We don’t come close to spending $100,000+ now, so I’m not sure how likely it is I would need that much. I constantly wonder why we work so hard at stressful jobs when we have no debt and are very low spenders. Having said that, I’m also a person who will work a long time in the future “just to be sure”. We both dislike travel, so that’s not a reason to retire. I’m convinced we will either have way too much or be bankrupt due to health care.
We had a long discussion about this about 700 pages ago or so.
“8 times salary” is so nebulous as to be almost useless. Which year’s salary? What if you get a raise, are you suddenly going to need 8x your raise in extra retirement savings? What if you go part time for the last few years, do you suddenly need half of what you thought you always needed?
It’s marketing by the financial industry and makes a good sound bite, but keep in mind that their goals and priorities are not yours. They really don’t care if you have a comfortable retirement, they only want you to invest as large a sum as possible so they can make as much as possible.
The smartest way to do it, IMO, is start from the expense side and work your way backwards. For example: once the kids are out of college, the mortgage is paid, you don’t have to save for retirement any more, and you stop paying as much income and FICA on your earnings, it’s not hard for your expenses to drop 40-50% over what they were at the highest. SS (which if you consider it a pension is one of the worst out there) will replace 30-35% of your income (unless you make way more than the max every year). So really, for most people they only need to come up with 15-30% of their pre-retirement income to live as comfortably as they did before.
Does this require millions? The Fidelitys of the world would tell you yes.
Agree with the above post and have written the same many times in this thread.
“So really, for most people they only need to come up with 15-30% of their pre-retirement income to live as comfortably as they did before.”
I disagree with this and agree more with the financial companies. I’d be very concerned with falling short at only 30% of pre-retirement income to live on. Don’t forget the unknowns of healthcare costs, continuing care costs, and inflation. I’d much rather err on the side of too much than too little.
My dad had some successful businesses, and real estate holdings…not a holder of stocks/bonds. Parents were able to pass on inheritance $$ to siblings and me.
MIL/FIL no investments, and teacher pension/retirement and SS; house paid off, living within their means. They are proud to be able to pass the home onto their children.
We are comfortable with our holdings, and can guide both DDs on building up their personal estate.
Living well into retirement means more than $$. On the news stands now is a magazine type publication “Mayo Clinic Guide to Healthy Living”. They talk quite a bit about ‘resiliency’ One can always tweak how to live better as one ages.
We’re spending well over $100K but are saving quite a bit most years. Living on two coasts in affluent places automatically raises the expenditure levels. We could cut back sharply in two ways – pick only one place to live or, as ShawWife has always wanted to do, move to Canada. We could also travel a lot less, but not sure we want to. Just spent 4 days at a magnificent lodge in the Canadian Rockies hiking our hears (and knees) out. Not inexpensive but deeply gratifying to the soul. Came down from the mountain Friday night, took an early morning flight to NY and am meeting all day today (Sunday) with new clients. [Pays for the lodge, no doubt, and then some]. Back tonight to the Rockies.
I’m hoping to live 20-30 years and to work for almost all of that. It’s not clear that the quality of life stays that high in the mid-late 90s. Without significant changes in science/medicine, I’m not sure I’d want to be around much longer than that, but I will probably feel differently then.
We are likely to inherit a bit from my MIL – would have been a lot more if she’d sold a business the FIL started as I had advised (and in once case brought in a buyer as well). I think my mother should leave her remaining estate for my B who doesn’t cope very well – with a trustee who limits what he can spend – and that the remainder goes to her grand kids. Not sure if she will do that or if my sisters would agree to that. Currently under discussion. If so, nothing there for us.
What medical expenses should retirees expect other than long term care and paying for medicare supplement?
This is on top of SS, which gives you another 30% or so. Unless your expenses are really high, I think 50-60% should be enough for most people to maintain their lifestyles.
I’m not saying having more isn’t better, just that the financial companies have a vested interest in you giving them as much money as possible.
Another one I see a lot - you need 80% of your pre-retirement income in retirement. Well, if you have been saving the max in your 401k, that’s probably 20% or thereabouts right there. You don’t contribute that any more once you retire. Throw in 7.65% in FICA you aren’t paying any more, factor in work expenses (gas, meals, clothes), the extra in income taxes you pay on the extra income you were making while working, that’s 30-35% or more of your pre-retirement income you don’t need. You (hopefully) don’t have to save for college any more, you (hopefully) have your house paid off… This stuff all adds up.
Everyone’s individual circumstances vary of course, which is why it is smarter IMO to start from the expense side.
I feel like a lot of people, when told over and over they need to save a ridiculous pile of money, decide they have no chance of ever do it, and therefore do nothing.
If you calcate YOUR current and projected income vs expenses, you can have some idea of how comfortable vs uncomfortable you may be in retirement. That was how we plotted out things and it has turned out fairly accurate.
No one can give you the magic number – total amount nor amount times income at any particular time because they have no idea whether you will be spending tons flying and traveling or sitting around at home or in hospitals in your retirement.
Future medical expenses can vary a ton also, especially depending on whether you have any insurance that has a cap on your max out of pocket, since Medicare has no such max.
Do you still pay after paying for medicare supplements?
I have no idea how much retirees need to live comfortably. So far, I find that we don’t need much money. There is really not much to buy. Our biggest expenses are paying taxes and travel. I imagine as we get older soon we will slow down and don’t travel much. I think we can get by on SS if we have to.
@iglooo, I think that the payments after Medicare and supplements are moderate, but i an reluctant to depend on it. I take insulin. My private insurer occasionally decides that my particular brand of insulin is no longer within the formulary. I ask my doctor, and he tells me that the replacement is fine. On the day that he tells me I would really do better on something no longer covered, or something new, that’s the day I will be pleased to have a couple of extra bucks to pay for it out of pocket.
That’s even more the case with DW’s RA meds. If we hadn’t resisted the formulary directions, which the private insurer approved finally, she’d be in a wheelchair or worse. Instead, she’s hoping to run the NYC marathon next year. 
@Iglooo – someone more familiar with the topic can address it better, but I do think you will still have some out of pocket medical expenses after Medicare Supp. My mother has an excellent retiree survivor medical plan that only requires her to spend $500 on medical + $500 on drugs total. I believe it pays 80% of the portion that Medicare Supp does not pay. I have not paid close attention as the dollars are so low, but she regularly runs up against both caps. I am guessing that she would have more than $1000 in OOP expenses if she did not have the retiree medical on top of Medicare Supp. She also has retiree dental, which I do not think is common, so one more expense to consider.
There can be many expensive years before a LTC policy kicks in. She no longer drives so has to pay for taxi or drivers anywhere she wants to go. The transport expense is offset by no longer having to pay car insurance, maintenance, so that reduces the outlay.
She is cash flow positive after pension survivor benefit, SS, and IRA distributions. No mortgage or car payment, so her expenses are really just house-related (taxes, maintenance, utilities), food, and very little for medical.
Being in my mid-50’s and having watched both my parents, my in-laws, many, many of my friends parents retire, as well as many of my peers the idea that you can live confortably and happily on that level of your previous income is not, as far as I have seen, been born out by reality.
While many expenses decrease, health care, help for the kids, and other expenses stay the same or increase. And, of course, there is inflation.
It is, of course, individualized, but I would be wary of believing most active retirees can live well on a significant discount on their normal or at least adequate income.
Many older people do not need nursing home care but can’t live safely alone in their homes. The costs of in-home care, even less than 24/7, add up quickly.
The only way to tell is to run the numbers for your situation.
I’ve posted numbers showing that, if you’ve been contributing to retirement accounts and making house payments, your expenses drop at least 30% when you retire and have paid your house off.
If you paid your house off already and expanded your spending to include that, or you haven’t been saving close to the max for your retirement, then the numbers for you will be different, of course.
You also need to factor in that as you get older you become less active and will spend less on things like travel. There are formulas around if you google.
I am in Honolulu with my Dad visiting a terminally ill relative. We have taken some walks, and I literally cannot keep up with his pace. He is 81. He wants to travel until he dies, and I think he will get very close to that.
There have been rumblings about whether my daily oral chemo will remain on the formulary both with my current insurance and Medicare. That’s a budget-breaker right there.
While houses and cars may be paid off, there is still maintenance/repairs that can add up quickly. If one is in good shape well into the 70s, the car you have at age 65 may need to be replaced, too.
Buying into a CCRC around here costs far more than what our (starter) house is worth. That would be a six-figure dip into savings for us.
While we have had the benefit of very low mortgage payments over the years, and have lots of equity, we don’t have the kind of market appreciation we might have had if we’d bought something bigger in a more upscale neighborhood. (This strategy did enable us to pay for college, though I do realize we’d be in a different boat if we had pushed the flagship and free money…) There are tradeoffs for every choice, even if you believe you’ve made the best decision at the time.
The CCRC my folks plan to buy into costs a lot and is a medical NOT a housing expense, according to the CCRC. We are scrambling to figure out how to come up with the funds it will take.
Our med insurance caps our max out of pocket including Rx at $3000/person/yr as long as the meds are in their rather broad formulary. The insurance has been paying all H’s Medicare co-pays.
At some point, we may travel less than we do now. My folks were traveling and enjoying it into their 80s. They’ve slowed down a LOT in the past few years. They could use some assistance (e.g. Housekeeping), if they would accept it–fortunately it will be provided by CCRC.
Ok, but as I said, I’ve seen the actual numbers for at least 8 retirees, and discussed this with many frineds whose parents are retired. My mother-in-law, parents, an aunt and a number of others have asked my help or included me in their retirement planning. For many, the expenses were surprising (to them) high and/or the final pension + SS + investment income was less than anticipated.
While anecdotes are not data, I have observed a number of situations where unplanned events cost much more than anyone predicted.
So perhaps one “can” live on 15-30% of pre-retirement income, but I would only attempt that with a signficant rainy day stash. The risk in being overly optimistic in how little you will want to or even “can” live on is pretty big. I have more than one peer who is now carrying kids in colleges and helping parents who did not adequately fund their retirement (or in some cases made mistakes with their funds that doomed them.)
Many seniors I know here in the Bay Area have significant home equities. They usually sell their houses to move into a CRCC type of community and have more than enough to cover the costs.