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nun 02-17-2006 10:40 AM

what % of salary do you live on
 
I'm working towards ER. One thing that annoys me is the figure of 70 to 80% of your
salary that is often quoted as the income you need in retirement. I think this is
rediculously high as I don't expect to have a mortgage to pay in retirement and
I'll live on the same amount for other expenses as I do now, which is about $1500 per month. What % or amount do you live on?

Andre1969 02-17-2006 10:52 AM

Re: what % of salary do you live on
 
I'd estimate that right now I could probably live off around $2,000-2,500 per month. I make around $4200 per month. So, I figure I could make it on around 47-59% of my income. I figured $200 per month for a health insurance policy (dunno if that's ballpark or not) and that's calculating $700 per month for my HELOC. If I pay off the HELOC, that knocks me down to $1300-1800 per month, or 31-43%.

Martha 02-17-2006 11:03 AM

Re: what % of salary do you live on
 
I like this old thread started by Dory: 33%? That's my Story. http://early-retirement.org/forums/index.php?topic=83.0


brewer12345 02-17-2006 11:15 AM

Re: what % of salary do you live on
 
With our current lifestyle in an expensive suburb and with the kiddo, etc., I would guess that we could live on $5k a month, assuming the mortgage is paid for. It would be a lot less if we moved to a cheaper area or could find health insurance for less than $1k or so a month.

Andre1969 02-17-2006 11:19 AM

Re: what % of salary do you live on
 
Yeah, the big unknown for me is health insurance. I just have a single policy (no wife or kids) so i guess it wouldn't be THAT bad if I had to pay it on my own. A buddy of mine had a pretty good policy with BCBS for around $200 per month, until he recently got a decent policy with his company. It had a low deductible and covered just about everything. He's around 33.

Spanky 02-17-2006 11:25 AM

Re: what % of salary do you live on
 
The percentage is irrelevant. Our forecasted expense is $48K per year.

nun 02-17-2006 11:26 AM

Re: what % of salary do you live on
 
Looks like I was channeling that thread as its just what I wrote. I posted because of an interview I heard on NPR with the guy (Eisenberg I think) who wrote a book called "The Number". ie the
amount of cash you need to retire. Ultimately it was a pointless interview as no numbers were
discussed, just genaral philosophy of retirement.

The amount you live on should be a %age of your actual expenditure excluding the money you
save or invest and the mortgage if you won't have one in retirement. My plan is to take the equity in my house and buy a smaller one outright when I retire, live off my after tax investments until the 401k etc kick in at 59.5 and then "waste" any SS that I get on wine, women and song.

nun 02-17-2006 11:30 AM

Re: what % of salary do you live on
 
Quote:

Originally Posted by Andre1969
Yeah, the big unknown for me is health insurance. I just have a single policy (no wife or kids) so i guess it wouldn't be THAT bad if I had to pay it on my own. A buddy of mine had a pretty good policy with BCBS for around $200 per month, until he recently got a decent policy with his company. It had a low deductible and covered just about everything. He's around 33.

I'm a UK/US dual citizen and I'll be moving back to the UK when I retire for the National Health System. Its currently going through some of the same issues as the US system, but it gives a good level of care and you don't have to worry about premiums or copays. Also I'll get both US and UK state retirement benefits, so that's a lot of wine, women and song........

cute fuzzy bunny 02-17-2006 11:32 AM

Re: what % of salary do you live on
 
4% of my former salary. So as you can see, it can vary a lot. Depends on how you plan to spend and what you will start doing after retirement you werent able to do before (ie, travel?) or stop doing when you stop working (dry cleaning, commuting, eating lunch in a restaurant/cafeteria?)

Rustic23 02-17-2006 11:35 AM

Re: what % of salary do you live on
 
We live on 1/3 of our current salary. That is 1/3 of our gross pay. That does not include what goes into savings. Just what it takes to pay the bills. Right now, however, it pays for two houses. This will go down to 0 houses in retirement.

nun 02-17-2006 11:42 AM

Re: what % of salary do you live on
 
Quote:

Originally Posted by (Cute Fuzzy Bunny)
4% of my former salary. So as you can see, it can vary a lot. Depends on how you plan to spend and what you will start doing after retirement you werent able to do before (ie, travel?) or stop doing when you stop working (dry cleaning, commuting, eating lunch in a restaurant/cafeteria?)

I agree that it depends on what you do. My attitude is that I'll downsize my life a bit so I can retire a bit earlier. I'll get a smaller house and use the time to ride my bike on long tours and plant a fantastic garden. I may also look for some part time work, maybe a couple of days a week to bring in $10k per year which would be about half of my yearly expenses.

Nords 02-17-2006 11:50 AM

Re: what % of salary do you live on
 
Quote:

Originally Posted by nun
I'm working towards ER. One thing that annoys me is the figure of 70 to 80% of your
salary that is often quoted as the income you need in retirement.

That came from an old study in the '80s where the authors observed that work/commuting expenses made up about 20% of the average employees' spending. It's far more valuable as a sound bite than as an aid to ER analysis.

The truth is a bell curve that's so broad & flat that it's almost a rectangle.

Your approach is better-- track your expenses, figure which ones will stop in ER, and add in whatever you'll spend on travel & entertainment. For the vast majority of the ERs, and again that'a a pretty broad curve with fat tails, the number seems to be about $2000/month.

nun 02-17-2006 12:03 PM

Re: what % of salary do you live on
 
Quote:

Originally Posted by Nords
For the vast majority of the ERs, and again that'a a pretty broad curve with fat tails, the number seems to be about $2000/month.

This agrees quite well with my approximations, so why don't we see this number more widely in the media/zeitgeist. I'll offer a couple of ideas

1) A number as small as $2000/month might encourage people to save even less, not a good thing.
2) "The Man", for want of a better term, wants to keep us toiling away for a long as possible. What would happen if everyone figured out that with regular saving and a frugal attitude you can stop working in your 40s. Would society come to a halt, and if it did would it matter?

retire@40 02-17-2006 12:05 PM

Re: what % of salary do you live on
 
My barebones budget = 22% of my average fulltime income immediately prior to semi-retiring. *Not something I would want to do, but something I could do if I had to.

My current budget and the budget I would want to live on = 37% of the same as above.

Nords 02-17-2006 12:10 PM

Re: what % of salary do you live on
 
Quote:

Originally Posted by nun
Would society come to a halt, and if it did would it matter?

No, but journalists & financial analysts might starve... not sure that'd matter either!

retire@40 02-17-2006 12:19 PM

Re: what % of salary do you live on
 
Quote:

Originally Posted by nun
What would happen if everyone figured out that with regular saving and a frugal attitude you can stop working in your 40s. Would society come to a halt, and if it did would it matter?

This problem would be solved by the economy.*

Less workers in the economy translates to less goods produced.*
Less goods drive up the cost of those goods.
Increased cost of goods cause inflation.
Inflation decreases spending power.
Decreased spending power means you might have to go back to work.

kaudrey 02-17-2006 12:36 PM

Re: what % of salary do you live on
 
I currently spend about 40% of my gross salary, and about 40% of THAT is for my mortgage/prop taxes/insurance. Moving to a lower cost area (I'm in DC) will definitely help in that area.


HFWR 02-17-2006 12:44 PM

Re: what % of salary do you live on
 
Ballpark 55%

cute fuzzy bunny 02-17-2006 12:47 PM

Re: what % of salary do you live on
 
You bought a ballpark with 55% of your money?

Can we get the hot dogs and beer wholesale if we take in a game?

LRS 02-17-2006 12:49 PM

Re: what % of salary do you live on
 
We already adjusted our income down 25% a couple years ago. We paid off our mortgage and I reduced my work hours by half.

Now, it appears that we will be retiring in 4.7 years on a little more then the salary we make now. We will have one kid out the door and through college, so some savings there. But I estimate we will have to start paying $1000 a month or more for health insurance (we have special health concerns and will continue our work health insurance policy).

I figure we will need a net of $3000 per month to survive comfortably (right now we live on about 2100 and save about 800/month). It looks like my husband's pension plus a modest draw from our investments, plus, perhaps, a 500 hour per year job (hubby will be eligible for that at his workplace) will see us through untiil my pension kicks in. The closer we get to the magic year (2010), the more do-able it appears to be!

I forgot to say that right now we are trying to save about 20% of our salary, so we're living on 80%.* Because we will have a kid at home and significant expenses for health care at retirement, we will actually need a little more than we live on now.



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