<p>This is one of the key questions I have been trying to find the answer as we are planning retirement. Many retirement calculators suggest 70% of your current income, for example. To me, that will be a luxury. Once the mortgage is paid off and only use cash for basic transportations, there is really not that much cost for basic living in a low cost area. </p>
<p>I would really love some feedbacks from those who are already retired. Do you really need 70% pre-retirement income to live? Of course, how you live matters a lot but I am talking about the basics here. </p>
<p>It may be best to analyze your personal household budget to see what your ongoing expenses are.</p>
<p>Of course, then you would need to add on such things as:</p>
<ul>
<li>Costs of whatever activities you want to do in retirement. Hiking in the nearby woods may be cheap, while world travel in first class may be expensive.</li>
<li>Medical, dental, and optometry costs no longer covered by employer-provided insurance and not covered by Medicare.</li>
<li>Costs of assisted living or nursing care if disability issues are looming in the future.</li>
</ul>
<p>A percentage of pre-retirement income may or may not match your actual needs.</p>
<p>If you don’t have large loans ( mortgage, credit cards, auto), I think you can get by quite well on $50,000-$70,000) a year., for all areas except perhaps NYC, especially if you live as frugally as you, Dad ll.</p>
<p>If you live around high property tax area, you maybe paying few thousand $$ a month. </p>
<p>Wouldn’t this be an easy calculation? You take your total expenditure now, take out mortgage payment, then that’s what you spend for basic. I would do a 12 month average because then it would include travel, gifts, possibly other unexpected expenses. I think one area of spend will go down for me would be clothing and accessories (handbags), but I may spend more on my grandchildren. </p>
<p>I agree that the best way to figure out how much you will need in the future is to look to your current spending. Subtract things that you won’t have to fund after a date certain–perhaps tuitions, mortgages, loans, funding retirement, etc. Add in things you will have to start paying, e.g. social security, long term care insurance, medical insurance premiums, etc. What I or our household spend isn’t all that relevant to what YOU and your household are spending. I may have no loans, no mortgage, no rent but property taxes, may be supporting family members, you may have rent/mortgage, high property taxes, loans, etc.</p>
<p>The first question to be ask is if you own your home free and clear. It is becoming more common for retirees to not own their home yet. Also, the amount they are paying in property taxes is key in determining how much they’ll need to live. Unless the person is willing to move, they can not economize in these areas. </p>
<p>When one claims to be “dirt poor”, their retirement plans might be pretty modest. Then again, when they really arent’t “dirt poor” they should calculate plans including travel, nice meals etc. One place to cut costs is to cut down on alcoholic beverages.</p>
<p>Dining out (even fast food), travel (even road trips, train, bus, air), beverages other than water are all places that can be cut. How much one spends on groceries, food, where one lives (house, apartment, rented vs purchased), transportation (walking vs. public vs. vehicles & the type of vehicle). There are many living on what they get for social security–might not be as comfortable as many would prefer but it is a reality for a large group of Americans.</p>
<p>Oh for heavens sake. Spend a couple of months tracking all of your expenditures. See what number you get. Then see what is essential, and what is fluff. Make sure you include all annual costs as well like insurances, taxes, and the like.</p>
<p>YMMV from what I would get doing the same calculations.</p>
<p>Don’t most people by the time they are thnkng about retirement in the next 10 years or so, already have a budget that helps to establish how mch liquid, how much high risk, etc?
Many banks & credit unions have seminars on choosing a financial advisor and I haven’t found the pressure to sign up overt.
Your workplace, especially if it offers a pension probably also has available resources.</p>
<p>In my opinion, it is a lot more complicated than just tracking current monthly spending. </p>
<p>In retirement, there are expenses I image we will not incur when we are working. Unless you are retired, I don’t know what are those expenses. Is adding $500 a month for miscellaneous expenses enough? </p>
<p>I did compile an list based what I know now and it came out about $20K a year. Then our FA person says no way and the minimal should be like $80K a year. I just don’t see me spend $80K a year when the house and cars are all paid for. </p>
<p>I’m retired. do you think you will never have a car repair or need a new car? Do you think everything in your house is going to last forever (roof, heating system, carpets, appliances, even furniture)? </p>
<p>If you aren’t going to be Medicare age, your biggest ticket item will be your health insurance premiums…unless your employer gives those to retirees. </p>
<p>Also, what do you plan to do? You will still need to put gas in your cars, and pay for car insurance. You will still,have property taxes. You will still need food.</p>
<p>I can’t imagine that you will,give up your (expensive) hobbies, in fact, since you will,have more time to pursue them, they may be more costly.</p>
<p>Do you plan to travel…for vacations or to see your kids?</p>
<p>Also consider expenses that occur less often than once per year, but may be large, such as replacement of worn out cars, household appliances, and the like.</p>
<p>"
In retirement, there are expenses I image we will not incur when we are working. Unless you are retired, I don’t know what are those expenses. Is adding $500 a month for miscellaneous expenses enough?"</p>
<p>Who is to say? That depends on what <em>you</em> plan on doing with your retirement. </p>
<p>Are you planning to use your newly found time to cook at home more, which would bring your budget down – or eat more meals out, which would take your budget up?</p>
<p>Are you planning to use your newly found time going to the library to find books to read, which will cost you nothing – or going to plays, concerts and movies, which will take your budget up?</p>
<p>Are you going to have fewer gas expenses / wear and tear on a car since you won’t be commuting to a job anymore – or more gas expenses / parking since you plan on going downtown more frequently?</p>
<p>Do you anticipate your utilities will go up because you’ll be spending more time at home (and thus heating your house, using more water, etc.) – or down because you’ll be gone all the time?</p>
<p>This just isn’t answerable, at all, by anyone other than you. </p>
<p>Personally, I think my expenses are going to go <em>up</em> during retirement as I catch up on all the things I’ve delayed during my time of working hard and saving like mad. I plan on eating out more, spending more money on health / fitness related expenses, and taking advantage of cultural events in my city that I didn’t take advantage of when my focus was working. But that’s just me. My mortgage was paid off years ago so that doesn’t change. </p>
<p>Agree–you do have to allocate for transportation, including the eventual replacement of vehicle(s) and/or taxi or other method of getting from one place to the next. You also have to allocate for larger less frequent expenses–appliance repair and replacement, furniture repair and replacement, hobby equipment repair & replacement. If makes no sense for someone who has no idea of what your historical expenses have been to tell you how much you will need annually when you retire. </p>
<p>Financial advisors have a bias to make the number large and make you NEED their great planning and investment services so that you won’t live our your old age in poverty. H and I were able to estimate that we’d spend similarly after we retired as we were spending when working, except no longer needing to pay tuition, mortgage, because we finished paying off those. We also can no longer contribute toward H’s retirement per the IRS. We have insurance from H’s employer, so continue to pay those premiums and also are now paying premiums for Medicare B. We do have assets to cover larger unusual expenses or we save up when we know they’re coming up (like buying replacement vehicle).</p>
<p>It really isn’t rocket science and none of us has a crystal ball to KNOW what the future will bring. I’m guessing interest rates will likely remain low for some years forward. Because we are spending below our income, we are able to pay for our D’s room, board, expenses, and medical costs until she is able to get a job and support herself. We are happy that our assets allow us to do this without worrying that we will run out of money for ourselves and become a burden to our kids or loved ones.</p>
<p>Getting rid of tuition and mortgage will be big for me (4 more tuition payments, not that anyone is counting!). I do think you have to consider inflation as a factor in retirement as well. Assuming you might be retired for 25-30 years, think about price changes since 1985. A lot of people want to travel more after retirement, and that isn’t cheap.</p>
<p>It amazes me how many older adults live in homes that need an incredible amount of updating because they did not budget for it in their retirement years.</p>
<p>Most of the older adults that I know who are living in their homes (including my dad before he died), don’t update their homes because they don’t care. They’re comfortable with the way it is and they plan on the house being the last place they live.</p>
<p>What is interesting about this conversation is that H retired last May with the intention (and is) working 1/2 time for 5 years. Since May we are now paying Medicare, a suppliment to our health insurance and our taxes went up $100 more a month. When I turn 65 in August we will then need to pay for my part of the Medicare and the suppliment.</p>
<p>So, while most things about our daily expenses have not changed, we are spending about $1000 a month more than before retirement. We were not aware of these things both because we just did not research enough and we actually were not properly informed by H’s retirement person. We knew some and understood some but not all.
Your Medicare payment is based on you last 2 years of salary. H made the most in his career the last 2 years. This also hurt our D’s Med school monies.</p>
<p>Yet, again our personal expenses have been lowered some but not hugely. We are traveling but that is money saved for the trips ahead of time.</p>
<p>Making plans to retire is not simple math–it is understanding your health plan expenses, if you have long term insurance then that, plus the community/state you live in and how much the increase in taxes will be year after year, and Medicare. Also, truly understanding when to take social security. </p>