How much you'll really spend in retirement

[RetireBy90]

Article I found interesting.

How much you'll Really spend in retirement
https://www.wsj.com/articles/how-mu...ink-1536026820?mod=searchresults&page=1&pos=2

They point out the conventional wisdom is you will spend 70% of pre-retirement spending after you retire, but some research claims the number is closer to 130%.

Couple items that I found interesting:

1) They finally get around to pointing out you need to consider what you see yourself doing in retirement. I have found this important to myself recently. I don't have many answers but wish I had spent more time before RE thinking and carving it on a piece of paper.

2) I've read others comment on how spending in retirement, compared to your pre-retirement spending increases for first few years, then starts to decrease as you are less able to take some trips or the travel bug is fed and less important. Other early retirement splurges like that boat or motorcycle or RV happen and the itch is scratched. Other delayed desires are fulfilled and that is enough of that. (Opera comes to mind for me, about 10 minutes into first show.) All this to say that if your retirement spending tails off like some have found, then the average may be closer to 70% than 130%.

However if you agree with the 70% or 130% or somewhere in the middle, the authors bring out some great things to think about if you haven't yet pulled the pin. IMHO

 

[Red Badger]

Somewhat interesting. I am not a big fan of rules of thumb. To me, it's akin to when to retire; when to pull SSI. All very personal. But the article does suggest to analyze spending plans in detail. That's good advice that stands the test of time.

Prior to retirement, we lived modestly, but comfortably, on less than 50% of my gross pay. In retirement, we're spending more than that. However, it is still well below 70% of working gross income.

Got my hair cut today. Almost $40 all in (beverage, tip, etc). My barbershop is located inside a pub and doesn't hire kids. Nothing against kids, but, like doctors and pilots, I like my barber to have lots of experience.

YMMV!

 

[scrabbler1]

can't read the article due to paywall.


That being said, I always get a chuckle from any of those "percent of income" rules of thumb. Which income should I use, my full-time income or either of the two part-time incomes I had back in my working days? My day-to-day lifestyle was unchanged even with the lowest of those 3 income levels.

 

[RetireBy90]

We lived on about 80% of take home check and plan to replace 100% of take home. The thing I really identified with was the spending time on what we plan to do in retirement both the cost and more important for me is a plan for how to spend my time. I hope my plan for time will soon be ignored after I find my way but I am a bit crazy and anxious if I don’t have a plan, even if I don’t follow it.

 

[candrew]

The article hides behind a paywall and I'm not a subscriber to the WSJ, however, the excerpts you've provided are enough information. It's a frequent topic of discussion.

I think it fair to say that most FA's will attempt to convince people that they will *need* 70-100% of their pre-retirement income to live comfortably after their days of wage slavery end. That is not always sound advice and does serve the interests of the FA!

DW & I pulled the plug almost two years ago and we're living comfortably on 50% of our pre-retirement gross income. Considering that during our days of wage slavery we stashed 40% of our gross in 401K's and other taxable accounts along with servicing mortgage debt plus work-related expenses, we haven't noticed a drop at all in lifestyle now that we're in the draw down phase. As a matter of fact, we have been traveling outside the U.S. during all but a few months since retirement in November, 2016.

 

[daylatedollarshort]

I'll spend what we've budgeted or less in retirement. If I spent more I'd run out of money.

 

[LOL!]

If you've been saving 80% of your pre-retirement income and only spending 20% of it, then doubling that 20% in retirement will not usually break the bank.

 

[imoldernu]

Currently spend about 250% of my pre-retirement income.

 

[brett]

I am not in any way a believer in those articles that usually state the requirement is X percentage.

This is nothing but a big 'it depends'. Lifestyle choices, activities, health, residence, location.

Plus, the bottom line for us has always been after tax income. Nothing else matters but the actual unencumbered resources that we have available.

We spend more than some of our friends, and less than others.

But, we are not in the business of selling registered investments, annuities, etc.

 

[HarveyS]

The article said 70-130% of pre-retirement salary - not spending. IMO a big difference for most of us here as savings was a big part of our salary. For me, I am living in retirement at about 50% of my average salary. (average of the last 5 years before RE)

 

[corn18]

We plan to spend about 130% of our current budget in retirement. The extra 30% all goes to travel.

 

[Teacher Terry]

We spend half of what we earned. If we ever had to cut back traveling would be first at 10k/year and then eating out, etc at 800/month. We have a decent size fun budget.

 

[YVRRocketSurgery]

Try opening the link in private or incognito mode.

One of the problems is the baselining of terms and expectations.
The article discusses how much people think they need for retirement.
Most people said 70% of pre-retirement salary.
Then the article asked what kind of lifestyle they were hoping to enjoy in retirement. To support said described retirement lifestyle, the article calculated 130% of pre-retirement salary would be needed.

If you want to maintain your pre-retirement lifestyle, most estimates nowadays are below 70% of income because there's a lot of pre-retirement expense that you hopefully won't have during retirement: mortgage, child expenses, retirement savings, etc. But ideally, you'd track and understand what your true spend is to get a better estimate.

However, you'll likely have an extra 2000 hours per year to fill during retirement that you previously spent on work. If you're going to fill those hours with expensive activities, you're obviously going to need more retirement dollars.

Personally, I'm working towards a range. I feel I only need 30% of my salary to enjoy a similar lifestyle pre-retirement. However, I'm saving towards 80% of salary to fulfill my retirement goals/activities. So, f my retirement income stream encounters problems, I'd still be pretty happy with my retirement lifestyle.

 

[JustCurious]

The article said 70-130% of pre-retirement salary - not spending.

Right. The OP has mischaracterized what the article said.

 

[calico1597]

I'm finding the longer we are retired, the more we are spending. Retired nearly 9 years ago, I was almost afraid to spend much for extras at first. We both have pensions that provide more than enough and I have good sized IRA's that haven't been touched. We bought a winter home last year, already thinking we want to upsize it this winter. I'm getting the mindset that we should enjoy the $$$ now while still able to.

 

[NW-Bound]

If you've been saving 80% of your pre-retirement income and only spending 20% of it, then doubling that 20% in retirement will not usually break the bank.

Or you had a mortgage and two kids in college while still working, it's gonna take a lot of travel to "blow that dough" now in retirement when these expenses are gone.

 

[Dtail]

Cut down expenses heavily pre-retirement and was searching for work for a year, so this metric is not really a direct application for me.

 

[DrRoy]

We plan to spend about 130% of our current budget in retirement. The extra 30% all goes to travel.

Our first year RE spending was about 110% of pre-RE, this year 120%, and I am looking at 150% for next year. The main increase is for travel. This is as I raise our WR from 1.5% to 2.1%. Even next year though, this spending would be just below the pre-RE income. The difference is that taxes have dropped in half and saving, which was 25%+ is now zero.

 

[foxfirev5]

IMHO this is meaningless. Crunch the numbers for your personal situation and toss the rules of thumb out the window. It's not that tough.

 

[The Cosmic Avenger]

The article said 70-130% of pre-retirement salary - not spending. IMO a big difference for most of us here as savings was a big part of our salary. For me, I am living in retirement at about 50% of my average salary. (average of the last 5 years before RE)

EXACTLY. We save about 1/3 of our gross income, and have pre-tax payroll deductions for health insurance and an FSA, so our take-home is about 42% of our gross pay. (Yes, we'll have to pay for HI OOP in retirement, but still, I've used the Fido retirement calculator's detailed expense worksheet and our state's insurance exchange to estimate that already.)

Basically, if our annual spend is anywhere near our gross income, we'll be living much fatter in retirement than we ever did before!

 

[jollystomper]

I cannot see the entire article, but have they factored in that, if your spendable assets rise in retirement, you are likely to feel more comfortable spending more? E.g. firecalc says our assets have great odds of rising with our planned spending level. If that happens, we are likely to choose to spend more. So our retirement spending will increase, but by our choice and the ability to spend more.

 

[DEC-1982]

The article said 70-130% of pre-retirement salary - not spending. IMO a big difference for most of us here as savings was a big part of our salary. For me, I am living in retirement at about 50% of my average salary. (average of the last 5 years before RE)

Right. The OP has mis-characterized what the article said.

Yes, the rule of thumb is % of salary not income.

And the rule of thumb is not very useful for most people. Total expense needs to be figured out on its own.

 

[Dawg52]

Somewhat interesting. I am not a big fan of rules of thumb. To me, it's akin to when to retire; when to pull SSI. All very personal. But the article does suggest to analyze spending plans in detail. That's good advice that stands the test of time.

Prior to retirement, we lived modestly, but comfortably, on less than 50% of my gross pay. In retirement, we're spending more than that. However, it is still well below 70% of working gross income.

Got my hair cut today. Almost $40 all in (beverage, tip, etc). My barbershop is located inside a pub and doesn't hire kids. Nothing against kids, but, like doctors and pilots, I like my barber to have lots of experience.

YMMV!

My barber on the coast is in his 70's and has been in the business all his life. He charges $9 and I do add a tip. No beverages but I do get a piece of bubble gum. The snowbirds swarm the place during the winter. They all walk out with a big smile on their face after paying him.

 

[CaptTom]

I'm at around 40% of salary. Two and a half years in and no complaints so far.

Expenses shed before and at retirement: Mortgage, 401k contributions, savings, commuting expenses, and a higher tax bracket.

We travel about as much as we ever did and basically haven't changed our lifestyle much. What I used to spend on lunch with co-workers, now goes to lunch with DS.

Your magic % will differ. It all depends on how much you made before, and how much you want to live on after. Do your homework, know that number, and go for it when you're ready.

 

[JustCurious]

Yes, the rule of thumb is % of salary not income.

I think you meant to say "the rule of thumb is % of salary not expenses."