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Old 10-24-2008, 03:45 PM   #21
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Actually the most pleasurable things in life are free...aren't they? (well almost free)
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Old 10-24-2008, 03:49 PM   #22
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Thanks for the read!!!

I have a feeling when I am fully ER (getting my military pension) in a couple of months, my spending will be way down. It is amazing how living in small town New Mexico is so different than big city San Diego and how the cost of living really makes a difference!
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Old 10-24-2008, 05:00 PM   #23
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Can I have your phone number?
....ahem...ok folks, move along...nothing to see here!
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Old 10-24-2008, 05:08 PM   #24
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Anybody who would make a flat out statement like this is not a logical thinker. I got a $10 subscription to Money Magazine last year. They sent me an offer to renew at the same price. I believe in trying to get good value for my money, so I did not renew.
i've been using airline miles (small levels i'll never be able to burn up) to renew Money mag for free. some of the "people feature" articles remind me how silly some folks can be about the costs they expect to have in retirement.
but otherwise, there is actually some good info to be had within its pages. i would never pay for the subscription though.
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Old 10-24-2008, 09:55 PM   #25
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The 33% works for us. In fact, we can do it on less.

If we wait till 66 to take SS benefits, my wife and I will be able to match the lifestyle we had when the kids were home with just SS.

I think that most people who bought houses, paid taxes, supported kids, and got out of debt before they retired can do the same.

(Note that if working people ever figure this out, the support for SS could go down.)
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Old 10-24-2008, 11:20 PM   #26
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I've never understood the 80% pre-retirement income requirement once you've retired.
For a start they should use expenses rather than income. Once I've ERed my commuting costs will go down and they'll be no mortgage. I don't see much else changing so my post retirement expenses will be about 30% of my pre retirement expenses
When I ER'ed I re-figured my net income of working vs being retired, and subtracted off a few things.

No SS/FICA/MC -- 7.65% (approx $7800)
No IRA -- $5000/yr times 2 = $11,000
No 401(k) -- $20,500 /yr

That's $39,300 that no longer would be coming out of my pocket.

My "last year salary" of about $102K was effectively $81K.

Right there is the 80%.
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Old 10-25-2008, 12:24 AM   #27
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Right now our gross income breaks down as follows:

1. 38% goes to retirement savings.
2. 38% goes to spending (which affords us a good lifestyle with plenty of discretionary spending already included). A quarter of that 38% is used to pay for our mortgage as well as life and disability policies, all of which will be gone by the time we retire. But, they might be replaced by larger health expenses, so in my projections I will assume that our expenses remain unchanged in retirement.
3. 24% goes to taxes (fed, state, payroll). It is hard to know for sure what income taxes will look like by the time we retire, but we won't have to pay payroll taxes anymore once we retire. Based on current tax laws and the net retirement income needed (see 2.), our tax liability could be less than one fifth what we pay today.

So I estimate that in retirement we should be able to live nicely on 40-50% of our current income with no change in lifestyle. 33% would work only if we could keep our healthcare costs down ($8000 or less per year for 2 people) but at this point it sounds like a very optimistic assumption.
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Old 10-25-2008, 05:29 AM   #28
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With most retirees having just lost 40%+ of their 401K, I find it irresponsible for Money magazine to further scare people like this. The chart shows you need 88% of your pre-retirement income. According the report that works out to $185,000. Does anybody believe that after taxes, saving, and mortgage payment, added work related expenses somebody making 250K still have has 185,000 in disposable income.

Finally, there seems to me to be a big difference between need and want. 185,000 is more than $500 a day, there are plenty of nice resorts you can stay for less than $500 a day.


The press release for the study which is only slightly better than Money Mag story is here. It does say that if you make 250K you need a 4.3 million to have a 95% chance of not outliving your assets.
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Old 10-25-2008, 07:24 AM   #29
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Quote: You'll need just 70% to 80% of your pre-retirement income to maintain the same standard of living when you leave work behind.
That's not what we found.

With all that free time we used to spend at work, we learned that you need 120% to 130% of your pre-retirement income to maintain the same standard of living. Instead of working, we're out doing something and even going to a park costs a few bucks in gas.

When I retired my net income went up, not down, because I wasn't paying into the retirement plan, SS, and was maxed out on deferred compensation (sort of like 401k or TSP).

Perhaps my situation was unusual in that I had virtually no employment-related expenses. Clothes, gear and even the car were employer-furnished. What's this crap now that I have to buy my own gas and tires?
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Old 10-25-2008, 08:10 AM   #30
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The 33% works for us. In fact, we can do it on less.
I certainly do it on less. But that is based on my final years wages, not my average wage over the last 10 years or so. I had an unusual situation where my wages rose quite a bit over the last 3 years. After seeing my portfolio tank, I kinda wish I had stuck it out a couple of more years.

I will probably be reminded why I retired though as my old employer called yesterday and said they really needed a little help on a short term project. So I will go in for a few days here and there to give them a hand. They caught me in a weak moment as I wouldn't have been as willing a year ago. But I left on good terms and actually have been friends with several of the guys for years. Went to college with a couple of them. If I enjoy this project, I might actually throw my hat in the ring for other short term projects if they need me. Wouldn't be bad to work a few hours a week during the winter. Plus, a little extra spending money wouldn't be bad during this frigging bear market.
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Old 10-25-2008, 08:32 AM   #31
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Can I have your phone number?
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....ahem...ok folks, move along...nothing to see here!
My eyes are covered.
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Old 10-25-2008, 08:49 AM   #32
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I once did what I thought were fairly conservative calculations that told me that we could live -- reasonably securely and comfortably if not high on the hog -- for not much more than half of our current income. And that includes buying our own health insurance.

When you subtract out working expenses like clothing costs, commuting expenses, and the possibility of needing only one car in the household (and lower insurance premiums), you can easily knock as much as 15% off right there. With half the income you might pay 1/4 of the income taxes -- and if you were paying 14% to federal income tax, there's another 10% or so you don't need.

Social Security and Medicare? There's another 7.65% (and 15.3% if you're self-employed).

With a more sedate lifestyle that gives you more time, maybe you don't go out to eat as much as you have the time to prepare your own meals. Let's call that another, I don't know... 3%?

That's already close to a 40% reduction in income needs -- more like 45% if you were self-employed. And I haven't even included the ~20% of my pay that goes directly into retirement investing, an expense which is no longer needed if you have enough to safely retire already. So we're down to about 40% of current income, which gets closer to 50% again when adding health insurance back into the mix.
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Old 10-25-2008, 01:13 PM   #33
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I can't imagine why anyone would use a rule of thumb to figure out how much income they'll need in retirement when they have (or can have) a very accurate estimate of their individual needs.

It's called a budget.
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Old 10-25-2008, 04:07 PM   #34
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Ok, this may be a quibble with the word budget. Generally when you say budget, people think "A play to restrict your spending"

I think it is the first step of budgeting that people need to go through prior to pulling the retirement trigger. That step is to track you expenditures, sometimes to the penny. Know where you money goes, and then you can do the analysis as to where it will go in retirement. Couple this information with your income model, and you will know if FIRE is in your immediate future.... Ok, it's halftime, and I had to have something to do!
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Old 10-25-2008, 06:46 PM   #35
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Anybody have expenses go up in ER ?

I don't have many real "work" expenses (no drycleaning, etc).

But I can see a lot more of entertainment expenses with having 5 more "no work" days in a week. Fortunately I have a lot of cheap hobbies.
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Old 10-25-2008, 06:55 PM   #36
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Anybody have expenses go up in ER ?

I don't have many real "work" expenses (no drycleaning, etc).

But I can see a lot more of entertainment expenses with having 5 more "no work" days in a week. Fortunately I have a lot of cheap hobbies.
No.

I really don't want much.

I stopped paying for a house cleaning person.

Except for buying a used car last year, I have been spending ~$25k/year (which includes taxes and insurance and charity).
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Old 10-25-2008, 07:12 PM   #37
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Anybody have expenses go up in ER ?

I don't have many real "work" expenses (no drycleaning, etc).

But I can see a lot more of entertainment expenses with having 5 more "no work" days in a week. Fortunately I have a lot of cheap hobbies.
Wouldn't that at least be offset by the savings portion that you would no longer have? Especially for most people on this forum, as savings is undoubtedly higher than average.
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Old 10-25-2008, 07:16 PM   #38
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Here's a good article from a Canadian perspective on why you can retire on much LESS than 70%...

Retirement: A number you'll love | poweredByMoney | Canadian Business Online
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Old 10-25-2008, 07:57 PM   #39
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CG, one basic premise in the article is the CPP. The CPP balance grew like Topsy in the last decade precisely because large chunks of it were invested in the markets. I wonder how it's faring now? In other words, how secure is CPP?
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Old 10-29-2008, 08:57 AM   #40
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CG, one basic premise in the article is the CPP. The CPP balance grew like Topsy in the last decade precisely because large chunks of it were invested in the markets. I wonder how it's faring now? In other words, how secure is CPP?
True, but how secure is any pension these days (including pensions in the private sector)?

http://www.reportonbusiness.com/serv.../Business/home
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