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.


How to be happy: Part 1 of 300
When are your retirement dreams most at risk?