The WSJ and the conventional wisdom

[Martha]

Today's WSJ has an article about spending in retirement. The journal decided to survey retirees to see if their spending needs in retirement matched the rule of thumb that retirees will need 75% to 85% of their pre-retirement income to meet retirement expenses. The article did not say how many people they surveyed. The article said that though many are living "comfortably on about three-quarters of their pre-retirement wages, many retirees said their financial needs equal or exceed their spending during their working years."

Reasons for increased spending? One primary reason is people are spending more on discretionary items such as travel and home improvement. Another reason is that people are encountering some unanticipated expenses, such as higher than expected costs for homeowners insurance and health care.

"About two-thirds of surveyed retirees said their monthly expenses are about the same as, or higher than, before retiring--even though almost half of those interviewed had expected their expenses to fall."

Actual expenses were significantly lower for 8%, somewhat lower for 25%, about the same for 28%, somewhat higher for 27% and significantly higher for 12%.

They muddy the water somewhat by sometimes talking about expected expenses and sometimes talking about percentage of prior income (which I have never found very helpful).

They spent too much time with individual stories that were not terribly interesting--like the family spending $9000 a month and wasting too much money on home improvements. :P

[mathjak107]

id like to know who they surveyed. the typical wall street journal reader isnt usually typically the average retiree in income and spending habbits ill bet

[unclemick]

I feel a mini-rant coming on:

duuuuh! back when I worked for a living I 'somehow' managed to live on my income.

In retirement - the infamous 'pension plus portfolio plus SS' or SWR or - I have 'somehow' managed to live on 'that' income.

Now don't ask how I managed to vary it 12k low to 89k high taxes included(1993 - 2006).

I think I need to buy a really 'pretty' frame for my Curmudgeon certificate.

heh heh heh - thanks again sgeeee! Pssst! - the 89k was a remodeling year.

[Martha]

Yeah, the article did give the impression of people overspending before and after retirement and then wondering where all the money is going.

[. . . Yrs to Go]

Quote:

Originally Posted by Martha They spent too much time with individual stories that were not terribly interesting--like the family spending $9000 a month and wasting too much money on home improvements. :P

Yes. The concept of the article was good. The actual article was not.

I think I pretty much learned that health insurance is expensive. Another insight came from one couple who discovered that they should put away some extra money for large one-time expenses, like a new roof.

Informative, perhaps, to the vast majority of folks who haven't given a moments thought to retirement finance. But hardly worth the time of anyone who has spent more then a couple of hours on these boards.

[sgeeeee]

Quote:

Originally Posted by unclemick2 I feel a mini-rant coming on: duuuuh! back when I worked for a living I 'somehow' managed to live on my income. In retirement - the infamous 'pension plus portfolio plus SS' or SWR or - I have 'somehow' managed to live on 'that' income. Now don't ask how I managed to vary it 12k low to 89k high taxes included(1993 - 2006). I think I need to buy a really 'pretty' frame for my Curmudgeon certificate. heh heh heh - thanks again sgeeee! Pssst! - the 89k was a remodeling year.

My own personal spending varies significantly from year to year. I've got detailed records going back to 1998 [mostly retired in 2003, fully(?) retired last year] and I can't see significants trends even if I hold the plot at an angle and squint real hard.

I'm not sure a Curmudgeon certificate should be placed in a 'pretty' frame. Seems like it belongs in a frame built from slightly burned and scared scrap wood.

[CyclingInvestor]

Quote:

Originally Posted by 3 Yrs to Go Informative, perhaps, to the vast majority of folks who haven't given a moments thought to retirement finance. But hardly worth the time of anyone who has spent more then a couple of hours on these boards.

I enjoyed the article, not as an informative article, but as a source
of entertainment. I think most of here already pretty much know the
right way to do things - but it is still amusing to read about people
doing it the wrong way.

[mathjak107]

knowing my wife and i , im prepared for our retirement spending to be more than it is now before we retire. we have so many interests and hobbies that its scarey to think of us home and free every day. with us time cost money and we will have lots of that, free time .

[Helen]

Did you notice the side bar where the financial planner was quoted as saying he would not 'let' his clients retire unless they had a plan for what they would do with their time.


Excuse me ??

[. . . Yrs to Go]

Quote:

Originally Posted by Helen Did you notice the side bar where the financial planner was quoted as saying he would not 'let' his clients retire unless they had a plan for what they would do with their time. Excuse me ??

Things to do in retirement:
1) Fire financial planner

[chinaco]

I believe planned extraordinary expenses should be pulled out and not factored in. For example: I am getting ready to retire and the Year I retire I am going to rehab the house at a cost of $300k and Buy $60k worth of furniture.

That funding/expense should be set aside and not considered as part of the portfolio or general ongoing expense. My thoughts are that one should have the basic dwelling situation funded and covered before retiring (even if that means $ were set aside specifically for that purpose).


It seems to me that the big wild card is health. That seems to be a non-discretionary item that could upset things.

Most other spending (except for extraordinary catastrophes) are controllable. That would point to improper (i.e., realistic) planning as the culprit.

The 75% number is probably a decent rule of thumb... but that is about it.

[LOL!]

And Scott Burns reiterates his feelings on the subject today:
http://assetbuilder.com/?p=1401

[Mwsinron]

That 70 to 80 percent is an average. Chances are if you are LBYM type person you wont need near that.

[haha]

Quote:

Originally Posted by chinaco I believe planned extraordinary expenses should be pulled out and not factored in. For example: I am getting ready to retire and the Year I retire I am going to rehab the house at a cost of $300k and Buy $60k worth of furniture.

Even amortized over your lifetime this is quite an expense. Are you sure your house will not just swallow up the $300,000 of rehab?

Ha

[chinaco]

Quote:

Originally Posted by HaHa Even amortized over your lifetime this is quite an expense. Are you sure your house will not just swallow up the $300,000 of rehab? Ha

It was just an example of an extraordinary expense that should be accounted for differently than on going expenses. It skews things. Plus, if I were planning on something like that before I retired... I would not consider it as part of my retirement portfolio that would be used to generate income.

[mathjak107]

at this point even though we are 1 to years away from purchasing a retirement home which we will use as a 2nd home until we retire , i already subtracted that money out and dont count it as part of the portfolio.

thats why i like my bucket sysyem. it lets us have different money for different purposes with very dedicated investments for that time frame without effecting any of the portfolios we have for different time frames.