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View Poll Results: What Pre-Retirement Salary Do You Live On?
100% + 17 17.53%
90%-99% 6 6.19%
80%-89% 6 6.19%
70%-79% 9 9.28%
60%-69% 13 13.40%
50%-59% 12 12.37%
Under 50% 34 35.05%
Voters: 97. You may not vote on this poll

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Current Income Vs. Retirement Income
Old 05-28-2008, 07:43 PM   #1
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Current Income Vs. Retirement Income

I see a lot of financial publications discuss living on 70%, 80%, 90%, even 100%+... of pre-retirement salary at retirement.

Just wondering what the folks here live on?
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Old 05-28-2008, 07:45 PM   #2
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I seem to recall a poll of this subject somewhere in the past with results (no surprise) all over the board. Too many variables to be able to come up with any viable rule of thumb.
Numbers is hard
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Old 05-28-2008, 07:46 PM   #3
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Pre-retirement (2004) ~$75K.
Pension (2005) ~$20k
Pension (2008) ~$30K
"Knowin' no one nowhere's gonna miss us when we're gone..."
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Old 05-28-2008, 07:47 PM   #4
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My guess is that most folks around here don't look at retirement income as a percent of earnings, but rather look at it in terms of expenses.

Earnings while you are employed are reduced by retirement savings and other influences that make it an uncertain metric for retirement planning. Expenses. OTOH, reflect your real-live costs and priorities.

I use my annual living expenses, and figure that these will remain roughly the same in retirement. Work-related expenses drop, but leisure and health expenses increase.
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ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 05-28-2008, 07:52 PM   #5
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Originally Posted by tgotch View Post
I see a lot of financial publications discuss living on 70%, 80%, 90%, even 100%+... of pre-retirement salary at retirement.
Just wondering what the folks here live on?
Well, it's not on the advice of financial publications of that ilk.

The "ER spending curve" is two humps with very fat tails. It's not a log-normal curve by any stretch of the imagination and it defies statistical analysis... the "sound-bite journalists" hate that.

One spending hump is around $24K/year (the Kaderli perpetual-traveler lifestyle) and the second hump is around $48K/year. However there's a huge schmear of spending from $20K-$100K and quite a few outliers.

If you want more data, search the polls or start one of your own.

Or you could track your current expenses, decide what ER spending is important to you, and save at least 25x times that amount before you ER... or take the "Work Less, Live More" approach of earning some income during ER.

Your number will probably be somewhere between 5-250%.

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on "The Military Guide to Financial Independence and Retirement."

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Old 05-28-2008, 07:58 PM   #6
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Gross? Take home? Usual questions.
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Old 05-28-2008, 08:19 PM   #7
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I answered 70-79%. The question I was answering was how much less are our post-retirement living expenses compared to our pre-retirement living expenses. I don't use (or believe in) the 80% of income rule, since we never spent all our income in the first place. We were saving 50% of our income for the last several years, and living on the other 50%. We now spend about 73% of that 50%. But, we do not have to pay for health insurance. If we did, we'd probably have to spend 30% more than we do now.
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Old 05-28-2008, 09:53 PM   #8
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My net pension, after health insurance premiums and taxes, is 88.5% of my pre-retirement net pay. I didn't spend all of my pre-retirement wages, and I don't spend all of my post-retirement pension.....I invested 'pre' and I still invest 'post'. My spending is pretty much the same today, as it was before I pulled the plug.

I also got a 3% raise on my pension this year (cola) former co-workers got a 2% raise this year. I'm lovin' this ER gig!!!
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Accounting for differences in assets
Old 05-28-2008, 10:21 PM   #9
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Accounting for differences in assets

expenses pre and post retirement were similar at about 25% of pre retirement income. More would be more comfortable and provide more options but is not necessary.
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Old 05-28-2008, 10:29 PM   #10
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Currently living on about 35% of gross. Planning on a higher dollar amount (in present day dollars) on retirement. Gross is also rather variable so if I pick up side work or if bonuses are good at work this year then it could be closer to 28% of gross.
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Old 05-29-2008, 01:49 AM   #11
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Currently our gross income is spent as follows:
39% living expenses, 35% savings, 26% taxes.

The living expenses part is subdivided as follows:
38% discretionary expenses and 62% mandatory expenses.

The mandatory expenses include $15K in expenses that will disappear in retirement (mortgage payment and disability insurance). Those $15K will be used instead to pay for healthcare. We also expect to pay a lot less taxes than we are currently paying.

So right now we are shooting for a gross retirement income equal to about 40% of our current gross income. BUT, since we are still about 10 years from retirement, and since our income has so far increased much faster than our expenses (and we expect the trend to continue), by the time we retire we suspect that our retirement income will represent an even lower percentage of gross income.
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Old 05-29-2008, 01:49 AM   #12
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Gross income was a bit over $100K, but our living expenses were only about one third of the gross. That number included a mortgage that we don't have now that we are retired. So, our living expenses in retirement are less than 20% of pre-retirement gross.
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Old 05-29-2008, 03:39 AM   #13
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I did not vote because the poll sounded as if it was targeted at people that are FIRED. I am still working.

However, we plan to have 100% of my pre-retirement income. DW has stopped working. If we considered her income, it would be about 60%.

Today (with our mortgage) we spend about 70% of my gross income... the rest is saved. When we pay off the mortgage, which will happen before I stop working , our expenditures will be about 55% of my income.

So we are over shooting our need on planned income when we ER. We know we will spend more than our current expenditures due to travel.

I suspect that the net result (over the entire retirement) is that we will have a withdrawal rate of less than 4%. Because my target portfolio is 25x income (at year of retirement) at ER... or there about.
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Old 05-29-2008, 07:47 AM   #14
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I voted less than 50%, because our anticipated living expenses, except for tax on the income, are much less than 50%. I should say that I am not cutting back dramatically to achieve that, but some air travel will have to go (ready to cut that out anyway).

I am trying to engineer a FIRE plan that allows me to live off the dividends and interest of a 60/35/5 AA or a 65/30/5 AA...we'll see where it goes. That should be about 3.1-3.3% WR, so I have calculated tax percentages based on those AAs and by running turbotax on-line with the anticipated figures. Grossing up for tax, I still will have expenses significantly less than 50% of current gross income. All of this said, gross income increased dramatically in 2007, which is one reason a nearer term FIRE is becoming possible.

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Old 05-29-2008, 08:22 AM   #15
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I checked 70-79% because that was the gross. The net pay went up when I retired because I was maxed out on deferred compensation and now I'm not paying into SS or the retirement plan. After we paid off the old house we were saving about 45% of our gross income.

I have noticed that there are a lot more opportunities to spend in retirement since there is so much more free time.
When I was a kid I wanted to be older. This is not what I expected.
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Old 05-29-2008, 08:35 AM   #16
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I am not retired yet, because I am waiting another 18 months for lifetime medical.

However, at a 4% SWR my income in retirement will be more than my present salary. So, I went ahead and voted ">100%". Hope that is OK.

Waiting, one day at a time.
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

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Old 05-29-2008, 09:03 AM   #17
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I expect my total post-retirement budget won't change, although there will be more fluff than there is now.

For example, the line item for income taxes will decrease significantly, but I will increase my travel and entertainment budget by that same amount.

If I need to cut back I will. Otherwise it will be less work and more play.
No man is free who is not master of himself. --- Epictetus
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Old 05-29-2008, 09:22 AM   #18
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I have several years to go before ER, but I've already done retirement expense projections based on current expenses I expect to have in retirement with an average 3% rate of inflation added in. I anticipate that the money we will be saving during the accumulation phase will suddenly become the "travel/fun money" during retirement. Therefore, we're shooting for 100% of pre-ER income from pensions + SS + initial 3.5% SWR from savings. All subject to adjustments of course based on actual circumstances when the time arrives.
"There is no dignity quite so impressive, and no independence quite so important, as living within your means." Calvin Coolidge
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Old 05-29-2008, 12:15 PM   #19
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I voted 70 to 79%. That would be gross. Take home I'm over 100% due to savings and SS/MC I no longer have to pay out.
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Old 05-29-2008, 05:24 PM   #20
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I am at about 50% - I am spending more than before jumping because of health insurance, no company car w/ paid insurance and GAS. We are travelling more, braces for the kids - more eating out, groceries(no cutting back on good eats!) and also many home improvement projects - I am definately spending more than I had expected - but, still w/in tolerances and if need be we can cut back easily.
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