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