we also start paying for Medicare, using 2022 rates). And our home property tax is only about $1300 a year--he'd have a stroke if we were in a high property tax state! As much as I try to get him to sit down and look at the monthly expenses, "you are doing a great job" is his response. He will be in for a rude awakening if I am the first to go!
Yep.
Not sure why people think that their expenses would be so much lower the day after they retire. For me, take-home needed in retirement roughly equals my take-home needed before retirement. The only thing I am "saving" is the amount I was previously setting aside each month for retirement, plus a few purely work-related expenses like commuting costs. Certainly not 50% of my previous take home, or anything even remotely close to it.
My pension, social security and 4% withdrawal on my Roth IRA will be more than 5 times the amount of my take home pay when I was working. I didn’t plan to have this much retirement income, but I am delaying social security until 70, and I have had tremendous growth in my tax free Roth account.
Congratulations! That's Success with a Capital "S."
Why isn't AARP working for its members to get dental care? Are they ADA supporters? When I go to the dentist it feels like I'm competing with him for my annual SS benefit!
Not sure why people think that their expenses would be so much lower the day after they retire. For me, take-home needed in retirement roughly equals my take-home needed before retirement. The only thing I am "saving" is the amount I was previously setting aside each month for retirement, plus a few purely work-related expenses like commuting costs. Certainly not 50% of my previous take home, or anything even remotely close to it.
if anything we found time cost money and one thing we have plenty of in retirement is time .
there is no way in the tristate area that 6 grand kids are going to cost less then being consumed at work
This phenomena, if you want to call it that, surprised me as well. I'm the bill payer in our marriage, so was tuned in to our expenses very closely before retirement. Most prospective retirees think in terms of their expenses while working and assume they'll be the same in retirement. This is wildly untrue, especially if you plan well for your retirement.
A previous comment about not making it sound too rosy for younger folks is valid however. IMHO it's better to be over prepared than the alternative, and a modest amount of worry prior to retirement is healthy.
Paying off the mortgage is big, as is the elimination of FICA and Medicare taxes. Some states, like the one I live in give seniors a break on retirement income. Some states that have no income tax make it up by having high taxes of other sorts. Some states give a break to seniors on their property taxes, and some simply delay the payment of property taxes, which is merely kicking the can down the road as far as I'm concerned. All that being said, it's a mistake to let the tax tail wag the retirement dog. I wouldn't consider moving primarily for lower taxation. Unless you're right on top of it you may discover that there's something you missed when you arrive.
Like my state that imposes yearly property tax on vehicles, boats, and the motors on those boats.
The "secret" I believe is creating several sources of independent income with the realization that one of them might disappear. Ask yourself if you could still thrive (not survive) if one of them took a hit, then build your plan accordingly.
We have three sources of income but were never rich by any stretch of the imagination. We used to struggle while working and grossing about 130k year, due to the mortgage, child support for 12 years, alimony for 2 years, all the employment taxes, children's education, contributions to retirement savings etc.
Now we gross about 100k a year in retirement and have money to spare. No mortgage, no child support, no employment taxes, no retirement fund contributions, no more etc either. That gross amount this year included a hefty amount from retirement savings for an extensive remodel. Next year there will be no remodel and we're selling the house and buying another for cash, netting a 32% profit on the old one. I turn 70 next year and will file for my delayed SS, so our fixed income will rise to 101k, with no need to withdraw from savings until RMD's.
Due to SS COLA our income will continue to rise every year until RMD's and then will jump to an average beginning level of 140k and rising every year, more than we ever earned while working with far less expense. We will stay below IRMAA penalties on Medicare as well. If one of us dies SS will revert to my higher benefit, with the loss of the other. We chose the 100% survivor option on my wife's 30k pension. If, after one of us dies, and the survivor drifts into IRMAA territory, or single filing taxes rise to an unacceptable level, charitable contributions will get the survivor under that limit. Excess will be gifted or redirected to a taxable brokerage account.
The answer; It's complicated, but with a modicum of planning you will be golden.
Here's your issue.
A $100k/year gross in retirement is substantial, especially with no mortgage and less spend overall. You're way, way above median income for the vast majority of the areas of the country. You're comparatively well off.
I'll be around that this year - working. I'm single, so for two, it does spend for less. I have a low mortgage payment, but it is not zero.
Even with employment and all the associated taxes, it's plenty for one, or even two. I travel quite a bit. I dine out a lot. I have a good bit of discretionary income left.
Our combined social security alone is, or will be after January 1st, $4,300/month or $51,600/year and the big thing here is if that was all we had we would pay zero federal and state taxes.
In Ohio we could do it on social security alone if we had to.
Ohio
Total expenditures: $43,773
20% comfort buffer: $10,943
Cost of a comfortable retirement annually: $54,716
New York not so hot and glad we don't live there.
Total expenditures: $69,418
20% comfort buffer: $17,354
Cost of a comfortable retirement annually: $86,772
California
Total expenditures: $66,087
20% comfort buffer: $16,522
Cost of a comfortable retirement annually: $82,609
So it is more about where one lives in retirement.
Our combined social security alone is, or will be after January 1st, $4,300/month or $51,600/year and the big thing here is if that was all we had we would pay zero federal and state taxes.
In Ohio we could do it on social security alone if we had to.
Ohio
Total expenditures: $43,773
20% comfort buffer: $10,943
Cost of a comfortable retirement annually: $54,716
New York not so hot and glad we don't live there.
Total expenditures: $69,418
20% comfort buffer: $17,354
Cost of a comfortable retirement annually: $86,772
California
Total expenditures: $66,087
20% comfort buffer: $16,522
Cost of a comfortable retirement annually: $82,609
So it is more about where one lives in retirement.
i live in nyc and not manhattan and i would not call a pretax income of 86772 comfortable .
even if you own a home taxes are 10-15k for a small house with utilities 400-600 a month .
my son is in westchester and pays 31k . so numbers thrown out like above are pretty meaningless.
we pay 24k in rent and that is in a high rise which is very different than in two family homes that are 7 figures.
our area has a median income of 110k ..on the other hand scarsdale ny has a average income of 452k.
where my son is median income is 160k .
so averages dont really mean much applied across the board by state
i live in nyc and not manhattan and i would not call a pretax income of 86772 comfortable .
even if you own a home taxes are 10-15k for a small house with utilities 400-600 a month .
my son is in westchester and pays 31k . so numbers thrown out like above are pretty meaningless.
we pay 24k in rent and that is in a high rise which is very different than in two family homes that are 7 figures.
our area has a median income of 110k ..on the other hand scarsdale ny has a average income of 452k.
where my son is median income is 160k .
so averages dont really mean much applied across the board by state
Very true. If it costs a higher percentage of income to cover expenses- including 'required discretionary expenses, lol', then by itself, income itself doesn't become the driving factor about choosing a place to live; choices in lifestyles available in a given area become a more important metric. Areas that supply those needs become more in demand, and their costs rise to meet the needs...and salaries rise to meet the costs. Always has been this way.
From the standpoint of quality of life, it all evens out. Some people need to have a 'museum' near them, even if they never use it. If they don't need or want it, then having one near is of no value. If on the other hand, they do need it, that 'museum' becomes a precious plus for choosing that place to live. Replace 'museum' with any other personal need...and you get retirement forums.
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