A rule of thumb is 80% of your current income to maintain your current lifestyle. Some people say no you need 100%, due to higher medical expenses.
I’m guessing there are a fair amount of old farts on the SDMB, what has been your experience?
I have an early retirement offer, i can do 80%, keep my health insurance. would downsize our housing situation. I’m eager to take the offer, but i’m cheap and fret about finances.
Some older relatives live quite comfortably and say they don’t really need as much money as they thought. Others blew threw there 401k and are scraping by on Social Security.
I haven’t retired yet, so I can’t say but I’ll follow this thread. I learned that if you’re collecting social security you can still work and earn almost $19K without penalty.
We use the following earnings limits to reduce your benefits: If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.
I might get some simple job like checking receipts at costco just for something to do and walking around money, but NEEDING to work is something i am interested in.
Wife made a detailed Excel file of our current and estimated future expenses. Took that to our financial advisor, who said I could retire. Did so last year, woohoo!
By retiring early, I feel I’ve bought myself some extra years. And they’re the healthiest years I have left, so much better to spend them somewhere other than work.
Sounds like you’re getting a really sweet offer.
Like lobotomyboy said, you can always take a low-pressure part time job, to cover some of your living expenses.
My understanding is that if you maintain 80%, inflation is your only enemy. there will be small cost of living increases. But exactly how long you live shouldn’t matter.
I am retired, so is my husband, for about 6 years. Due to my company pension, my own IRA plus social security and my husband’s social security, our household income is pretty close to what it was before we retired. We don’t have commuting expenses, I don’t eat lunch out 5 days a week, my husband shops less. Our car insurance has gone down a little due to less driving. The last re-fi on our house left us in pretty good shape due to low interest rates.
The upshot of this is that we have more disposable income than before we retired. At least that’s the way it seems. Part of it is a sense of ease due to the fairly decent sized IRA, which so far has grown faster than we have spent it.
The things that scare me are two-fold: inflation, and end-of-life expenses for one of us, possibly leaving the other one on the short end. I am taking steps to reduce the risk of the latter, but there isn’t much I can do about the former. In the meantime I try to enjoy the leisure.
I accepted an early retirement offer and left the working world at the end of 2016, 3+ years earlier than I had planned to retire. But I took the offer only after talking with a financial planner. I was advised to do the same thing as @Capn_Carl, which was to make a spreadsheet of monthly expenses as well as income. It was a lot easier to make that decision when seeing the numbers.
In answer to the OP, we’re getting by just fine on about 65% of our pre-retirement income; in fact, we’re bringing in more money than we’re spending.
I think most retirees spend less money when retired than they did while working, so they can stretch their money better. The kids are supporting themselves and they are probably looking to downsize which will reduce their monthly costs. It really comes down to what you’ve saved, how much you are getting from Social Security, pensions, and other sources, and what your expenses are looking out 15 or 20 years. If you can stay healthy, and have adequate health coverage, you can probably due fine on 75% of your working income. You can’t go on 10 cruises a year and buy a new Lexus every few years. We still have most of our money in the stock market so if the market tanked and didn’t recover for a few years that might be a problem, but we can always cut back and pinch pennies for a while.
We are spending less now. My car gets about a hundred miles a week when it used to get at least 500.
We both used to buy coffee/lunch/snacks on an almost daily basis and got home too tired to want to do more than throw something prepared in the nuke. Now we eat almost every meal at home and we enjoy it because we prepare our food how we like it best.
We are both happier than we have ever been in our adult lives. I highly recommend it.
Just before I retired I got my financial planner to do a projection of how I’d do in the future, and that needed yearly spending. We sat down with our checkbook (actually Quicken) and our credit card summary. We had estimate a number about 65% of my gross salary, and we found that this was what we were spending. The rest was taxes, 401K investments, and savings we had started to do after we finished paying for college for our kids.
So, remember reduced taxes and investments. If you’ve been frugal, that will save you a lot.
Very much reduced gas costs, one tank per month. (The pandemic helped.) Reduced clothing costs. We have time to optimize savings on our grocery budget. Not much reason to eat out since we can split cooking and start it early.
Do budget for big expenses, like when something breaks or you need a new car.
Bottom line, we’re spending no more than our estimate and probably less. We did pay off our mortgage, so that was $1,000 a month in improved cash flow.
The big thing though is this, if you have investments. You can move some from long term high growth things to income producing things, like dividend stock funds. If you can produce more income from these and SS and pensions than you need, you don’t have to worry too much about what the market does.
As for medical, I was on Medicare pretty soon after I retired, and we got a plan which paid deductibles, so we have a fixed cost every month and don’t have to worry about what my wife’s new knee costs. I was on COBRA between the time I retired and Medicare kicked in, so I didn’t look at the market much.
I live in the UK, so our National Health Service The NHS website - NHS (www.nhs.uk) takes care of my medical expenses.
I planned an early retirement (paid off the mortgage; had made pension payments for 35 years; had savings worth 2 years income) at 55.
My expenses haven’t changed much generally, so I take an occasional cruise or visit Las Vegas.
Retirement planning is very different in different countries and with different groups. In the UK, most retirees will have paid off their mortgages and there are several benefits that any over-60 can use, like free prescriptions and free travel on busses.
It is possible to live on the State Pension (currently around £180 a week - but it can vary a lot) and many people do, but it will be a struggle.
Those of us who worked for government (small ‘g’) organisations are likely to have accrued a decent index-linked salary-based pension on top of that (The NHS pays 1/80 for each year worked) but many similar private pension schemes switched to contribution-based payouts when tax benefits were changed.
I would say, as a rough guide, that a UK citizen should aim for 50% of final salary to live comfortably and 30% to get by. Of course, those living in rented houses and those still supporting children and grandchildren may have a harder time of it.
I encourage most young people I mentor to work towards owning your home debt free by the time they get to retirement age. Then you should be able to reduce that need of after tax income down to 50-60%.
I retired a few weeks before my 63rd birthday and my pension alone was about 80% of my final salary. Then came government pensions for my wife and me that brought it over 100%. The payments out of the RRSPs (equivalent to 401(k)) that started 8 years later brought it well over 100%. Since I brown-bagged lunch and wear the same clothes, expenses didn’t drop much (just commuter train fare, but I still went to my office one or two days a week). So we are still spending less than we make, especially during the pandemic.
My 95 year old father is making significantly more today than he ever made in his working career because of Required Minimum Distributions (RMD) from his retirement account. He was pretty aggressive with his investments over the years and IRA is still worth quite a bit more than its value when he retired, even after 20+ years of withdrawals.
Some here are talking about what percentage of income one will get in retirement. That’s easier if you are counting Social Security and a defined-benefit pension plan. It’s harder for those of us with defined-contribution plans, where how much we have each year and how long it lasts depends on how much we have in total and how well we invest. So at 55, I’m looking at my 401(k) and IRA accounts and trying to determine what multiple of my salary they amount to. If, for example, I have fifty times my annual income in an IRA plan, I can withdraw, say, two percent annually and match 100% of my current income. Fifty times annual income is a lot though.
Don’t forget that your investments are going to be generating income also. If you can generate enough income so that + SS is enough to live on, you won’t have to take anything out. 50xs your income is way too much.
I retired with about 14 times my income, and with market gains I have more invested than I had when I retired 5 years ago, even after expensive home improvements and paying off my mortgage.
Wow. I’m only 55 but with the market as high as it is, I’m already at 8-12 times annual income. (BTW, should one look at gross annual income, or net of taxes and retirement contributions?)
