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Author: alyourpal Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19414  
Subject: What income do you need in retirement? Date: 7/21/2007 9:41 AM
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Hello,

The Motley Fool have now allowed British Fools access to the US discussion boards, and I'm from Treasure Island, as we call it(UK). Time was when we were poor relations to our American cousins, but times have changed with the $2 £(pound sterling). This was a very popular thread on the UK Fool discussion boards:- http://boards.fool.co.uk/Message.asp?mid=10326337. It would be very very interesting to know how much one can exist comfortably on in retirement in the US. So heres the post that started it all off. Lets hear your take on it?

Kind Regards

Al
TMF England

Following the question about how much you need for retirement, calculating the income you will need is a vital part of planning for it. I didn't actually do that until retirement was looming, and I guess most people don't either (although I suspect Fools are more likely to). Its probably one of those things where many of us bury our heads in the sand, afraid of a nasty shock.

For me and the Mrs who are debt and mortgage free, £14 grand after tax pays all the bills including food and drink. £4 grand to run the house, £4 grand to run the cars and £6 grand for food, drink, and the odds and sods. It enables us to run two modest cars, petrol, mobiles, newspapers, etc. All the basic comforts. Having spoken to a couple of pals similarly situated recently, they had both calculated very similar figures. Talking to a widowed guy recently who has a smaller and thus cheaper to run home, he gets by comfortably on £9 grand, his only extra purchase during the year having been a new Windsurfer sail. I expect others with grander houses would spend a bit more than us, but not that much more. These figures don't include any extras like holidays, major purchases or 'fun', nor any maintenance costs other than that on the cars.

The most difficult thing to estimate was the supermarket bills, but it was easy to actually measure them accurately by putting till receipts into a jar for two separate 4 month periods and then analysing them.

From this information it becomes easy to answer the question "How much is enough to retire?". Just add up the projected pensions and see how far they fall short of this basic easily calculated figure, add the figure you want to put on the 'fun' factor. You will then be able to calcuate an answer based on your assumption of how much income you are expecting your capital to generate, and whether you intend to draw it down to supplement your income. Without it you won't have a clue.
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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11422 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 10:16 AM
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It would be very very interesting to know how much one can exist comfortably on in retirement in the US.

Where in the US would you like to talk about - the amount would vary extremely depending on location.

rad

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Author: Bobcatkitty Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11423 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 12:14 PM
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It also depends on your personal definition of "comfortable". For the 2 of us, that amount would be close to $5K per month. We don't actually spend that much each month, but having the cushion is what allows me to sleep well at night.

This is truly an area where one size doesn't fit all.

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Author: DorothyM Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11424 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 12:33 PM
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Hi - I'm recently retired (just a few months) -- I live in New York City and I've decided to stay here to take advantage of all the things that brought me here so many years ago. In doing my calculations I decided to replace 100% of pre-retirement net pay.

I'm not a profligate spender, but I have the sense that I want to take advantage of what's out there now because there will be a time when I won't be able to to it.

In these few months I've had some horrendous unexpected vet bills and I've done a bit of weekend travelling (which I couldn't do when working) and have paid my annual health club membership. I'm taking some classes at NYU (French now and French and an Art History class in the fall session). Because of being somewhat overwhelmed with the French class I haven't done a lot of things that I would otherwise have done (concerts, museum going, etc.) I do a lot more lunches and dinners with friends than I used to. We used to meet for coffee but now that there's time it ends up being an excursion (for want of a better word) and a meal at a "nice" (i.e., $$$) place.

I plan one "big" trip each year and one small one plus a few weekend jaunts. This year my big trip will be to Brazil and the small one was to Nebraska (for the Sand Hill Crane migration), a birding weekend to Chesapeake Bay, a weekend to upstate NY and one to the Jersey shore and perhaps one to visit friends at Cape Cod.

Long way of saying that my calculation now is that I need at lease 120% of my net income pre-retirement, adjusted for inflation -- I can do it within a 4% withdrawal rate.

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Author: Bobcatkitty Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11425 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 12:46 PM
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Dorothy, my DH has been retired for almost 12 years now, and SS benefits for us at age 62 started recently.

We've looked at those 12 years as one adventure after the next. We've done the sailing in Florida, the motor home thing across this great country, and don't want to think about the times we've moved.

Currently, we're in between adventures as our newest 2 home situation has been quite a transition. I believe out next big trip might be a bus tour of the Maritime provinces...but time will tell.

Enjoy your new adventure and best wishes for following your heart and dreams.

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Author: alyourpal Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11426 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 12:50 PM
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Where in the US would you like to talk about - the amount would vary extremely depending on location.

Its obvious that if you live in a big city you are going to have to pay more for insurances, possibly local taxes, and from what I have seen, gas.

Please, just talk about where you live. In a visit to Louisiana a few years ago, people were complaining that you needed $30,000 pa for a couple to just exist.

A lot of people on the UK Fool ask the question "how much capital do I need to retire", without having calculated the bare minimum income to exist comfortably without fun spending. This post was aimed at uncovering that.

Al

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Author: rosewine Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11427 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 2:06 PM
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Please, just talk about where you live</>

I'm in the Northwest and am "sort of" retired. My social security of $1100 a month and my two small pensions from prior employers of $600 a month are enough to pay the mortgage and the bills. I have a part time job that nets about $1000 a month that pays the extras and most of the time I just stick it into my credit union savings account. I also have a seasonal part time job that nets about $5000 for 3 months work in the spring.

Both the part time jobs will continue for as long as I want to keep working there. I do not anticipate having to take any money out of my other retirement accounts until I have to at age 70 1/2.

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Author: Bobcatkitty Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11430 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 4:16 PM
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Please, just talk about where you live</>
+++++

I guess I failed to do that in my previous posts. We have a small winter home in central Florida, and that is our legal & permanent residence. We have a large summer home in NW Arkansas. Our expenses of $5K or so per month include costs associated with both homes....i.e taxes, maintainance, homeowners assn. dues, insurance, utilities etc.

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Author: mendomann Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11432 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 7:33 PM
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From the Yahoo Board:

One of my financial advisers sent me his newsletter. It contains some
factoids of likely interest in this group.

The average retirement age for men is 63, and for women it is 62.

On average, a household will need 73-percent of pre-retirement income in
retirement.

At age 65 retirement, 43-percent of all households will fall short of
that goal by 10-percent or more.

At age 65 retirement, 54-percent of Baby Boomers (born '55 to '64) will
fall short.

At age 63 retirement, 66-percent of all household will fall short.

In 2002, Social Security was 40-percent of retirement income.

In 2030, Social Security will drop to 33-percent of retirement income.
(Obviously a prediction.)

Defined benefit pension plans are declining at a rapid rate.

The median 401(k) balance for households approaching retirement is $60,000.

The savings rate in the U.S., which has always been low, went negative
in 2005. First time since The Great Depression.

People are living longer, and need more money for a longer retirement.
But the good news is that people today are healthier and can work
longer, save over more years, and put off their retirement.

No mention of health care expenses...

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Author: fleg9bo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11433 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 8:09 PM
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I don't know that these formulas telling you what percentage of your working income you'll need in retirement are particularly useful.

What you need to know is what your expenses will be.

Some expenses will decrease:
--work-related things such as clothes, transportation and lunches out
--no more SS and Medicare taxes to pay
--no more saving for retirement

Other expenses may increase:
--leisure activities and travel
--health care, especially if you'll be paying your own insurance premiums

I kept track of our spending for several years before retiring so I knew pretty closely what we needed to maintain the standard of living we wanted. I included a generous estimate for health care costs for the time when we would no longer have company coverage. I retired first and when DW joined me, I knew that an annual withdrawl of 4% of our portfolio would cover our estimated expenses.

As far as what income you need, that all depends on how you want to live. If you are looking at some bare minimum, I can't help because I haven't looked at that possibility.

The savings rate in the U.S., which has always been low, went negative in 2005.

The official savings rate is not a useful figure. It only takes into account how much people stash away from their paychecks. It doesn't count growth in investment accounts like 401ks and IRAs or private brokerage accounts nor home appreciation. If you made, for example, $250,000 in the stock market over the past four years but spent all of your paychecks, you have zero savings by that accounting. In recent years many people have saved less because their portfolios and homes have increased their wealth enough to satisfy them.

--fleg

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Author: telegraph Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11436 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 9:53 PM
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You can live on 25K a year in TX...many places. IN some places you can rent for a few hundred a month. If you don't want a new car, and keep on e10-15 years, you're all set. It helps if you have health insurance coverage from elsewhere (retired militayr or covered by employer).

If you had a paid for house, you'd be all set....too.....

Half the retirees in FL live on under $28K/yr.


t.

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Author: telegraph Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11437 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 9:58 PM
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Not really...the factoids are avaerage and for those who are here...and aware....

They have likely saved a lot more

They likely LBYM so they don't need that much income

"average" is nice..but the average person might be 5'8" tall and weigh 158 lbs..... which mean nothing.....

the 'average' person might live on the east or west coast....

the 'average' person might have this or that...

What is important is what you have. I don't really care if the average person has 60K in a 401K at retirement. What is important is what I have in assets whether in 401K or not. And what you have.

Of course, it might be interesting to note the average person is likely to be hurting at retirement...but the average person might also be working part time at Home Depot or similar to pay a few bills. or seriously downsizing.

If being average means you'll be eating dogfood at age 70, that isn't something to aspire to.


t.

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Author: MFDnNC Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11438 of 19414
Subject: Re: What income do you need in retirement? Date: 7/21/2007 10:24 PM
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Oh get real - locations - life style - etc,

There is NO answer to how much

There are too many variables

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Author: tilnow One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11440 of 19414
Subject: Re: What income do you need in retirement? Date: 7/22/2007 9:24 AM
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Alyourpal in the UK,

As you investigate, take a look at Asheville, North Carolina. I'm a northerner who's only visited in the Asheville area, but liked what I saw. Rich cultural activities, beautiful surroundings, and a relatively mild climate that still experiences the four seasons.

Tilnow

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Author: Grumpybiker Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11460 of 19414
Subject: Re: What income do you need in retirement? Date: 7/30/2007 8:13 PM
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a weekend to upstate NY and one to the Jersey shore and perhaps one to visit friends at Cape Cod.

What do you consider "upstate" NY, DorothyM?

I live near Masonville, NY and have some open acreage on which you are most welcome to pitch a tent! Come up anytime!
http://groups.msn.com/GrumpyPix/online.msnw?action=ShowPhoto&PhotoID=149

Not recommended though, if you are afraid of bears. I see evidence of a lot of bear activity on my property and two weeks ago there was a mountain lion sighting only a mile and a half from here!

I love it up here!

I have been "retired" since December of 1989. It wasn't my idea and there was no retirement planning involved. After lengthy stays at Walter Reed Army Medical Center in Washington, DC and a VA Hospital in Boston, I suddenly found myself a civilian again!
Ordinarily, I would be entitled to retirement pay from the US Army, but my VA Disabilty is more than my pay would have been and therefore cancels it out. There is no "concurrent pay" which would enable me to collect both, my retired pay and the VA Disability.
Between my VA Disability check and my Social Security Disability benefit, all non-taxable, I was able to afford my 12 acres of retired retreat.
My DW also draws SS Disability. She got injured on a job and permanently damaged some ligaments in her arm and shoulder. I turn 61 next month and my much loved spouse is ten years younger.
http://groups.msn.com/GrumpyPix/inkorea.msnw?action=ShowPhoto&PhotoID=134
Yeah, I know - we don't look like that anymore:
http://groups.msn.com/GrumpyPix/online.msnw?action=ShowPhoto&PhotoID=553

Anyhow, I am cat-friendly and you are welcome to visit anytime.

Regards,

Grumpy
US Army, Retired

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