Thebttmline
Confused about dryer sheets
- Joined
- May 3, 2019
- Messages
- 3
DirtBiker,
In your OP from a couple of years back, you mentioned experts recommending having retirement income around 80% of pre-retirement income - and that you were hoping for more like 100%+ so you would have more for play/travel. I don't think those 80% types of guidelines work well at all for aggressive savers, which it sounds like you are.
Once you are retired, you will no longer be
- funding retirement accounts
- paying FICA tax
- paying down student debt (hopefully)
- paying a mortgage (possibly)
- paying for kid expenses / saving for their college (hopefully)
If those expenses are 1/2 of your income, and they all go away by the time you are retired, then you would need 50% of your current income to have the same disposable income that you have now. i.e. You could live the same lifestyle you are accustomed to on half the income in retirement.
In addition, if your income dropped 50%, you would also be paying a lot less income tax, so that is another expense that while not going away completely, would drop considerably.
You may have some costs that go up (health insurance) and you may travel more / spend more on play than you do now. But regardless, basing your retirement spending upon your current spending that includes all of those items that will go away is not terribly meaningful, IMO.
I'd suggest you take your current gross pay and subtract out those expenses that will be going away. Then add to that $X,000 - your estimate for how much you might want for extra travel, etc. beyond what you do today. Depending on your situation, you may want to increase what you currently spend on health insurance. That type of estimate will likely be closer to the income replacement number you need.
This is the beauty of a Live Below Your Means lifestyle during your working years. You don’t need to replace as much income since you were not using all of it to live your current lifestyle.
In your OP from a couple of years back, you mentioned experts recommending having retirement income around 80% of pre-retirement income - and that you were hoping for more like 100%+ so you would have more for play/travel. I don't think those 80% types of guidelines work well at all for aggressive savers, which it sounds like you are.
Once you are retired, you will no longer be
- funding retirement accounts
- paying FICA tax
- paying down student debt (hopefully)
- paying a mortgage (possibly)
- paying for kid expenses / saving for their college (hopefully)
If those expenses are 1/2 of your income, and they all go away by the time you are retired, then you would need 50% of your current income to have the same disposable income that you have now. i.e. You could live the same lifestyle you are accustomed to on half the income in retirement.
In addition, if your income dropped 50%, you would also be paying a lot less income tax, so that is another expense that while not going away completely, would drop considerably.
You may have some costs that go up (health insurance) and you may travel more / spend more on play than you do now. But regardless, basing your retirement spending upon your current spending that includes all of those items that will go away is not terribly meaningful, IMO.
I'd suggest you take your current gross pay and subtract out those expenses that will be going away. Then add to that $X,000 - your estimate for how much you might want for extra travel, etc. beyond what you do today. Depending on your situation, you may want to increase what you currently spend on health insurance. That type of estimate will likely be closer to the income replacement number you need.
This is the beauty of a Live Below Your Means lifestyle during your working years. You don’t need to replace as much income since you were not using all of it to live your current lifestyle.