80% rule? 4% Rule? What is it really?

[Talkjk]

Hello, Retirement planning came all of a sudden for us. Own my own business for many years and never really thought about retirement. Thought I would work until I drop in a business I love. But guess what I got burned out, seems like it happened over night. So then we got the retirement bug. You know as soon as you start looking into it and realizing it could happen, you get consumed with it. Researching, checking, over thinking, under thinking...... We have saved what we think is a fair amount and plan to sell the business to help reach our goal.

We need help with planning what we need for a monthly draw.

What does it cost to live?

No house payment
No car payment

Would like to travel the US in our motor-home some
Would like to go on a trip once a year

Is it 5k, 6k, 7k, 8k,.......?

Oh ya, 55 years old today. The plan is MAy 2020

 

[RobbieB]

I have no idea, don't track expenses.

 

[Mdlerth]

There is more than one right answer

What does it cost to live?

How long is a rope?

Seriously, it's all over the map here. Some folk do fine on <20k per year, others lifestyles spend three times that in a month.

It's probably a good idea to start by gathering data on your own specific needs.

 

[HadEnuff]

Hello, Retirement planning came all of a sudden for us. Own my own business for many years and never really thought about retirement. Thought I would work until I drop in a business I love. But guess what I got burned out, seems like it happened over night. So then we got the retirement bug. You know as soon as you start looking into it and realizing it could happen, you get consumed with it. Researching, checking, over thinking, under thinking...... We have saved what we think is a fair amount and plan to sell the business to help reach our goal.

We need help with planning what we need for a monthly draw.

What does it cost to live?

No house payment
No car payment

Would like to travel the US in our motor-home some
Would like to go on a trip once a year

Is it 5k, 6k, 7k, 8k,.......?

Oh ya, 55 years old today. The plan is MAy 2020

No truer words were ever spoken.

What I would suggest is looking at what you've spent over the last few years. Anything in there you want to give up? If you ran your own business you probably are used to running a few expenses through the biz that you won't be able to run through after you retire, like maybe a car, medical insurance etc.

I like the 4% rule, but I really am more comfortable myself at 3 to 3.2 %, and I'm 10 years older than you.

Add the new expenses like travel...

Good luck.

 

[Walt34]

Seriously, it's all over the map here. Some folk do fine on <20k per year, others lifestyles spend three times that in a month.

It's probably a good idea to start by gathering data on your own specific needs.

+1.

Track YOUR expenses for at least a year, preferably two. Everyone else's expenses will be meaningless to you.

Here is a list of questions that you'll want to have solid answers for:

http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

 

[Talkjk]

I have no idea, don't track expenses.

Thank you Robbie for the response. But just not comfortable with that. YET

 

[Talkjk]

How long is a rope?

Seriously, it's all over the map here. Some folk do fine on <20k per year, others lifestyles spend three times that in a month.

It's probably a good idea to start by gathering data on your own specific needs.

Yep, just wanted to see how it compared.

And Love your sign off.

 

[dtbach]

I don't really track expenses either, but I make sure they are less than what I bring in every month on average. Make it easy on yourself by just taking 3.5% of your assets (at 55 that is about right) and comparing that to your normal expenses. Surely you must have an idea of utilities, insurance, food, etc. Then figure out how much you can spend on travel.

 

[Talkjk]

No truer words were ever spoken.

What I would suggest is looking at what you've spent over the last few years. Anything in there you want to give up? If you ran your own business you probably are used to running a few expenses through the biz that you won't be able to run through after you retire, like maybe a car, medical insurance etc.

I like the 4% rule, but I really am more comfortable myself at 3 to 3.2 %, and I'm 10 years older than you.

Add the new expenses like travel...

Good luck.

Yes, we are working on that three times a week at least. Seems to change a bit. We are now tracking it better than we did

 

[Talkjk]

+1.

Track YOUR expenses for at least a year, preferably two. Everyone else's expenses will be meaningless to you.

Here is a list of questions that you'll want to have solid answers for:

http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

Thanks for the link.

I don't like #12. Does someone really have to die?

 

[Dtail]

What are your plans for medical coverage? Can you manage your income for ACA tax subsidies?

 

[Walt34]

Thanks for the link.

I don't like #12. Does someone really have to die?

I'm pretty sure they do eventually. So far the human mortality rate is 100%. No fractions, no decimals.

 

[TwoByFour]

Thanks for the link.

I don't like #12. Does someone really have to die?

I think the salient point of #12 is to think a bit about what can go awry with your plan and make sure you are not painting yourself into a corner. For instance, my big worry in our plan (we are retired) is long term care - can we afford it? Also DW has a pension with no survivor benefits. I will be OK if something happens to her, but mostly because it is built into our plan.

 

[HI Bill]

We need help with planning what we need for a monthly draw. What does it cost to live?

No house payment
No car payment

Would like to travel the US in our motor-home some
Would like to go on a trip once a year

Is it 5k, 6k, 7k, 8k,.......?

Oh ya, 55 years old today. The plan is MAy 2020

There are lots of budget spreadsheets out there. What it costs to live depends on your wants, needs, and activities in retirement. A couple can live on $1500 month, or in my case, $3K, but some here need $21K+/month. If you really don't want to track expenses, try using an account aggregator like Mint.

 

[joeea]

We need help with planning what we need for a monthly draw.

What does it cost to live?

You need help. But random strangers on the internet aren't going to be able to provide that help.

Would like to travel the US in our motor-home some

Great. What will that cost you?

Would like to go on a trip once a year

Let's see. Going on a trip costs between $20 and $25,000. Maybe you've taken a trip before and have some idea what that one cost?

Is it 5k, 6k, 7k, 8k,.......?

Maybe, maybe, maybe, maybe, ........?

Oh ya, 55 years old today. The plan is MAy 2020

So you have a few months to figure it out.

If you aren't able to sit down and figure out the answers, you might want to spend a few dollars and a few hours with a fee-only fiduciary financial adviser.

 

[pb4uski]

Your best bet is to go through and do some analysis of what you spend now. What you need can range from $1k to $10k per month of more depending on your lifestyle.

The 80% that you hear mentions is principally for people who live paycheck-to-paycheck since about 20% is taken out for payroll and income taxes... but that can vary and many people's net pay also includes hefty deductions for retirement contributions and once you are retired you no longer need to save for retirement.

Go through your bank and/or credit card statement for 2017 and 2016.

The adjust that for changes that you expect to make in retirement.

 

[Dtail]

Your best bet is to go through and do some analysis of what you spend now. What you need can range from $1k to $10k per month of more depending on your lifestyle.

The 80% that you hear mentions is principally for people who live paycheck-to-paycheck since about 20% is taken out for payroll and income taxes... but that can vary and many people's net pay also includes hefty deductions for retirement contributions and once you are retired you no longer need to save for retirement.

Go through your bank and/or credit card statement for 2017 and 2016.

The adjust that for changes that you expect to make in retirement.

Bolded - As all the veteran readers on this site know, using a percentage of income for a calculation of potential spending needs in retirement is an outdated mode of thinking vs. calculating one's estimated expenses in retirement in conjunction with keeping track of current expenses.

 

[RAE]

I don't really track expenses either, but I make sure they are less than what I bring in every month on average.

+1, same here. After doing this for quite a few years now, I have a pretty good idea what I should be spending on an annual basis.

 

[USGrant1962]

The 80% that you hear mentions is principally for people who live paycheck-to-paycheck since about 20% is taken out for payroll and income taxes... but that can vary and many people's net pay also includes hefty deductions for retirement contributions and once you are retired you no longer need to save for retirement.

True. Years ago, as a first approximation, I used my working take-home salary (neglecting bonus) as my monthly retirement budget. I've since done a real budget and have tracked it, but my old take-home pay seems to be a pretty accurate estimate.

 

[Independent]

Go through your bank and/or credit card statement for 2017 and 2016.

+1

If you are a business owner, somebody is keeping track of finances fairly carefully. It is probably you, your wife, or an accountant. That person can figure out your total personal spending. It could be as simple as the amount of money that you've transferred from the business account to your personal account.

Then, look at the checking and credit card statements for the big outliers. Maybe you paid for a new roof, or a wedding, or took a trip to Europe. Put them on you "think about how to plan for the occaisional big ticket item" list. The rest is a good start at your "normal" spending.

 

[ERD50]

It's hard for me to take the OP seriously.

OP states they are a successful business owner, yet they ask open ended questions like this and look to answers from strangers? This doesn't add up for me.

It would be like saying:

" I think I need to advertise to draw more business. What would that cost"?

or
​

" I need to expand my business, what would that cost?".
​

We have no idea what your expenses would be in retirement. And our expenses have no bearing on yours. And your past expenses may have little bearing on your expenses in retirement.

You need to figure it out. Asking for help on how to figure it out, or if there are areas you missed makes sense, but asking for a number makes no sense at all.

If I were you, I would not be planning on retiring until I had a better handle on those numbers.

-ERD50