Spending in Retirement

Spending in Retirement

September 5, 2018

An article in the September 4, 2018 Wall Street Journal discusses the question of what people will spend in retirement. Its author is connected with something called the Center for Advanced Hindsight, which I suppose is humorous. The article indicates that the center brought together a large number of people and asked them what they thought their expenses would be in retirement. Because they had heard the figure of 70% of pre-retirement expenses, that's what they said. So far, not very scientific. Then, they brought in another group of people and asked them what they would like to spend in retirement. The answer turned out to be 130% of pre-retirement income, and the author called these results startling. I don't see why. If you ask people to think of all the things they might spend money on, it's bound to be a large number. There's a point to be made here, although. There are certain expenses that are basic and won't change much in retirement, like telephone and utilities. Other expenses bring you a somewhat nicer lifestyle, and still more bring you to the penthouse of retirement living. You can estimate your income based on your right to Social Security and pensions, and calculate a number you can safely withdraw from retirement accounts and other savings. Then, you can see what level of retirement that will "buy". If that's not what you want, you have two choices: save more money or delay your retirement. Or you could do both. It's not, as they say, rocket science, but it does require some financial calculations.

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