How much do YOU think YOU need to retire? ...and at what age will you (and spouse) retire? (Part 1)

Parents Forum Parent Cafe
12501

We weren’t given any choice. We couldn’t contribute and nothing counted toward any benefits. Oh well, fortunately H has benefits but not good for folks who needed those years and benefits. I guess you were supposed to be independently wealthy, have another job that had benefits at the same time, or had a partner that had benefits?

It would have been OK if I was allowed to contribute toward SOMETHING–deferred compensation or SOME fund toward retirement but I wasn’t given any options at all. It doesn’t seem fair that the districts and states can be exempted and employees don’t get any choice or say in the matter.

12502

@busdriver11 , ah - but I don’t contribute to SS. That’s the reason for the Government Pension Offset. I don’t know why so many districts in some states got to decide at some point to be government pensions instead of SS + pension like most states. Oh well, I’m better off by 15 years of salary (minus all that stuff from home that teachers take for lessons) and richly blessed by 15 years of students and teacher friends.

12503

Sidebar: I have had to pay unemployment on myself for decades, but I can never fire myself and never collect a penny of unemployment.

12504

I pay unemployment and W/C on myself and would never make a claim against myself or nonprofit.

12505

Where I am you can decline workers Comp on yourself.

12506

I will get a decent state pension. I am the only person in my age group I know (other than other state workers) who will have any pension.

12507

Neither my H nor I will get any pension. If the stock market crashes badly, I guess we’ll hope the kids have space for us!

12508

H’s pension is what we live on—it pays most of our day to day expenses as well as some travel. We are happy to have it and very glad H lasted until a Congessional bill was passed so that the amount was re-calculated and a better reflection of his 45 years of work. It gives us great peace of mind and allows me to run my nonprofit with no salary.

It is also great that we have lifetime subsidized medical with his former employer paying a portion of the premiums.

12509

One can look at all their assets and see how ‘balanced’ they are for their age. For example, H’s 401k, the Prudential tool says “you are investing like you are 20”. However our overall portfolio is at the right balance for us. The 401k we have in 3 different stock accounts. They want to have one consider bonds, international stocks, alternative, in addition to domestic stock. The stock funds we have do incorporate a bit of these other 3. Key for us is looking at ST and LT gains…we lower our investment risk in other areas of our financial holdings.

Generally they like to see one having 80% of cash flow at retirement from somewhere (80% of prior to retirement annual income). So generally people are drawing down from their nest egg. However one’s expenses may be such that they need more or less than that yardstick.

When one understands and can do well in a market segment (be it real estate or some other aspect like one of the posters on this thread), one gets to a point where they are comfortable w/o diversification because they can ride out downturn periods. With stocks, one can get out and in quickly…just deciding if and when to do so.

12510

@SOSConcern makes good points. The stock and bond markets differ from the real estate market primarily in that 1) all relevant information is instantaneously priced into the market and 2) the markets are transparent (to a point) and liquid.

It may seem counterintuitive, but this lack of transparency and market illiquidity creates opportunity for well positioned investors. That said, I generally don’t recommend investing in real estate, especially if debt is involved.

12511

Real estate is the third most common way (after investing and tech) that self-made billionaires on the Forbes 400 list made their money.

12512

I’d like to focus on the original question of the thread or, more specifically, what is a realistic expense budget after retirement. Financial gurus often use the “80% of pre-retirement income” figure, but I think this is absurd. For example, if you’re earning $20,000/month but only spending $10,000/month before you retire, it’s pretty clear you won’t need $16,000/month thereafter.

So my question to the group is, what would be a reasonable post retirement budget for a couple, assuming they own a home with no mortgage?

Obviously there is no universal answer, but I’d like to identify if there’s common agreement on the cost of a stable, reasonably comfortable standard of living after retirement.

For me, the basics would include:

Property taxes
Homeowner’s insurance
Home maintenance
Utilities, including TV, internet and his and her cell phones
Food
Clothing
Transportation expenses, including two cars
Health care (presumably with medicare coverage)
Gym memberships
Travel and entertainment

Of these expenses, it seems that most would be fairly consistent across the board, with the obvious exceptions being health care, home related expenses, and travel and entertainment.

I’m leaving out income taxes, as this can be as little as zero (if you’re living off your savings and have little or no taxable income) to a lot (if you’re in a high tax state living with a fully taxable pension.

Any thoughts on a realistic annual budget for the categories I’ve listed? And have I forgotten anything?

12513

Add “kids/grandkids” spending to the list, @sherpa ?

12514

Food budget could really vary from retiree to retiree. As could utilities given different weather conditions and subsequent needs, size of home, etc.

Another cost is paying for things in your old age that you used to be able to do yourself - yard work, housekeeping tasks, walkways shoveled, even simple things like getting on a ladder to change the batteries in your smoke detectors. I guess that falls under home maintenance but it is likely to be more than you currently pay for.

12515

Definitely don’t think any of these expenses are consistent across the board. Some people have very few costs associated with these things, other people have huge ones. Everyone is going to have their own individual numbers.

12516

@sherpa, the answer I have repeatedly read in this thread and elsewhere and we have found true for ourself is, “it depends.”

The best way to get an estimate is figure out what CURRENT expenses AND income while employed are and project they will be at various points, e.g. when 1st spouse retires, when 2nd spouse retires, at age 65 when Medicare begins, at age 70 when required minimum distributions from retirement accounts begin.

Consider also lifestyle. Many have mentioned the go-go years, when the couple is younger and traveling, then the go-slow years when not so much travel, followed by no-go years, when perhaps more medical care is needed.

Anyone who claims to have one perfect budget for all is lying.

12517

@sherpa , I agree , better to look at expenses. includes gifts as above. I also include my personal care… not giving up monthly hair cut, color and occasional massage. Might want to include charity donations. Depending what you chose for Medicare, vision and dental might not be included.

12518

It’s strange, we’ve never operated on a budget; we’re fundamentally frugal and have been savers/investors ever since we met. We’ve been plowing money into retirement accounts for years, and have always lived below our means.

Just for the heck of it, I’ll throw out some numbers off the top of my head for our situation. Disclaimer: DW pays most of the bills so I’m guessing on some, and we’re not yet eligible for medicare so health care’s a wild guess.

12,000 Property taxes
2,000 Homeowner’s insurance
2,000 Home maintenance
5,000 Utilities, including TV, internet and his and her cell phones
10,000 Food
2,000 Clothing
10,000 Transportation expenses, including two cars
5,000 Health care (presumably with medicare coverage)
1,000 Gym memberships
5,000 Travel and entertainment

And I’ll add:

10,000 Home improvement (I’m always building garden retaining walls, garden sheds, etc.)
5,000 Additional cost for future help with things we now do ourselves as per @doschicos
5,000 Gifts
3,000 Massages (oops, forgot that one, thanks, @mabel )

That totals $77,000 per year, which is less than I would have expected.

12519

We also don’t operate on a budget and haven’t ever in our decades of marriage, nor do we track our expenses with any precision.

Off hand, you don’t mention state and fed taxes, which are a big hunk of expense for many of us. Other insurance? We have some life insurance, some umbrella coverage, hurricane and flood insurance. We also spend/gift substantial sums to support family members and bolster their retirement savings. Donations can fluctuate quite a bit, as does travel. Are those categories you spend in as well?

12520

No state taxes here but that could change. :slight_smile: