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I wonder how you save for that? <LOL>

http://www.marketwatch.com/story/will-you-need-135-of-your-s...

But according to research conducted by Dan Ariely, people need 135% of their final income to live the way they want in retirement. The reason for this astounding difference has to do largely with the way Ariely, a professor of economics and behavioral finance at Duke University, did his research.

Instead of asking people to ballpark how much of their final salary they will need, he asked the following questions: How do you want to live in retirement? Where do you want to live? What activities do you want to engage in? And similar questions geared to assess the quality of life that people expect in retirement.

Ariely then took the answers and “itemized them, pricing out their retirement based on the things that people said they’d want to do and have in their retirement.” Using those calculations, he found that people want to retire to a standard of living beyond what they currently enjoy. (Who wouldn’t if money were no object?) Read Ariely's blog post on the topic here.

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intercst
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I always assumed I'd need more in retirement because I wanted to travel, get away in the winter, etc. Also, I lived 5 minutes from my office, dressed business casual most of the time, and went home for lunch, so my expenses weren't going to drop just because I quit working.

I was right about the travel expense but kept it reasonable by going mostly by car and skipping the $500/day resorts I used to frequent. What I didn't plan on was the rate of inflation in health insurance, which I had to purchase myself after retirement. But now that I'm on Medicare that expense is more reasonable. Now if someone would just run over Paul Ryan.........
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I always assumed I'd need more in retirement because I wanted to travel, get away in the winter, etc. Also, I lived 5 minutes from my office, dressed business casual most of the time, and went home for lunch, so my expenses weren't going to drop just because I quit working.

You will not that the article said you would need 135% of your salary, not your expenses in retirement. Your expenses may have gone up but I hope it was less than your final salary.

I'm saving around 30% of my income. Once the kids are out of school, the mortgage paid off and the horse gone, I could be saving 50% of my income. Therefore, I would be living on less than 50% of my income. Unless I want to blow a lot of money, I don't how I would be anywhere near needing 135% of my income in retirement.

PSU
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Hi intercst!

I think the key to evaluating this "research" is "wants" versus "needs".

But what else would one expect from a "Dookie"?! ;-)

Cheers!
Murph
Home Fool
( UNC-Chapel Hill Grad )
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Instead of asking people to ballpark how much of their final salary they will need, he asked the following questions: How do you want to live in retirement? Where do you want to live? What activities do you want to engage in?

With those kinds of questions, I suspect a large number of people need 135% of their salary while working, too.

--Peter
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We are spending a little more in retirement than we did when working.

We travel a lot more because we have the time to. We go to more movies than before because afternoons are open and didn't used to be. We pay our own health insurance now, which is $1200 a month which used to be $200. And we have a $10,000 deductible *each*, which means that cat scans, MRIs, and the like come out of our personal pocket (and have.)

We buy more books, go to more plays, and I certainly spend more at Home Depot than I did when my only free time was weekends.

Other expenses have gone up, but modestly. Property taxes, groceries, gas, utilities are the obvious, but there are others.

Once you figure in commuting time, weekend work, etc. We have an extra 60-70 hours a week to fill. In a week that's 168 hours-56 for sleeping, that's doubling the leisure time, and unless you're going to sit on the stoop and count the Chevys that go buy, you're probably going to spend some dough that you wouldn't have before. Heck, even cooking costs more because now we have the time to try some fancy stuff, where before it was always quick and dirty grub because we were both so tired after work.

All of that said, our lifestyle hasn't changed. We always read, went to plays and movies, etc., just not in the quantity we do now.
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How do you want to live in retirement? Where do you want to live? What activities do you want to engage in? And similar questions geared to assess the quality of life that people expect in retirement.

I *want* and *expect* a lot. Who wouldn't? What kind of BS study is this?
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What kind of BS study is this?

probably a grant that we're paying for!
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We are spending a little more in retirement than we did when working.

As with anything, it depends what you're counting. Since the kids have largely left we're saving 30% or more per year for retirement (is that an expense?), and probably spending no more for better vacations because of the savings of not buying extra tickets or rooms for the kids every time.

After you take OUT working expenses and add back IN more healthcare and non-business aided travel, I'm budgeting for about what we're spending now minus the savings, figuring that any additional expenses in the future will be covered when the mortgage is paid (we're on a 10 year mortgage while working).

So Goofy, I guess it depends on what you mean by "spending."

Hockeypop
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So Goofy, I guess it depends on what you mean by "spending."

Don't make it more difficult than it is.

"Spending" is what goes out of our wallet and bank account.

It is more now, in retirement, than it was before retirement. Not horrendously so, but "more" also has a simple definition.

I take it by your post that you are not yet retired. When you are, and have been for a few years, you will have a frame of reference from which to speak. Perhaps for you the answer will be "less"; for us it's not.

It appears that you are looking at the "savings" you are realizing because certain expenses have gone away. Good. If mortgage and kid expenses go away, that's all to the better. But then after a couple years of that, you will have a new baseline from which to compare.

As I noted, some people are content to sit and watch TV through their retirement, and so they won't have additional expenses of travel, entertainment, golf, etc. Some of us do, and it doesn't mean that we've suddenly gone wild and are throwing dollar bills out of the car window as we drive along.

It means that we've doubled the amount of time we have to do things which often, not always, cost money.

Our mortgage is paid off, and has been for 15 years. Our travel is modest; we're not staying in 5-star resorts; indeed, we're usually staying with friends, or driving the RV to campgrounds nearby (but not always nearby.) I drive a 14 year old car, and so did Mrs. Goofy until hers was totaled by a hail-storm this spring. (And no, I'm not counting extraordinary expenses like this, although they are significant. We're also getting the house repaired, stained, new roof and gutters, and I'm not counting that either.) I'm only counting actual living expenses, and as I say, they are higher, not lower.
 
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Spending" is what goes out of our wallet and bank account.
It is more now, in retirement, than it was before retirement.


The thing is, you have a lot of control over your expenses. At least, the amount over and above your baseline minimum living expenses.

Our annual expenses for the last few years have included about $20,000 - $25,000 for travel & cruises. That's $20K that we didn't have an an expense before we retired.
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The thing is, you have a lot of control over your expenses. At least, the amount over and above your baseline minimum living expenses.


i think that's an important point .. it seems i have more control after retiring.



but ... although i have a pretty good handle on current expenses ,i haven't a bloody clue what i was spending before retiring.
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We are living comfortably on about 2/3 of what I was earning before retirement. That includes a retirement plus SS; and not touching investments yet.

We don't travl extensively, but we do take about 2 vacations a year (e.g. cruise, etc.), we eat out about 75% of the time, and buy what we want. We also spend a fair amount of time doing volunteer work.

I don't know about paying $1200 for health insurance, unless you have not reached Medicare age yet. My most expensive insurance was between retirement (62) and going on Medicare (65). Once on Medicare (icluding a supplemental medical plan and a separate drug plan), my medical expenses are lower than even when I was working and on a group plan.

Another factor here is what was the salary before retirement. If somebody was making $50K, then maybe they will need more after they retire, to cover medical, etc. If somebody was making $200K, I don't think they will need $270K in retirement.
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but ... although i have a pretty good handle on current expenses ,i haven't a bloody clue what i was spending before retiring.



FWIW ..i dug out an old spreadsheet and looks like i'm spending in retirement about 80% of pre-retirement


..strange.
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About 20 years ago, I attended a community education workshop on finances and financial/retirement planning, presented by a couple of small biz financial planners.

As part of workshop, I completed a questionaire to determine what I would need in 'retirement'. I assumed a 'what I want to do in retirement' rather than the 'need for retirement'. My wants were perhaps 200% of my then current income. The financial planner LAUGHED at my naivete. He basically told me to go away and grow up, and accept that my 'dream' wasn't gonna happen.

I discovered TMF... retire early homepage... other resources...

As a result I changed my 'job' goals to a higher paying position, made it happen, and over the last few years, after reaching some of the goals produced in the workshop 20 years ago... I find that I could easily 'want' a bit more... primarily because my estimate of travel needs has changed.

so... What kind of BS study is this?

Personally, I've never understood why other folks limited themselves.
Perhaps this study merely illuminates the gaping hole that exists between planning for 'needs' vs planning for 'needs + wants'.

And, yes, I'm far better off for having 'dreamt'... than had I not.

:-)
ralph
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Since I was widowed at age 50, I never thought about how much I would need, but only how much would I have. I am lucky to have SS, husband's pension (1/2) and 401K (now my IRA) and taxable investments.

I also opened up my own business and 25yrs later am almost totally retired except for a few clients and selling some photos.

I would be quite comfortable. But here is the thing...and it can happen to any of you who have children. I know of so many retirees who have "children" that had to move back home because they lost their jobs, or at least need financial help. Dolling out financial help to children and grandchildren can be a drain on your retirement funds. This was not something I originally included in my retirement expenses!

Lucky for them I am not one to go galavanting around the world!

Birgit
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