WSJ Retirement Section 12/11/06

ZMAN · 12-11-2006, 05:57 AM

I just joined and was prompted to write by the Wall Steet Journal section 12/11/06 on retirement. The frontpage story is entitled, "The Retirement Lies We Tell Ourselves". One of the "lies" is that we can live on less than 70-80% of pre-retirement income. On page R-4 of the section, the writer essentially tells us that we will need 100% of pre-retiremtn income and that we only get to drop to 80% if we were saving that other 20% for retirement. I am sure that there are a million strings on the topic. But for you veterans: What is the real story? I am still working, mid 50's, but doing some planning to get out.

unclemick · 12-11-2006, 07:08 AM

Hmmm - in my case 12% to 35% cause I was a really cheap bastard the first 12 years. Now trying to spend more -- about 110 - 130% of intial retirement in 1993 $ skipping any inflation adjustments.

Moral - I think each ER has to work up his/her estimate based on planned lifestyle.

Dory's ancient 33% That's My Story Post/thread convinced me to join this forum back in ?? 03.

heh heh heh

**REWahoo** · 12-11-2006, 07:09 AM

Quote:

Originally Posted by ZMAN

One of the "lies" is that we can live on less than 70-80% of pre-retirement income. On page R-4 of the section, the writer essentially tells us that we will need 100% of pre-retiremtn income and that we only get to drop to 80% if we were saving that other 20% for retirement. I am sure that there are a million strings on the topic. But for you veterans: What is the real story?

Welcome to the forum ZMAN.

There are folks here saving 60%...does that mean they only need 40% of their pre-retirement income to live on? The big lie is that you can determine anything about what % of your income will be needed for retirement if you leave expenses out of the equation. In my case we're living large on about 60% of what I grossed when I was a megacorp slave. Like Unclemick says, everyone's situation is different, so these so called rules of thumb are just what the WSJ called them: lies. But not for the reason they give you.

There have been dozens of threads here discussing this subject if you want to look for them.

Rich_in_Tampa · 12-11-2006, 07:17 AM

Which brings up the age-old question: why base your decision on pre-FIRE earnings rather than expenses?

ZMAN · 12-11-2006, 07:33 AM

Indeed I have worked up expenses left and right, but then I see the detailed and confident article in the WSJ telling me less than 100% is a lie.

I think, am I being delusional living on less? Are these people just shills for the investment industry? Am I missing something in my calculations? Even healthcare. In my area a very good policy with a consumer reports highly rated carrier is currently about $10,000 per year.

**REWahoo** · 12-11-2006, 07:43 AM

Quote:

Originally Posted by ZMAN

Indeed I have worked up expenses left and right, but then I see the detailed and confident article in the WSJ telling me less than 100% is a lie.

Are these people just shills for the investment industry?

Ya think?

rs0460a · 12-11-2006, 08:10 AM

DW/me live happily, comfortable, and meet more than our expectations on 100% of our current net income.

Our retirement is set to have this same net income (add taxes for gross amount).

Simple, for us...

- Ron

Dawg54 · 12-11-2006, 08:37 AM

Quote:

Originally Posted by Rich_in_Tampa

Which brings up the age-old question: why base your decision on pre-FIRE earnings rather than expenses?

Expenses is the way to go. Everyone will have a different % to income number. My % will be closer to Unclemick's early numbers but the average person will be higher. Percentages are fun to discuss but thats about it.

**Martha** · 12-11-2006, 09:02 AM

Welcome Zman. I haven't read the article yet. I am tired of these percentage rules of thumb that make no sense on an individual basis. If I was making $300,000 when I retired I would not need $300,000 to live on, more like 20% of that amount. But if I made $30,000 I may need 100%. Also, expenses vary tremendously on an individual basis. Do you have a mortgage? What part of the country do you live in? Do you want to travel? Do you have college expenses for kids? Do you have retiree health benefits from work? Etc.

Assumptions are made about lifestyle that are not accurate especially for early retirees.

Instead, they would do more of a service by talking about what expenses will decrease and what may increase when you retire and what you can do to manage expenses. But unfortunately rules of thumb are appealing, even though they can be intellectually lazy.

riskadverse · 12-11-2006, 09:07 AM

Any article that quotes a percentage of pre-retirement income needed after retirement is written by a moron.

unclemick · 12-11-2006, 09:16 AM

Hmmm - we've had some threads in the past trying to match actual $ budgets with ER lifestyles. A much more challenging endevor. Anyone remember the old $50/day type threads?

Heh heh heh heh

Nords · 12-11-2006, 11:09 AM

Quote:

Originally Posted by riskaverse

Any article that quotes a percentage of pre-retirement income needed after retirement is written by a moron.

Make that "a working moron on deadline".

grumpy · 12-11-2006, 11:10 AM

We are living large on the same level of EXPENSES as before retirement. As others have said, this is only about 50% of our peak pre-retirement INCOME (we were big savers).

Grumpy

**Gumby** · 12-11-2006, 02:08 PM

The article correctly notes that you won't be saving for retirement, so that percentage comes off the pretirement income. But it ignores the fact that you also won't be paying 7% of your gross in social security and medicare and that your income tax rate is likely to drop substantially. And you likely will not have a mortgage.

For example, here is our situation

100% Gross Income

33% Taxes - FIT, SIT, FICA, Medicare (but not real estate)
4% Mortgage Principal & Interest
37% Savings (401k,403b,457,taxable)
2% Charitable gifts
24% Livin' Large

All I need to do in retirement is take the 24% and adjust it upward to offset taxes. If I assume an average of 10% in taxes, I need only about 27% of my preretirement income to have the same standard of living (29% if I continue the same level of charitable giving).

LEX · 12-11-2006, 10:03 PM

Taking retirement advice from the WSJ, Forbes, or any of the other house organs of the Institutional Money Complex is the fastest way to end up yet another Host for these Parasites. ER (at least for me) includes investing on your own. If you require hand holding, you are most likely to be taken to the cleaners by the broker holding your hand (and shaving your deals for their margins!). As they say in the securities business: for every trade, the broker makes money, the brokerage house makes money, and two out of three ain't bad!

macdaddy · 12-12-2006, 01:15 AM

I think travel would be the big budget breaker... some people love to travel, but some people just like sitting at home planting tulips.

chris2008 · 12-12-2006, 02:35 AM

My two cents:
If you keep track of your expenses before you retire you do not need a rule of thumb:
You will know how much it takes you to carry on living in the same way as pre-retirement.
You will know how much of your work related cost will go away after retirement
You will be able to calculate know how much extra money to factor in realisically for your desired after-retirement lifestyle.

Looking at some retired and quite wealthy relatives I learned that the desire to travel and for expensive hobbies was reduced once they had the spare time to make it reality. Often the desire came from stress and daydreaming during corporate life and was replaced by the joy to spend time with friends and relatives, putter around the house and to prepare carefully for the trips they really wanted to take.

We are planning to live on after retirement from what we spend now over the year + inflation. In addition we are building a "fun and support cache" for hobbies and trips that go beyond our existing budget. Once our health and age does not allow to travel extensively or the desire goes away we will use this cache to buy us more help around the house.

HFWR · 12-12-2006, 07:53 AM

Quote:

Originally Posted by macdaddy

I think travel would be the big budget breaker... some people love to travel, but some people just like sitting at home planting tulips.

And not pushing up daisies...

jackcjackson · 12-12-2006, 08:10 AM

I would say that the 2 expenses that makeup a majority of my spending will be gone when I retire. 1. Retirement contributions. 2. I don't plan to carry a mortgage when I am retired.

Right now I live below my means and my mortgage, while modest, and retirement are easily my biggest expenses. I would say eliminating those would suggest I dont need 100% of my current expenses ( and nowhere near current income) to retire.

Not to mention most people have commuting and travel costs related to working,etc.

I don't like flashy stuff or taking expensive vacations. When I am older I will probably want to travel less, if anything.

newguy88 · 12-12-2006, 08:12 AM

They are wrong.

My situation. Had a home that had a 17000 mortgage real estate tax payment of 8000 a year. Total of 25,000. Two car payments that were needed to get our sorry butts to work everyday 100 mile round trip was 8000 a year and after 5 years the cars were well toast with 180,000 miles and needed to be replaced.

So the 100,000 salary did not go that far.

Now my mortgage is 3,000 a year and taxes are 3,000 a year my cars are new and paid off my pension is 33,000 a year and I will sub teach at schools I can use a bike to get to. My new home is nicer than my old place. MOVED from the crazy New Jersey to North Carolina.

So I will have 50,000 instead of 100,000 50% LESS and I have MORE MONEY after paying EVERYTHING from food to utilities!

Oh and in 8 years the wife gets her SS and in 10 I get mine an additional 20K on the low side thinking. So what are these guys smokin? Oh yea they want your 401 k MONEY!

12-11-2006, 05:57 AM	#1
ZMAN Dryer sheet aficionado Join Date: Dec 2006 Posts: 47	WSJ Retirement Section 12/11/06 I just joined and was prompted to write by the Wall Steet Journal section 12/11/06 on retirement. The frontpage story is entitled, "The Retirement Lies We Tell Ourselves". One of the "lies" is that we can live on less than 70-80% of pre-retirement income. On page R-4 of the section, the writer essentially tells us that we will need 100% of pre-retiremtn income and that we only get to drop to 80% if we were saving that other 20% for retirement. I am sure that there are a million strings on the topic. But for you veterans: What is the real story? I am still working, mid 50's, but doing some planning to get out.

12-11-2006, 07:08 AM	#2
unclemick Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Jul 2003 Location: north of Kansas City Posts: 5,560	Re: WSJ Retirement Section 12/11/06 Hmmm - in my case 12% to 35% cause I was a really cheap bastard the first 12 years. Now trying to spend more -- about 110 - 130% of intial retirement in 1993 $ skipping any inflation adjustments. Moral - I think each ER has to work up his/her estimate based on planned lifestyle. Dory's ancient 33% That's My Story Post/thread convinced me to join this forum back in ?? 03. heh heh heh

12-11-2006, 07:17 AM	#4
Rich_in_Tampa Moderator Emeritus Join Date: Feb 2006 Location: Tampa Posts: 5,884	Re: WSJ Retirement Section 12/11/06 Which brings up the age-old question: why base your decision on pre-FIRE earnings rather than expenses? __________________ Rich Tampa, FL (10% retired) As if you didn't know..If the above message happens to contain medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any medical purpose whatsoever. Consult your own doctor for all medical advice.

12-11-2006, 07:33 AM	#5
ZMAN Dryer sheet aficionado Join Date: Dec 2006 Posts: 47	Re: WSJ Retirement Section 12/11/06 Indeed I have worked up expenses left and right, but then I see the detailed and confident article in the WSJ telling me less than 100% is a lie. I think, am I being delusional living on less? Are these people just shills for the investment industry? Am I missing something in my calculations? Even healthcare. In my area a very good policy with a consumer reports highly rated carrier is currently about $10,000 per year.

12-11-2006, 08:10 AM	#7
rs0460a Full time employment: Posting here. Join Date: Feb 2006 Posts: 987	Re: WSJ Retirement Section 12/11/06 DW/me live happily, comfortable, and meet more than our expectations on 100% of our current net income. Our retirement is set to have this same net income (add taxes for gross amount). Simple, for us... - Ron

12-11-2006, 09:02 AM	#9
Martha Administrator Join Date: Feb 2004 Location: minnesota Posts: 9,864	Re: WSJ Retirement Section 12/11/06 Welcome Zman. I haven't read the article yet. I am tired of these percentage rules of thumb that make no sense on an individual basis. If I was making $300,000 when I retired I would not need $300,000 to live on, more like 20% of that amount. But if I made $30,000 I may need 100%. Also, expenses vary tremendously on an individual basis. Do you have a mortgage? What part of the country do you live in? Do you want to travel? Do you have college expenses for kids? Do you have retiree health benefits from work? Etc. Assumptions are made about lifestyle that are not accurate especially for early retirees. Instead, they would do more of a service by talking about what expenses will decrease and what may increase when you retire and what you can do to manage expenses. But unfortunately rules of thumb are appealing, even though they can be intellectually lazy. __________________ . Do not rely on the information provided--my posts are not to be taken as legal advice. Needless to say you must consult with your legal representative. I am not responsible for errors. If I offended you with cya I apologize. If I did not, I tried.

12-11-2006, 09:07 AM	#10
riskadverse Full time employment: Posting here. Join Date: Oct 2002 Posts: 652	Re: WSJ Retirement Section 12/11/06 Any article that quotes a percentage of pre-retirement income needed after retirement is written by a moron. __________________ San Diego . . . Hell on Earth!

12-11-2006, 09:16 AM	#11
unclemick Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Jul 2003 Location: north of Kansas City Posts: 5,560	Re: WSJ Retirement Section 12/11/06 Hmmm - we've had some threads in the past trying to match actual $ budgets with ER lifestyles. A much more challenging endevor. Anyone remember the old $50/day type threads? Heh heh heh heh

12-11-2006, 11:10 AM	#13
grumpy Full time employment: Posting here. Join Date: Jul 2004 Posts: 975	Re: WSJ Retirement Section 12/11/06 We are living large on the same level of EXPENSES as before retirement. As others have said, this is only about 50% of our peak pre-retirement INCOME (we were big savers). Grumpy

12-11-2006, 02:08 PM	#14
Gumby Administrator Join Date: Apr 2006 Posts: 1,817	Re: WSJ Retirement Section 12/11/06 The article correctly notes that you won't be saving for retirement, so that percentage comes off the pretirement income. But it ignores the fact that you also won't be paying 7% of your gross in social security and medicare and that your income tax rate is likely to drop substantially. And you likely will not have a mortgage. For example, here is our situation 100% Gross Income 33% Taxes - FIT, SIT, FICA, Medicare (but not real estate) 4% Mortgage Principal & Interest 37% Savings (401k,403b,457,taxable) 2% Charitable gifts 24% Livin' Large All I need to do in retirement is take the 24% and adjust it upward to offset taxes. If I assume an average of 10% in taxes, I need only about 27% of my preretirement income to have the same standard of living (29% if I continue the same level of charitable giving). __________________ You should not assume that I have a clue about anything I post. If you need a lawyer, go get your own.

12-11-2006, 10:03 PM	#15
LEX Recycles dryer sheets Join Date: Oct 2004 Posts: 325	Re: WSJ Retirement Section 12/11/06 Taking retirement advice from the WSJ, Forbes, or any of the other house organs of the Institutional Money Complex is the fastest way to end up yet another Host for these Parasites. ER (at least for me) includes investing on your own. If you require hand holding, you are most likely to be taken to the cleaners by the broker holding your hand (and shaving your deals for their margins!). As they say in the securities business: for every trade, the broker makes money, the brokerage house makes money, and two out of three ain't bad! __________________ "TEMPUS FUGIT"

12-12-2006, 01:15 AM	#16
macdaddy Recycles dryer sheets Join Date: Feb 2006 Posts: 403	Re: WSJ Retirement Section 12/11/06 I think travel would be the big budget breaker... some people love to travel, but some people just like sitting at home planting tulips.

12-12-2006, 02:35 AM	#17
chris2008 Recycles dryer sheets Join Date: Apr 2005 Posts: 208	Re: WSJ Retirement Section 12/11/06 My two cents: If you keep track of your expenses before you retire you do not need a rule of thumb: You will know how much it takes you to carry on living in the same way as pre-retirement. You will know how much of your work related cost will go away after retirement You will be able to calculate know how much extra money to factor in realisically for your desired after-retirement lifestyle. Looking at some retired and quite wealthy relatives I learned that the desire to travel and for expensive hobbies was reduced once they had the spare time to make it reality. Often the desire came from stress and daydreaming during corporate life and was replaced by the joy to spend time with friends and relatives, putter around the house and to prepare carefully for the trips they really wanted to take. We are planning to live on after retirement from what we spend now over the year + inflation. In addition we are building a "fun and support cache" for hobbies and trips that go beyond our existing budget. Once our health and age does not allow to travel extensively or the desire goes away we will use this cache to buy us more help around the house.

12-12-2006, 08:10 AM	#19
jackcjackson Confused about dryer sheets Join Date: Dec 2006 Posts: 3	Re: WSJ Retirement Section 12/11/06 I would say that the 2 expenses that makeup a majority of my spending will be gone when I retire. 1. Retirement contributions. 2. I don't plan to carry a mortgage when I am retired. Right now I live below my means and my mortgage, while modest, and retirement are easily my biggest expenses. I would say eliminating those would suggest I dont need 100% of my current expenses ( and nowhere near current income) to retire. Not to mention most people have commuting and travel costs related to working,etc. I don't like flashy stuff or taking expensive vacations. When I am older I will probably want to travel less, if anything.

12-12-2006, 08:12 AM	#20
newguy88 Thinks s/he gets paid by the post Join Date: Nov 2005 Posts: 2,119	Re: WSJ Retirement Section 12/11/06 They are wrong. My situation. Had a home that had a 17000 mortgage real estate tax payment of 8000 a year. Total of 25,000. Two car payments that were needed to get our sorry butts to work everyday 100 mile round trip was 8000 a year and after 5 years the cars were well toast with 180,000 miles and needed to be replaced. So the 100,000 salary did not go that far. Now my mortgage is 3,000 a year and taxes are 3,000 a year my cars are new and paid off my pension is 33,000 a year and I will sub teach at schools I can use a bike to get to. My new home is nicer than my old place. MOVED from the crazy New Jersey to North Carolina. So I will have 50,000 instead of 100,000 50% LESS and I have MORE MONEY after paying EVERYTHING from food to utilities! Oh and in 8 years the wife gets her SS and in 10 I get mine an additional 20K on the low side thinking. So what are these guys smokin? Oh yea they want your 401 k MONEY!