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Old 01-19-2017, 01:30 PM   #41
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I remember "maxing out" my IRA (a whole 2 grand - ) back when they started.

Yup save early and often!
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Old 01-19-2017, 01:34 PM   #42
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okay i'm glad i'm not the only one who keeps a spreadsheet. i have one (updated annually)

From 1/1/16 to 1/1/17 our retirement accounts are up 22.2% and our net worth is up 31.8%. Excluding real estate our net worth is up 47.7%. Regardless of % i still feel good about things.
Don't get used to it

2016 was a particularly good year overall, coming off a slump for the last part of 2015 and then a nice rally from Brexit forward most of the year.

I do agree at your age a target egg and budget is not the best idea - nail that stuff down when you're about 5-7 years out. Just focus now on saving what is realistic...and actually living too (have some fun).
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Old 01-19-2017, 02:40 PM   #43
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I guess I'm the needle in the haystack. I found this site after I retired, good thing or I would have been scared off of the idea.
I used the percentage of income rule of thumb to plan my retirement.
Details: I have steady POST tax income streams that make up 89% of my POST tax and deduction pre retirement income, at this time I spend 76% of that income. I still carry the same mortgage pre and post retirement. Thankfully I have no cost medical otherwise I probably would be still working.
I am not by any stretch of the imagination saying anything contrary to the sage advice from all the above posters, I am just saying what has worked for me so far early in my early retirement.
I still live the same if not better in retirement.
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Old 01-19-2017, 02:51 PM   #44
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For young, lower earning families, an 80% target is a good starting point. If you are a higher earning worker, particularly if you are a big saver, then the 80% drops significantly. If you are a saver, you are probably also a planner who is not afraid of time spent on a spreadsheet or on a retirement planning program. People on this Forum are probably looking at 50% or less of their earnings, and that includes a sizable travel budget!
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Is 80% of income really the right goal in retirement? Explain
Old 01-19-2017, 03:07 PM   #45
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Is 80% of income really the right goal in retirement? Explain

I'm about to retire at 50 and my retirement "budget" is ironically about 80% of my age 35 income but only 40% of my current income.
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Old 01-19-2017, 03:23 PM   #46
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The cost of health insurance was our biggest shock. It went from being 1200/year to 10k/year. Travel i s our other big cost since we want to do it while we can.
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Old 01-19-2017, 03:31 PM   #47
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I remember "maxing out" my IRA (a whole 2 grand - ) back when they started.

Yup save early and often!
+1

Best decision I ever made!
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Old 01-19-2017, 04:20 PM   #48
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Lot of us on this forums are heavy savers which means the expenses are lot less than 80% number media throws around. They are assuming that you are an average American who spends every penny they earn.
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Old 01-19-2017, 05:37 PM   #49
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Instead of looking at our gross income, we looked at our current spending and also the Consumer Expenditure Survey to see what other retired people spent as a starting point:

https://www.bls.gov/cex/tables.htm

We ended up reviewing and optimizing all our expenses, which allowed us to retire much earlier than we previously thought possible.

There is no point in using a rule of thumb like 80% of gross on something important when it is not that hard to make a spreadsheet with planned retirement expenses, and one afternoon of work could possibly shave years off your retirement date.
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Old 01-19-2017, 06:01 PM   #50
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Lot of us on this forums are heavy savers which means the expenses are lot less than 80% number media throws around. They are assuming that you are an average American who spends every penny they earn.
That's right and by virtue of my savings and investments I can spend more dough in retirement than I did when I was working and I do -
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Old 01-19-2017, 07:19 PM   #51
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People are remarkably resistant to the idea of tracking their spending, but in my view, that is the single most important thing you can do to plan for retirement. Because it is your actual spending you need to cover in retirement, not some percentage of your income. That one number -- your spending -- should form the basis of all your decisions about saving, investing and timing.

The young wife and I currently live (quite well, I must say) on 38% of our gross income. When we retire in a little over two years, we will easily cover at least double that spending. If our living standards change after retirement at all, it will only be for the better. That has always been the goal -- to live at least as well after retirement as we did before.
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Old 01-19-2017, 08:31 PM   #52
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People are remarkably resistant to the idea of tracking their spending, but in my view, that is the single most important thing you can do to plan for retirement. Because it is your actual spending you need to cover in retirement, not some percentage of your income. That one number -- your spending -- should form the basis of all your decisions about saving, investing and timing.

The young wife and I currently live (quite well, I must say) on 38% of our gross income. When we retire in a little over two years, we will easily cover at least double that spending. If our living standards change after retirement at all, it will only be for the better. That has always been the goal -- to live at least as well after retirement as we did before.
Basically I just track withdrawals from the checking account, and not in greater detail than that. In particular there is cash that I take out every so often that I don't track it. If you paycheck etc are direct deposited this does work fairly well. Of course this deals with net income and does not include withholding, Social Security, any pretax health insurance contributions etc. But it is fairly simple, just sum the checks you write each month. Then you can get a yearly total by adding up the 12 months that make it up.
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Old 01-19-2017, 08:54 PM   #53
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I've never tracked my spending and I never will.

My retired spending is roughly 2X my employed spending and that's a nice comfy level.

And I'm still stackin' dough -

I disagree with the 80% estimate also, 200% is a better number.
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Old 01-19-2017, 10:03 PM   #54
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Probably depends on what your income is...80% of mine would not cut it, sounds like 80% of your might assuming your pay raises keep up with inflation. I'd advise keep on keeping housing costs in check, maintain a reasonable lifestyle, continue saving as you have been and you will be fine.
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Old 01-19-2017, 10:08 PM   #55
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Add ne to the list of "80% of income is a lot of hooey" people. For me, it is simply, "80% of what?" Twice I reduced my weekly hours worked during my working years. So, which income amount should I use, my full-time salary, my first part-time salary (which was about 53% of my FT salary), or my second part-time salary (which was about 32% of my FT salary)?


When I was putting together my ER plan and budget in 2007-08, I used my current expenses but made the following adjustments: I eliminated my commutation expenses and FICA taxes, and increased my health insurance costs. The reductions and additions roughly offset each other. The rest of my expenses were basically the same. I wasn't contributing to my 401k during my extra-low salary time so nothing changed there.


As others here have written, you don't start with your income and work your way down to your projected expenses. Instead, you start from zero (or, perhaps, your current expenses) and work your way up (or sideways, or down).
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Old 01-19-2017, 10:59 PM   #56
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I've never tracked my spending and I never will.

My retired spending is roughly 2X my employed spending and that's a nice comfy level.

And I'm still stackin' dough -

I disagree with the 80% estimate also, 200% is a better number.
RobbieB, 200% of pre-retirement Income, or pre-retirement Spending?

I'm guessing the latter. (And I do salivate at many of your posts!)

Big difference. We will/plan_to spend more than our pre-retirement spending. But, given that our post-tax spending is less than 1/3 of our gross, there is no way we will be able to consistently spend 2x last year's gross in retirement.
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Old 01-19-2017, 11:52 PM   #57
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You kind of need to generate or have available the amount of money that you spend each year. If your capital nets you more than that, all the better.
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Old 01-20-2017, 04:32 AM   #58
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Whenever I see an article, or hear an "expert" spout those generalities, I run the other way! As many others have said, It's all about spending, you need to have a good handle on what your expenses are.
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Old 01-20-2017, 05:57 AM   #59
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One thing is for sure, the often quoted answer of 75% to 85% of your preretirement income is likely to be as right as the proverbial broken clock that shows the correct time twice a day!

The 75-85% rule of thumb might be appropriate for people who live from paycheck to paycheck and don’t save much for retirement since for such people their take-home pay might be 75% to 85% of income after taxes and other withholdings. However, if someone is making substantial contributions to tax-deferred employer retirement savings plans such as a 401k or 403b or if they have substantial withholdings for IRA contributions even if they spend all of their take-home pay their take home pay would be substantially less than 75% of income.

In the ideal situation, one will have detailed records on actual spending for the last couple years in Quicken or Mint of some similar tool that could serve as a starting point for developing a retirement budget. If such information isn’t available, then you will need to do some analysis of your expenses for the last couple years to get to that starting point. A “top-down” approach would be to take your take-home pay for the year and reduce it for any additional savings you made – presumably the remainder was spent on living expenses. While this approach is a bit crude, it is better than a wild guess.

A more refined approach is to build a “bottoms-up” retirement budget looking at various categories of spending. There are plenty of forms and templates available that can serve as a guide. A broad approach is usually sufficient. For example, we have two vehicles and put about 10,000 miles a year on each. Vehicle 1 gets 20 miles per gallon and uses regular gas that averages $3.50 a gallon. Vehicle 2 get 23 miles per gallon but uses premium gas that averages $3.75 a gallon. So our budget for gasoline for the two vehicles is $3,380.
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Old 01-20-2017, 06:05 AM   #60
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Just to echo others - spending, spending, spending. Take a look at everything you have spent for the last couple of years and then start subtracting. Mortgage? Education and other kids expenses? Investing (this could be a huge one if you are aggressively pursuing FI), taxes (could be way lower for a while if you are tapping taxable accounts for RE spending then go up for RMDs). Then start adding back in. Travel more or less? Health insurance prior to Medicare?

In DW and my cash our spending in RE is quite a bit lower than 80% and we still return some of our theoretical withdrawals to saving even though we travel more now than when employed. The biggest reductions were savings and taxes.
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