Retirement Expenses

Since this thread is titled "Retirement Expenses", the kids aren't likely a part of the equation. If you still have kids at home after you retire, you need to stop spending money on things like college expenses, etc. for them. Chances are, any extra money you spend after retirement will probably never be replaced, and you might need it very badly years down the road.

If the kids are still around at that late date, they need to get jobs and start carrying their own weight.

Right. I cite (the kids) as an expense that will be there pre-retirement, but which isn't in the budget after. i.e. an expense that goes away lowering the replacement ratio. Of course, as with anything, this is situation specific, some may have launched the kids decades before retiring, or had no kids, or had so late in life, they are putting them through college while in their retirement years, etc.

Subtracting 28% for mortgage isn't a good figure. Anyone who has had there house long enough to pay it off has had it so long that although it started out 28% of their income, because of inflation it's more like 10-14% now. Thumper

This past week was the 10th anniversary of my retirement from the workforce. Yup, just before the infamous "911" and all of the uproar that followed. So I can comment on my planning in the 1990's, and ten years of actual experience after Y2K.

I don't think there is a "one fits all" formula for pre-retirement vs. post-retirement income needs and expenses. Much depends on whether you plan to continue living in the same house, same area, same cost of living, or not. In my case, the collapse of the New England high-tech economy in 1989-90 forced me to look elsewhere for employment, so I liquidated just about everything I'd accumulated in the 25 years I'd lived there. I was widowed, and my children were grown, educated, and gone, so I had only myself to consider. What I got for cashing out was only about half what I'd estimated 4-5 years before, which gave me some concern. What cash I did come out with went into the stock market. Between 1991 and 1996 I made three long-distance moves westward to get income, and in each place, I rented a small place, and moved toward what I considered a minimum-frills budget. My paychecks went into the brokerage account, and I "paid myself" monthly with a check to a local bank to cover cost of living, and adjusted that monthly check to a developing post-retirement budget.

There are so many variables between my lifestyle and cost of living in Eastern Massachusetts 25 years ago and how and where I live today (Central Wyoming) that it's hard to calculate things in terms of some sort of simple ratio. Granted, I moved from a high cost-of-living area to one of the lowest cost (and most stable) places in the US. That's incidental to a ton of very subjective decisions I made about my desired post-retirement lifestyle.

My suggestion, based on my experience, would be to make some decisions to what you want for a post-retirement life, then start moving in that direction and establishing what it costs to live that way. The one major cost reduction I experienced when I did recover was elimination of automobile mileage expenses related to commuting to/from work.

Hank years

This kicks in one thing that I almost never see in retirement spending planning. Who pays for daughter Susie when she comes back home w/ a kid and pregnant and divorced from her no-good shiftless husband, who you told her not to marry (w/ a very expensive wedding) in the 1st place? Or son John who can't hold a job because he is too lazy or distracted by video games and wants to move into the basement of the big house you planned on downsizing from? You may have already paid for their education, but now who picks up their bills? They are still your kids after all.

Chip

Yes, those possibilities are important and can have a big impact on finances. Perhaps the amount of cash that should be on hand for unforseen emergencies is usually underestimated. Another event that is not often taken into account is divorce, which, if I am not mistaken, approaches something like 50% of all marriages nowadays. And after a nasty divorce, at any age, financial planning can essentially start all over again from zero.

If you consider all the other ?Black Swan? events that could happen, such as sudden illness of self, spouse, or children, accidents, fires, floods, earthquake, robbery, denial of insurance claim, etc., there is more risk in making plans for the future than might be apparent at first glance. Although the probability of any one of those unforseen events may be quite low, the probability that AT LEAST ONE will happen may be considerable..

The article linked above is a collection of nine bios of folks who retired (with comments from readers). It is a good read. I noticed that four of the nine were kind of forced into retirement. Arguably they did not have all the money they had hoped for when they retired. Yet there seems to be an emphasis by these retirees on how happy they are with the lower stress of no job (or a part-time substitute); that this is worth the reduction in income. It is interesting.

Employed white collar people (for one) seem so stressed these days. Typically they are physically unhealthy as well. It is like there is so much bureaucracy in any job and so little that makes an employee feel like she or he is contributing something meaningful.