Retirement Spending: Tips and Research Findings
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- เผยแพร่เมื่อ 22 ก.ค. 2024
- What will your retirement spending look like? As you plan for retirement, you’re probably looking at expenses and inflation to estimate your needs. But some calculators and techniques can cause problems, which might lead you to think you need more (or less) in savings and income than you actually need.
Let’s look at some findings and popular assumptions to see how they stack up. We’ll see how a fixed inflation adjustment isn’t always the reality. That’s what we see through some studies from actual bank account spending as well as retirement researchers.
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For example, the Retirement Spending Smile suggests that you might spend at roughly inflation minus 1% (although healthcare could inflate at a faster rate). As a result, not all of your spending needs to keep up with inflation. That said, later in life, those healthcare costs make an impact. Or, retirement spending stages known as Go-Go, Slow-Go, and No-Go years can also require a bit less saved for retirement. That’s because you periodically cut spending (at least in the assumptions) as you slow down in life.
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SOURCES MENTIONED:
Retirement Spending Smile: www.financialplanningassociat...
BLS Consumer Expenditure Survey: www.bls.gov/opub/reports/cons...
Read more: www.approachfp.com/retirement...
Whether or not any of those will actually happen as assumed is unknown, so you have to make whatever assumptions you’re comfortable with. Nobody can predict the future, so it’s crucial to research this more and seek advice from financial, tax, and other professionals before you make any decisions.
We also take a look at average spending in retirement. There are two sources here. One includes relatively well-off households, and the other is a broader set of households using the Survey of Consumer Expenditures (from the Bureau of Labor Statistics). It may be interesting to see how you compare, but remember that comparison is the thief of joy. Actual spending needs depend on where you live, your lifestyle, your health, and other factors.
As you plan for retirement, think about the retirement spending patterns shown here, and run some numbers to explore some possibilities.
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CHAPTERS
00:00 Intro
00:52 The Traditional Way: Standard Inflation
01:56 Retirement Spending Smile
02:58 Go-Go, Slow-Go, No-Go Years
04:03 More Resources
04:23 How Much Will You Spend in Retirement?
09:44 Where Do Retirees Spend Money (And How Much)?
12:34 Logistics of Spending
14:49 Tips to Manage and Maximize Spending
IMPORTANT:
It's impossible to cover everything you need to know in a video like this. The only thing that's certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. ““Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with extreme skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.
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Thank you for giving such good explanations! We have found your site just this weekend and have subscribed because you do such a good job here. We have been retired almost ten years and are 66 years old. Our expenses did not change a lot at retirement because our children were out of the house/almost out of the house and we had paid off our mortgage already. The travel money is one area of expense that did go up (and weddings, too!) due to the children having gone to school and marrying out of state. The grandchildren mostly live out of state now, so the travel budget to see them will remain high for some time it seems. Our health remains very good and God provides all we need to maintain good health and travel, too. We are delaying SS for 1-2 more years and living off pension and some withdrawals from accounts currently.
You are one of the first planners who I have listened to who even mention that you DO NOT need to replace full income in retirement.... so many fewer expenses in retirement... at least for me... I am living on 50% of my working salary now( I am still working) so when I retire, I am sure I will be fine!
We like to travel internationally, but that type of travel is expensive. So we've adjusted our plans to do most of the traveling during our working years (aim to travel every year), and slow down in retirement. It definitely hinders how much we can invest now for retirement, but life is meant to be lived.
That said, there are some obvious benefits to doing things this way. We get to see the world sooner, while we are younger, and have more energy. We'll have more stories to tell if/when we retire. Also, doing a lot of the traveling earlier will reduce the pressure to do a lot of the traveling in retirement when we aren't working, hence reducing the amount of money we need in retirement.
Sounds like a very reasonable approach-happy traveling!
appreciate your content. Thank you !!
Very well done. The JP Morgan analysis was super helpful.
I paid off all my debts and started contributing to my 401ks midway through my career and retired at 51. I can live on $20k, but budget $33,500 until I start taking SS. This income level offers me free Silver Cascade medical insurance in WA and $37 for dental. Medicare kicks in at 65 and will be under $200 a month. My biggest issue is drawing down my 401K IRA so I don't pay high taxes and Medicare starting at 75. I can choose to QCD Qualified Charitable Distributions up to $100,000 tax free of my RMD which still leaves me plenty left for emergencies.
2022 Govt studies show
Avg American Retirees Spending
Ages 55-64 $64,937
Ages 65-74 $52,356
Ages 75> $40,839
Fixed increase in spending once a yr .
Well what really sticks out there is housing. 30%+. Pay off your mortgage! That is the track i'm on and will be completed by retirement age. Highest priority next to the retirement savings.
That makes sense, paying off the house. The worry is that now our property taxes are skyrocketing. In the 90s and 2000 or mortgage was around $1200 a month. Now our property taxes alone are $800 and climbing
@@kippywylie I pay $500 per month for property tax on my mortgage free house. It would be $2000 per month if I had to pay rent .
When we retired the normal cost of working went down. Our eating out went up slightly due to more time together. The big increase in is spending is for travel. We are traveling while we can, as we have the means.
Im pretty much in a no go phase my whole life lol
I laugh at the articles, whatnot, that say you need 70% or 80% + of replacement income in retirement. What are people doing? !! Still working but we live on 30% of our income. That's living not existing. We go out often to festivals, wineries, breweries, concerts and travel. We plan to increase that in early retirement ( coming up in a year ) so we have budgeted 55K a year. 20K being travel. We can spend months out of country and take multiple cruises on that 20K. We are going to play the ACA game until medicare. We will show 35 to 55 K a year in income and get stipends to keep health insurance costs low. Somewhere in the $200 a month range for a silver plan.
if you use the percentage of income you need in retirement, it should not be based on your gross income, but on your net income
Data and surveys are great for the media to write articles and the financial institutions to have to show customers
But as an individual it's useless. You have to decide what you want and who you are. Only you know the retirement you want and your personal health.
While being healthy doesn't guarantee you'll live a long time or stay healthy it gives you an idea of how likely it's possible for you to have a long healthy retirement.
Do not base your retirement spending on average or surveys. Base it on what you want and who you are
Inflation goes up by about 3 percent per year.
Social Security goes up about 8 percent every year that you wait to start taking it out.
The difference is about 5 percent.
So the longer you wait to start taking out social security you will make 5 percent per year on your distributions from SS.
It's worth it to wait. The only drawback is that SS will become insolvent by 2034
Hi Justin, What I would like to know is if a couple can retire abroad on $500k without relying on SS. I firmly believe it's far to risky to rely on some benefit from our government that may or may not happen. And, either way it doesn't keep pace with the cost of living increases.
I'm sure it can be done in the right circumstances-it just depends on where exactly you'll live and things like health issues, spending, etc. We can't say for certain how the future will unfold, but there are places with a low cost of living, and $500k would be a fortune in some areas.
Oil ..rose 63% / most investors know almost nothing about investing in oil ..
Take care of your health & diet now, worry less about health later!
1 in ten live to 100.... That's means 9 in ten don't. Live while you can. Don't live by actuarial tables that are designed to guarantee insurance companies profit. I have seen so many who are health "nuts", that die before 65. I have seen some who ate bacon every day live to 100.