Retirement spend

[boiler717]

The retirement number thread made me take a fresh look at our investing. Some of the calculators made it seem like we are way ahead and I thought we were behind based on the calculators I was using.
It seems like the crux of the difference is spending in retirement. I have no idea how to estimate this. Calculators are using 80% of income. Our current spending not including mortgage is like 30-35% of our gross income, mortgage is about 12% of gross.
How are you developing your spend number to get your retirement number?

[flygirl]

We did ours based upon the monthly amount we want to spend monthly in retirement. We did it thru a financial planner so I don’t know how they calculated potential taxes and all that.
I think when using the percentage of income you want to keep in mind what your plans are when you retire. For instance I think our mortgage will be replaced by travel, at least for the first 10 years. Or will you want to rent a vacation rental/buy a place somewhere else?

[awkwardpenguin]

80% of current income is a reasonable assumption for middle-income earners, but we pay more than 20% in taxes, so we're not spending even close to 80% right now, let alone in retirement.

We track our spending pretty closely, and averages from that feed a retirement budget spreadsheet. I've made adjustments - subtracted out daycare and added in health care costs. I also know that for the most part the main numbers stay the same or increase (mortgage, property taxes) while consumer spending decreases with age. Rather than adjusting each of those things individually, I figure it will all come out in the wash. We'll revisit the spending plan as we get closer to retirement, but for now it's enough to get a target number.

For the actual projection I use Personal Capital, which has a very flexible retirement planner. I use SS benefits at 70% of current projections and that we'll collect at full retirement age. It allows for you to add limited time spending like college costs, the remaining term on your mortgage, etc. It also allows you to designate a "base scenario" and make copies to adjust the parameters without changing the original. I find it very flexible and helpful.

[scout8]

I created a budget based on what I think our spending will be and convert it to a percentage.

[isabel]

I recommend Personal Capital for this. It’s a good tool to input everything and run scenarios to see where you stand with meeting your goals.

Our Vanguard advisor I think has us aiming to save enough to spend 70% of gross income, which still seems excessive to me considering we won’t have a mortgage or childcare. That’s a huge chunk of our spending.

[bee20]

For my spend number, I am currently living a life pretty similar to my target retirement lifestyle, so I've basically taken current expenses, added healthcare (estimate for my younger retirement age as well as 64 for my pre-medicare age, it rises quite a bit), and then added a 10% expenses buffer and 15% for income taxes. At some point during my retirement I will have my mortgage paid off but I am keeping that as a "bonus". I will be retiring much younger than the conventional age but I have a few life goals I want to iron out before setting a date.

Healthcare is about 1/3 of my post-retirement budget unfortunately so as I get closer I might look into any alternates there (like moving abroad on a retirement visa for some period) but I am hopeful for further US healthcare reform.

[gt7301b]

I imagine our number will be lower than 80%, as right now we take home around 60% of our income. I still use 80% when I run the calculators because I imagine we will travel a lot in the first few years of retirement and will most likely have a kid in college at the time.

[ohgillian]

We have ours set at 75%. I don't know if it's right or not but we are over-target, so it's probably fine. We currently save I think 15%(?) for retirement so arguably are living on 85% now.

[steamboat185]

We assume our spending will stay constant and model off what we spend today adjusting for inflation. We won’t have daycare or a mortgage in retirement, but we are assuming healthcare will be expensive and at some point we will need a new car (we want to retire in the next few years). We’ve tracked our spending for years, which helps and know that sure one year we spend more on vacation, but the overall amount doesn’t change too much.

[aspentosh]

Jan 29, 2021 18:20:37 GMT -5 isabel said:

I recommend Personal Capital for this. It’s a good tool to input everything and run scenarios to see where you stand with meeting your goals.

I will second this! Though be prepared, there is no scenario where you will get 100% of meeting your goal. They do that because they can't guarantee it. But our FP (from PC) has said that if you get mid to upper 90s you can basically assume 100%.

[dragon's breath]

I look at a few things-- I'll no longer have a mortgage and I'll no longer be putting x% into retirement savings. Plus, my son will be moved out and not dependent on me at that point. I'll be allowed to take my health insurance into retirement, at the same rate, but premiums will be post-tax instead of pre-tax. However, I'm going to want to travel a ton, and, in old age, I'll be paying for my own long-term care.

So, I figure I live pretty well now, can afford some of my wants, but not all of my wants. My pension should cover all bills and most necessary expenses (until I require some form of care). I plan for my spending to be at least my base income now, so 100%, increasing around age 80 to possibly 200% (I want to be able to afford great care, whether that be in-home care or a nursing home). Due to my pension and benefits, my retirement is age-based rather than savings-based, since I'm well on track with savings, but have a minimum age requirement for retirement.