What %age of your pre-retirement income do you need in ER?

[rescueme]

I'll be retired five years in a few months. As for my plan (and actual spent) during that time, my rate has been 100% of pre-retirement net income, adjusted each year based upon my personal rate of inflation (PROI), for the products/services I actually budget for.

I never considered gross income for what I needed to plan on for retirement, due to all the "extra's" - both required and optional deductions.

 

[Surewhitey]

So far we're spending less than $3k monthly. Compared to $5-6k while w***ing. Didn't need the second car and trying out the first 6 months in PDC Mexico and surviving quite well 2 blocks from the Caribbean.
We were in the $15-18k salary/bonus range / mo (pre-tax) prior and saved big time for the past 10. Taxes kicked us in the hiney for a few final years in So Cal.

 

[scrabbler1]

This is always a difficult question for me to answer because twice in the 8 years before I ERed in 2008 I voluntarily reduced my pay because I wanted to work fewer hours and have more time for myself.

The first pay cut back in 2001 reduced my hours (and gross pay) by nearly 50%. The second pay cut back in 2007 reduced my hours (and gross pay) by 40% of my previous pay. Taken together, those 2 pay cuts reduced my hours (and gross pay) by 68%, or about 2/3.

So......which pre-retirement income should I use in the denominator, the full-time pay or the latest part-time pay? If I use my current expenses versus the FT pay, I would choose the 20%-30% answer. But if I use my current expenses versus the lowest ending PT pay, I would choose the 70%-80% answer. The latter is what I chose for this poll.

 

[tmm99]

I never understood the 80% income thing. It makes sense if this theory assumes that you are spending 100% of your income now. So it makes more sense to me if someone said that when you retire, you will spend 80% of what you used to spend (kids are gone, mortgage gone, added healthcare equals 20% less expenditure, or something like that.)

I am not voting because although I spend much less than what I make, I will probably be spending about the same amount in retirement as I am spending now.

Are you spending in retirement 80% of what you used to spend? (I imagine this would be another poll...)

 

[nun]

I'm in the 21-30% category and I'd like to say hello to all my fellow below 30% friends.......we are truly [-]cheap[/-] big time LBYMers

 

[veremchuka]

I retired just over 4 years ago. I paid off my mortgage 1 1/2 years ago. I spend less today than when I was working mostly due to not having the mortgage payment but even with that I was spending a little less than when I was working and that was mostly due to not using as much gas or car maintenance. Other than that my spending and behavior is pretty much the same as when I was working. My gross pension is 35% of my what my gross salary was and since paying off the mortgage I have lived off my pension and banked 36% of my gross pension each month.

 

[obgyn65]

Minimum % in my case is about 10.

 

[F-One]

I voted 100% of current gross. Currently we have company subsidized health insurance but that goes away when I quit work. In addition, we are planning on moving to a more expensive place on water (extra house insurance and flood insurance). So what we save now will go for those things plus some set aside for extras

 

[Beryl]

Retired 11 months ago - 6 months after paying off my mortgage. I could live off my pension which is 30% of my salary but I don't. I'll supplement 3-6% more with my savings until SS kicks in (it is my only COLA). So, I voted 31- 40% is needed.

Obviously, I'm no longer actively saving.

 

[Midpack]

Obviously this forum is way out of the mainstream and I expect the results to be skewed by that. Still it's an interesting exercise and it might highlight the basic contradiction inherent in the 80% dogma.

Not sure how you're going to reconcile these two sentences, looking forward to your conclusions.

What % would you recommend FP's use for people who don't track their expenses and can't project spending for themselves (as they should)? I would expect an FP to err on the high side for those customers, unfortunately there are a lot of people like that though you won't find many here.

 

[Trawler]

Not yet ERd. save 33% spend 33% and give all the tax folks (feds, state, local, SS, medicare, realestate etc etc..) 33%. Post retirement projected expenses are 45% of pre RE gross income as we will have HC insurance on our own and plan to spend more than we do today on travel and hobby. The best part of this is our Taxes should be going down down down to almost nothing except realestate the first few years of RE.

 

[youbet]

We're not having a bit of trouble spending as much post retirement as pre-retirement. And we weren't doing much saving immediately prior to RE as DW had switched to part time work and my career was winding down along with a rapidly imploding MegaCorp employer (no bonuses and no stock option performance). I picked 100%.

 

[RockyMtn]

This is an irrelevant question in my mind. Post retirement spending related to pre retirement income as a % is misleading. The better question is what % is your post retirement spending of your pre retirement spending IMHO.

 

[NW-Bound]

The better question is what % is your post retirement spending of your pre retirement spending IMHO.

Agreed.

Even then, it is difficult for me to answer, as our expenses are in flux right now. With our children out of college, that frees up quite a bit of money. But then, we started to pay for healthcare, and may splurge some more on travel.

I do not have a definite plan, other than striving to keep our fixed expenses low (hah!), and splurging on discretionary leisure spending if the market god is generous.

 

[nun]

This is an irrelevant question in my mind. Post retirement spending related to pre retirement income as a % is misleading. The better question is what % is your post retirement spending of your pre retirement spending IMHO.

We should poll that, although the results for careful planners would probably be a lot of 100%s. My spending will be the same post as pre retirement. I'll have to pay for health insurance, but the premiums will be covered by savings on commuting costs and going from paying 16% Federal tax to 10%

 

[nun]

Not sure how you're going to reconcile these two sentences, looking forward to your conclusions.

What % would you recommend FP's use for people who don't track their expenses and can't project spending for themselves (as they should)? I would expect an FP to err on the high side for those customers, unfortunately there are a lot of people like that though you won't find many here.

Thorough budgeting is the only way to estimate the income required. The %age will vary widely according to circumstances. That's my main issue with 80%, it's meaningless even as a rough guide. By polling I hoped to show that relating income requirements in retirement to gross income pre retirement is worse than useless, and given the standard deviation of the results and that the mode is under 50% I think the numbers confirm my assertion.

 

[scrabbler1]

We should poll that, although the results for careful planners would probably be a lot of 100%s. My spending will be the same post as pre retirement. I'll have to pay for health insurance, but the premiums will be covered by savings on commuting costs and going from paying 16% Federal tax to 10%

I agree. The savings I had when I eliminated my commutation costs and FICA taxes were offset by paying for my own health insurance. Income taxes dropped a little, too.

 

[Texas Proud]

Thorough budgeting is the only way to estimate the income required. The %age will vary widely according to circumstances. That's my main issue with 80%, it's meaningless even as a rough guide. By polling I hoped to show that relating income requirements in retirement to gross income pre retirement is worse than useless, and given the standard deviation of the results and that the mode is under 50% I think the numbers confirm my assertion.

I don't think that this poll will show what you want as it is biased heavily to the under 80% crowd... IOW, not the results you would get if you asked the general public...

Also, as pointed out by others, it probably is a good estimate to start to the average Jane or Joe that does not make a lot of money or have much in savings... at least it might get them thinking about what they will need..

 

[Bikerdude]

I retired in 2000 with 60% of my working gross income. The amount was very close to my net take home income. I have averaged a 3% increase per year since and have no complaints.

 

[nun]

I don't think that this poll will show what you want as it is biased heavily to the under 80% crowd... IOW, not the results you would get if you asked the general public...

The poll has shown me exactly what I expected, ie that most people who can actually retire do it on far less than 80%. The majority of people who will need 80% are low earners who can't afford to save enough to generate 80% of their income......again, income %ages are a meaningless metric for retirement, actual spending should be used and the capital/fixed income sources arranged to meet that income need.

 

[Beryl]

I retired in 2000 with 60% of my working gross income. The amount was very close to my net take home income. I have averaged a 3% increase per year since and have no complaints.

I guess not!!! The only COLA my MegaCorp has provided was a mandatory one after they lost a class action suit. We all see under $20 added to our pension checks each month.

 

[Finance Dave]

This is good to see, as I had asked this question a few months ago. Taxes play a big role in this too. When you're making big bucks, a huge % of your gross goes to paying taxes. In FIRE, tax rates will be much lower for me...I'm guessing I'll be paying in the 15% marginal bracket, or about 9-10% average....which will be nice.

 

[LauAnn]

Are you spending in retirement 80% of what you used to spend? (I imagine this would be another poll...)

A poll phrasing the question similar to the way you suggest makes more sense to me.

 

[Bikerdude]

I guess not!!! The only COLA my MegaCorp has provided was a mandatory one after they lost a class action suit. We all see under $20 added to our pension checks each month.

Sorry, I guess my statement was not very clear. The 3% increase was not a cola just my inflation rate. So I retired with 60% adjusted for inflation each year. All out of my own pocket.

 

[akck]

Thorough budgeting is the only way to estimate the income required. The %age will vary widely according to circumstances. That's my main issue with 80%, it's meaningless even as a rough guide. By polling I hoped to show that relating income requirements in retirement to gross income pre retirement is worse than useless, and given the standard deviation of the results and that the mode is under 50% I think the numbers confirm my assertion.

When I used 80% of income, planning indicated retirement age at 66+ and I was resigned to working that long. As I get older and closer to retirement, expenses and confirmations from others indicated the actual percentage will be less. Now, when I plug in a more reasonable percentage, retiring at age 60 became possible. Retiring before age 60 is not possible, mainly because of the medical benefit that kicks in then. For planning, I still use a higher percentage than what I think it will be, which gives me a safety factor.

What I wonder about is how people who plan on 100% or more of income will ever be able to retire?