A common rule of thumb is that you can live in retirement on about 70 percent of your pre-retirement income. Should you bank on that? Will you really spend less in retirement? Well, I’ve got good news and bad news.
The good news is, yes, you will spend less in retirement. The bad news? Most people spend less because they have less to spend, not because they couldn’t use the extra income.
Even with the house paid off and outlays on things like work clothes a thing of the past, many retirees still spend the same or more (especially during the first 10 years of retirement) because other expenses go up. Two categories that often increase dramatically are: 1) Travel and recreation and 2) Health care.
So as you plan for retirement, don’t put too much stock in generalities or rules of thumb. Think about what you actually want to do during those years and what your expenses are likely to be. Then put together a well thought out budget that realistically matches those expenses with the necessary income.
~Joe
After my husband died I retired at 50. I was the bread winner but most of my income was spent on the family and getting and being in the work force. I went back to work after 3 months but on a part time basis out of boredom. Then at age 61, I retired fully. This time I am really retired (for now) and have been for 2 years. If I was not paying my sons school loans because he can not find work and supporting him while he lives with me, I could live on 63% or less of what I made while working. I am debt free, own my own house, and have always been frugal. So yes, it is possible to live on a lot less and be very happy.
Hi Donna. Thanks for sharing your example. That’s encouraging to the rest of us. It’s a great example of how big of a difference it can make if you’re debt free and have your house paid off.
Joe