Most financial advisors say that we plan to spend approximately seventy-five percent of pre-retirement income to maintain our current lifestyle in retirement. Some even say that we will spend the same amount in retirement, as we have to go before retirement.
I personally have a problem with this proposal. I researched the topic in hand to determine the actual cost of living, and what our actual cost of living in retirement.
To understand the real lifeSpending, we need robust and accurate as a starting point to begin.
The best source of data in the United States for this information is the survey on consumer spending, which annually by the Bureau of Labor Statistics, Department of Labor is performed. ) These data for 2006 (latest year available can be viewed on the website below.
The similar models of a couple approaching retirement is in the painting, "Composition of consumer unit." In thisTable column "man and woman only" contains the information that we consider.
From the survey, we find that there are more than 25 million couples in which husband and "a woman" group. The average age of the reference member is 56.8 years. The pair combined $ 73,032 income and profit after tax is $ 69,350. Again, the tax savings is $ 3682, depending on the amount of taxes for the couple after their retirement pay.
We see from the data that the entireMaintenance costs for our couple is $ 55,631 or 76 percent of income. This is used very close to the number, the financial advisor. But wait! There are many expenses of $ 55K, will disappear after retirement.
Moreover, the actual expenditure on pensions to cover basic expenses of life can be shared, for the survival of subsistence and discretionary, the "nice to have a necessary but not absolutely necessary. Remember the definition of which vary with the couple.
Ias the cost of living and eliminating those that disappear into retirement. Then I've categorized the cost as basic and arbitrary. The result?
Real · retirement living expenses – $ 40,000 (54.8% of income)
· Subsistence Base – $ 28,000 (38.3% of income)
Living · discretionary spending – $ 12,000 (average 16.45)
A big difference compared to 75 percent "rule of thumb" used in the industry.
My conclusionsThis analysis is available in retirement living. On this site you can download an Excel spreadsheet that you can use your expenses in retirement real model.
I would encourage you to see information from the investigation of this torque on average close to retirement contribution to how we can make your expenses and compare your retirement expenses to be real.
You may not need so much money for a comfortable retirement, says your financial advisor.
Author's Note:Read the overview of consumer expenditure for the year 2006 BLS Consumer Expenditure Survey.