Do you seriously think you can afford to retire? (determine, obtain, assistance)
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What are medical expenses like in retirement, when you are pushing 80? Is it all covered by Medicare? Do I need to plan for it?
Right now it is mostly covered by Medicare, but Medicare will undergo some changes going forward in order to remain solvent and it's hard to know how to plan for it. It is a complex area to calculate, and lots of ink has been spilled about it.
Expenses in retirement versus expenses while working
Quote:
Originally Posted by hartford_renter
That's what so called financial professionals say people need saved up.
I agree it is ridiculous it has no basis just like a lot of what they say. I spend about 30% of my gross income right now and I would end less if I were retired.
If you are spending 30% of your gross income right now (while working), that means two things: first, that you have good discipline, but second, that you have a very good income. That sort of skews the discussion when we talk in terms of percentages.
So what does it mean to spend 80% of one's former gross income when retired? If the former gross income was $200,000 per year, then of course actually spending $160,000 is living a very, very luxurious life and such a high amount is completely unnecessary. But the median family income in this country is about $50,000. In that case a person will not feel like living on $40,000 a year is living high on the hog, although it can be done in reasonable comfort without any real hardship. And the lower you go, the tighter that 80% would be to live on.
Therefore, to me, it makes more sense to talk about dollar amounts as opposed to percentages. But even in terms of dollar amounts, there are enormous variables as to what people consider their "needs"to be:
1. How much will you want to travel?
2. How will you travel - Motel 6 or luxury hotels? World travel or mostly in the U.S.?
3. How often will you eat out?
4. When you do eat out, will a meal cost $10 plus tax and tip, or much more?
5. What sort of car will you "need"? There is a tremendous range of costs here.
6. Same with housing (the tremendous range). Will you downsize because the kids are gone, etc.?
7. Entertainment? Will it be the TV at home? My luxury in retirement is good tickets to live classical music, perhaps about twice a month on average. These tickets are not cheap - about $100 and up.
So I do agree that the 80% rule of thumb is so broad as to be meaningless, largely because 80% means different things to people of different income levels.
no one can speak for anyone else as far as their needs . what you need to retire is no different then the amounts of income we all need to live when we are working. there is no rule of thumb for the most part and everyone is unique.
Well we need to tell the financial professionals that. The professionals say you need to spend 80% of your gross income in retirement and you will need to save up enough to withdraw only 4%.
For a typical family with 2 children earning 50K per year. They would need 40K in retirement and social security would cover approximately 1700 per month. So they need about 20K from their savings per year.
For the last 50 years people have been retiring with these parameters and they have done just fine. There is no need to scare people I don't think the professionals have it right.
To replace the 20K per year you could just buy an annuity for about 300K. Or you could just cut your spending. The doomsayers on this message board can't seem to explain how people have been retiring for the last 100 years when the social safety net was much weaker.
there are general rules of thumb but like everything else when it comes to humans they just get you in a ball park.
there is a whole lot more your missing from the equation than just spend 80% and save enough to pull 4%.
there are alot of parameters that have to be met in order for those guidelines to hold true at a high rate of success..
As of right now a 62 year old male can get about 18k a year non inflation adjusted from an immeadiate annuity with 300k.
Thats only good if your single as your spouse gets nothing at that level.
Not a bad deal if you live but an awful deal if you dont.
I wonder how so many people have managed to retire in the last 75 years? The median income hasn't changed much in the last 75 years, if anything it has dropped slightly.
Was everyone poor 30 years ago? Did financial planners exist back than? I wonder
One should aim to save about 25-30x their annual expenses less Social Security. You manage to tuck that away and you can retire comfortably. Don't pay no mind to the scare tactics of you must save 80% of gross income. Imagine if you are currently working and are saving 10% in a 401k - from the begininng you are starting out with 84% of gross (salary-10% 401k - 4.2% Fica - 1.4% Medicare), then deduct 15-20% for federal,state,local taxes, medical benefits - you now are living on 64% of gross. If you can swing it on 65% of gross today, why would you need 80% tomorrow - you don't. Even if you didn't save a dime in the 401k, you still would be coming home today with 75% of gross.
Remember, it's all about having enough savings/investments less any Social Security and/or pensions to cover expenses.
its usually a case of the chicken or the egg. the folks maxing out their 401k's and putting the biggest chunk away from their check are not the typical folks who dont hsve a decent amount saved .
its the people who barely save and are living on just about their entire pay checks while working that need the biggest percentage of what they earned when they retire.
those living on 84% of their pay check and maxing out their 401k's are more than likey not going to be the ones struggling and needing to save more.
like escort said its really about dollars and cents not percentages.
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Expenses in retirement versus expenses while working
