More Retirement Surveys

[REWahoo]

Robert Powell at MarketWatch.com has an article on the contradictions of recent surveys on retirement:

And now for the (good) news
Pessimism or optimism on retirement? Depends on survey

http://tinyurl.com/7tnc7

One interesting point (interesting that a financial writer would actually point this out):

"Which studies are right on target and which studies are off the mark, if not misleading?

Well, part of the answer lies in the motivation for such studies. Many studies, especially those produced by financial-services firms as well as academicians, are partially self-serving. They exist, it seems, to strike fear in the hearts of unsuspecting Americans."

 

[TargaDave]

Many studies, especially those produced by financial-services firms as well as academicians, are partially self-serving. They exist, it seems, to strike fear in the hearts of unsuspecting Americans." [/i]

The financial service sponsored studies saying you need 85% of your pre retirement income for retirement is the classic scare tactic that's easy to pick apart, but what about the more subtle self-serving advice. Like Bernstein joined at the hip with Bogle and index funds just after a period (1982-2001) of fantastic index fund gains. I like the Bernstein concept, I just have a healthy dose of skepticism when people have a financial interest, no matter how much I like what they say.

 

[windsurf]

85%??  What lame, lazy advice.  What if you were making 200k?  So, you need 170k to make ends meet in retirement.  What Bull****.  On the other hand you made 20k.  So now you need 17k to be cool.  Where can we, those who want to rationally cope with what it takes to weedle out a respectable (at least we are clean) living (as we are dying), in our remaining (sob) years, turn to glean some keen advice?  Let me give a clue: It ain't going to be Money Mag., it ain't going to be Kiplingers, and it, sure as hell, ain't going to be the Wall-****ing-Street Journal.  I think it is right here between the bookends of MJ and JG and between the cerebral ears of Nords, Cutthroat, Dantien etc. 

 

[Mr._johngalt]

85%??  What lame, lazy advice.  What if you were making 200k?  So, you need 170k to make ends meet in reitrement.  What Bull****.  On the other hand you made 20k.  So now you need 17k to be cool.  Where can we, those who want to rationally cope with what it takes to weedle out a respectable (at least we are clean) living (as we are dying), in our remaining (sob) years, turn to glean some keen advice?  Let me give a clue: It ain't going to be Money Mag., it ain't going to be Kiplingers, and it, sure as hel,l ain't going to be the Wall-****ing-Street Journal.  I think it is right here between the bookends of MJ and JG and between the cerebral ears of Nords, Cutthroat, Dantien etc. 

Damn straight!

JG

 

[Sheryl]

Well put, Windsurf.

I refuse to read anything that talks about retirement needs in terms of pre-retirement income. It's completely meaningless, and indicates to me that the writer or speaker is a moron.

How much I'm making is totally irrelevant, what matters is (a) how much I'm spending and (b) how much I expect/plan to spend.

It's really not rocket science. But it does seem that the only intelligent discussion of the topic is on this board.

 

[Mr._johngalt]

Well put, Windsurf.

I refuse to read anything that talks about retirement needs in terms of pre-retirement income.   It's completely meaningless, and indicates to me that the writer or speaker is a moron. 

How much I'm making is totally irrelevant,  what matters is (a) how much I'm spending and (b) how much I expect/plan to spend.

It's really not rocket science.  But it does seem that the only intelligent discussion of the topic is on this board.

Good post! Kudos.

JG

 

[MJ]

Although, it think most of us on this board have a lifestyle of LBYM, and in my case LWBYM, but what % of middleclass America follows this lifestyle?

 

[TargaDave]

85%?? What lame, lazy advice. What if you were making 200k? So, you need 170k to make ends meet in retirement. What Bull****. On the other hand you made 20k. So now you need 17k to be cool. Where can we, those who want to rationally cope with what it takes to weedle out a respectable (at least we are clean) living (as we are dying), in our remaining (sob) years, turn to glean some keen advice? Let me give a clue: It ain't going to be Money Mag., it ain't going to be Kiplingers, and it, sure as hell, ain't going to be the Wall-****ing-Street Journal. I think it is right here between the bookends of MJ and JG and between the cerebral ears of Nords, Cutthroat, Dantien etc.

Like I said, the 85% thing is easy to pic apart, it's the more subtle conflicts-of-interest that will fool you.

 

[astromeria]

I suppose the 85% advice presumes you still have a mortgage and other debt, you aren't downsizing or moving to a lower cost area, you aren't changing anything about your lifestyle (still buying new cars at the same frequency, for example), you're fully responsible for your health insurance, and so on. Few people have all of these problems.

We're living on 25% of our peak household income, and we aren't breaking a sweat. DH is still working but at a downscaled job (dir of software engineering --> college instructor), and our lifestyle has barely changed--and only for the better, especially since I retired

 

[Outtahere]

I haven't retired yet but I can see our costs coming way down, insurance for cars will be lower since I'm not commuting 85 miles a day and all the maintenence that goes with it. I won't need a new car every 3 to 4 years, I won't have to pay $18 a day to park etc. I figure we can live on less than %50 of what I'm taking home, heck I'm saving that much now so once I leave it should be a breeze. DH works part time at something he likes and gets his SSI so the only worry I would have is health insurance, about 13 years for me and depending on when I leave 1 or 2 for him before he's off mine.

 

[Nords]

I suppose the 85% advice presumes you still have a mortgage and other debt, you aren't downsizing or moving to a lower cost area, you aren't changing anything about your lifestyle (still buying new cars at the same frequency, for example), you're fully responsible for your health insurance, and so on.

The original figure was 80%, which came from a study of work expenses. The academics concluded that the cost of work (commuting, drycleaning, restaurant meals, special equipment or uniforms) was about 20% of gross income. Of course this was a pretty broad brush and it was probably paid for by someone in TH's division.

Of course 80% is an extremely attractive sound bite, and the media has been using it for a generation!

 

[deserat]

In my unscientific survey of upper-middle class friends of mine who also happen to be financial planners/advisors, I've discovered that my goal of RE and my savings rate of 40-60% of my income is *VERY* rare. When I tell them that I try to minimize my lifestyle costs, they nod their heads. It comes down to how much do you need to live the lifestyle you choose and if there's any left over, how much of that you want to save--you can then move the balance either way, lower the lifestyle, increase the savings/increase the lifestyle, lower the savings - what is then affected the most is the day you can truly retire.

I frankly laugh at the articles and admonitions regarding 85%/etc. Pure garbage and bad math.

Bridget aka Deserat

 

[SteveR]

80-85% of work income needed in retirement?

Let's break this down in general terms.

Assuming no real change in lifestyle other than no longer working, what will that do to income needs?

--SS tax 6.2% (12.4 for self employed)
--Medicare Tax 1.45% (2.5% for self employed)
--Contributions to 401k or similar account----10-20%--assume 15%
--Contributions to personal savings, IRA or investment accounts---10-15%--assume 12 %
--Working costs--this is hard put into a general bucket but assume that the basic transportation, dry cleaning and lunch costs are not avoided but are just modified into other retirement costs of more travel, more eating out, more golf or whatever you do for fun that you have to pay for but don't have time for because you work. I think one could balance out these costs for most people so the may be ignored for this discussion.

The minimum you would need assuming everything else stays the same would be:

100 %
SS Tax 6.2%
Medicare 1.45%
401k 15%
Other savings 12%

Total needed 65%

So unless you are not paying SS, medicare, or saving for retirement, you can easily live on 65% of your current income. This does not account for lower income taxes (fed., state, and local) due to lower income needs which will allow an even smaller income requirement while still living the same pre-retirement lifestyle. Adjust as necessary for differnet taxes due to self-employment and differnet savings rates and you still are not even close to 80% of pre-retirement income.

Those foolish individuals not saving much for their retirement will need to replace more of their pre-retirement income because they are spending it instead of saving it. You don't need to save for retirement when you are retired but if you are up to your eyeballs in debt and are spending all you make then you will absolutely need 80+% of your income to fund all this. If you have not been saving then plan on working since you will not have anything to fund this huge income need.

 

[Mr._johngalt]

25% here. A slam dunk.

JG