Enough - How much is that?

[Dtail]

Yep the 80% spending in retirement of what your last salary you earned is so out of date.
We reduced expenses our last few years by 60% in order to retire on a still comfortable basis. My income wasn't reduced the last few years of working.

 

[Car-Guy]

Yep the 80% spending in retirement of what your last salary you earned is so out of date.

+1 My last few years of work I was probably spending about 50% of what I was earning... And that's when I was really blowing that dough... I'm not a LBYM type (far from it) but these days I really only spend about 30% a year of my final salary and that's being sloppy.

 

[disneysteve]

Yep the 80% spending in retirement of what your last salary you earned is so out of date.

I'm really not sure if it's a bad rule of thumb for the vast majority of people. Most people save very little of their income. Something like 70% live paycheck to paycheck. All of those folks will need 80% of their pre-retirement gross if not more.


We need to remember that the folks here represent a small minority of the population. It's not the norm to be living on 60% or 50% or 30% of your income. Most people live on 100% and even more thanks to debt.

 

[steelyman]

When I created my retirement planning spreadsheet, which is still used, I set an annual target income of 85% of final gross salary, compounded for inflation. That’s been exceeded each year and will likely continue. It’s just a data point and was helpful in deciding when to leave the working world.

 

[Leo1277]

I'm really not sure if it's a bad rule of thumb for the vast majority of people. Most people save very little of their income. Something like 70% live paycheck to paycheck. All of those folks will need 80% of their pre-retirement gross if not more.

We need to remember that the folks here represent a small minority of the population. It's not the norm to be living on 60% or 50% or 30% of your income. Most people live on 100% and even more thanks to debt.

I think this is the point, the folks on this forum are not very representative of the population at large, of which also around 50% end up having social security as their only retirement income IIRC. In this case, the 80% number is somewhat appropriate and can maybe create some pressure to really move aggressively.

When we went through such kind of planning for the first time, the FA asked us to make a detailed spending budget, which was more effort than we expected because until that time we had never really paid attention to the details on the spending side. IIRC at that time we actually spent about 30% of what we earned, and more than 50% was put in 401ks.

 

[Out-to-Lunch]

The funny thing for us is that I knew not to pay attention to the 80% rule of thumb. Rather, we just saved and tracked expenses; like many here, due to agressive saving, we certainly did not need to be able to fund anything like 80% of our income. However, as we prepare to retire, we, due to the agressive saving, are ABLE to fund 80% of our pre-retirement income!

Oh, the irony.

(Yes, that means we will have worked a bit longer than we needed to, but it was for other reasons.)

 

[MarieIG]

When I was much younger, probably in my early thirties, I had a conversation that has stayed with me over time. My friend asked if I could imagine having "enough" money. And I said, absolutely, I could. She said she thought no one felt as though they had enough, that there was always more to be had, and once each milestone was achieved, the next goal would loom large. It occurs to me that this board is composed entirely of people who agreed with me. For each of us there has been a point where we said, I have enough money. We haven't stayed in touch, so I don't know if that old friend's opinion has changed. I hope so, for her sake.

It seems to me - this is a spectrum - with the proverbial miser on one end and the grasshopper on the other.

Also, money is not necessarily all about the money. Your friend may have been a bit of a goal oriented person. It may be about the challenge. I have tended to be a goal oriented person (always having to accomplish something) although less so now/ learning "to be"; and the goals are evolving.

At this point, I see money as a sense of security; and a means to an end.

There are some people who want, absolutely want, and enjoy earning money in their 80s and 90s. (Although not necessarily on an Early Retirement Board.) That is not me, but I'm not judging them.

 

[SpinDoctorTX]

We had enough at 62 (DH) & 56. There are many folks with more than us, but many more who will never retire. Retirement is priceless and has been a blessing.

 

[garyt]

Yep the 80% spending in retirement of what your last salary you earned is so out of date.

Especially here, where most of us are saving at least 20-25% of our income. So that's already only spending 75-80% of your income, then take their 80% recommendation of that and your at 60-64% of your current salary.

 

[garyt]

I'm really not sure if it's a bad rule of thumb for the vast majority of people. Most people save very little of their income. Something like 70% live paycheck to paycheck. All of those folks will need 80% of their pre-retirement gross if not more.


We need to remember that the folks here represent a small minority of the population. It's not the norm to be living on 60% or 50% or 30% of your income. Most people live on 100% and even more thanks to debt.

Good point

 

[Dtail]

Especially here, where most of us are saving at least 20-25% of our income. So that's already only spending 75-80% of your income, then take their 80% recommendation of that and your at 60-64% of your current salary.

Yes as been mentioned, for many folks outside this site it might make sense to some extent.
Most folks on this site made it to FIRE by LBYM concepts.

 

[Sniggle]

The 80% rule is really just your ending salary minus savings for most folks, especially those whose primary saving vehicle is the 401K.

I am kinda shooting for that. I currently save 10% after taxes (401K, SPP) and 5% before taxes (HSA). 80% would put me at 120K, mostly taxable, which I could live comfortably on. Of course, my goal (fueled by the crazy stock market) is to spend 120% of my ending salary when I retire, atleast for the 1st 10 years or so.

I don't know if it will ever feel like enough, but I hope it never feels like too little.

 

[disneysteve]

I don't know if it will ever feel like enough, but I hope it never feels like too little.

That's a great way to put it.

 

[RetireAge50]

5k/mo.7k even better. Enjoy!

 

[Irishgirlyc58]

I’m not retired yet but my plan is to have $140,000/year.
I came to this conclusion based on my expenses and the amount I would like to have left each month after expenses.
I will have a pension and social security. The money I have in a 457b will be for large unexpected expenses. Or expected but not wanted. Like a roof!
Coincidentally, $140,000 is close to 80% of my gross salary.
Funny how things turn out that way.

 

[TheWizard]

I retired eight years ago and, like several others on this thread, my goal was to have at least the same Net Income hitting my checking account each month.

This may have been around 80% of my gross salary or so. I'm not sure; I'd have to go back and check.

This level of retirement income had/has nothing to do with my "expenses". Or more correctly, it exceeds my basic expenses by a considerable amount, which gives me a lot of options in retirement.

In the years since start of retirement in 2013, I've managed to increase my income (AGI) a bit almost every year, although a portion of my AGI is due to modest Roth conversions.

Additionally, I've paid more Federal income tax each year in retirement than I ever paid in my peak working years...

 

[Leo1277]

...
Additionally, I've paid more Federal income tax each year in retirement than I ever paid in my peak working years...

Isn't that strange, one of the unexpected consequences of the 401k and its ilk. When we all started these we were always told "it is great because your tax rate will be lower in retirement when you withdraw". And it's even worse because of the social security tax torpedo. To at least avoid that, we are doing heavy Roth conversions to have the 401ks nearly empty by SS start at age 70. So we'll see how that all goes, as currently planned, there will still be higher yearly net payout than the last gross salaries before retirement. Have to learn to blow that dough I guess... need to start an apprenticeship with RobbieB and am religiously following the BTD thread, but the reality is I often wonder if I am still mostly stuck in a grad student spending mentality.

 

[JoeWras]

Isn't that strange, one of the unexpected consequences of the 401k and its ilk. When we all started these we were always told "it is great because your tax rate will be lower in retirement when you withdraw".

Mine is lower and will be lower (depending on any law changes). Nothing weird.

Even with SS, my 401k withdrawals would be partly in the 12% and 22% bracket. This versus the equivalent of 24% bracket where the income was deferred.

Working as planned.

YMMV if you have a good pension.

 

[TheHobbit]

Enough - 2x minimum expenses.
Absolutely enough - 2x “living in comfort” expenses.

 

[Leo1277]

Mine is lower and will be lower (depending on any law changes). Nothing weird.

Even with SS, my 401k withdrawals would be partly in the 12% and 22% bracket. This versus the equivalent of 24% bracket where the income was deferred.

Working as planned.

YMMV if you have a good pension.

Well, in our case it was a bit of a planning mistake, and we didn't quite expect the roaring market of the last 12 years. We had three of these each, and both of us filled all of them to the max each year. Should have also filled Roths already at that time despite their much lower contribution limits, and maybe have some after tax, at least currently cap gains rate is lower than income tax marginal rate. Hindsight is 20/20.

 

[JoeWras]

Well, in our case it was a bit of a planning mistake, and we didn't quite expect the roaring market of the last 12 years.

That's not a terrible reason! Our non-retirement accounts are throwing off more income and gains too, so our lower bracket benefit is shrinking. We'll see where it is in 12 years. I might join you on filling up the brackets before RMDs! It would be a good blow-that-fough problem.

 

[COHgirl]

I know we have enough. My husband still tries to grow our account. I think that because he’s been investing for 40 some years, it’s just ingrained in him to keep growing. He will never become a spender or be happy with our balance.

 

[gooddog]

Wouldn't 'how much is enough' depend on COL in the chosen retirement area? Living in the boondocks of Kentucky vs someplace like S.F. would certainly change one's perception on what is enough.

 

[TheWizard]

Wouldn't 'how much is enough' depend on COL in the chosen retirement area? Living in the boondocks of Kentucky vs someplace like S.F. would certainly change one's perception on what is enough.

Quite correct.

OTOH, Warren Buffett lives in Omaha, so does he have Enough?

Or is this just a fun game that we're playing?

 

[skyking1]

It also adds much to the uncertainty of the question. When the real estate taxes and costs go up so fast, it is no more that a WAG what those costs will be in 10~20 years.