I flipped through my KPF magazine and read a great article on, “Your Retirement Lifestyle”. So yesterday, I decided to figure out my Net Worth (see bottom of post) and was thinking about what I am going to need to financially accomplish to meet my retirement lifestyle. Of course, I want the grandest. Don’t we all? 😉
But, I would settle for mediocre, too. Read the section below. What’s your dream retirement?
From Kiplinger’s Personal Finance Magazine, February 2009
Most experts recommend that you replace 75% to 85% of your pre-retirement income in order to meet your needs after you stop working. But the size of your nest egg will dictate how many extras you can afford.
The snapshots below look at a 65-year-old couple who earned $90,000 a year while working and who need about $70,000 annually in retirement to maintain the same lifestyle. Their expenses were calculated in the 2004 Retirement Income Replacement Ratio Study by Aon Consulting and Georgia State University. We assumed the couple withdraws a conservative 4% of their savings initially, adjusted for inflation each year (add 3%), and then we imagined how they might spend it.
$500,000 Nest Egg
Annual Income: $70,000
($30,000 From Social Security);
$20,000 from a Pension;
$20,000 from Personal Savings
Lifestyle: With a cushion of about $20,000 a year, you can put a down payment on a used RV and tour the country. Focus on staying healthy and active because your budget doesn’t include long-term-care-insurance premiums. If you need cash in the future, you could take out a reverse mortgage.
$1-Million Nest Egg
Annual Income: $90,000
($30,000 From Social Security;
$20,000 from a Pension;
$40,000 from Personal Savings)
Lifestyle: You’ll savor life in your golf-course community and even splurge on an occasional cruise or a trip to Disney World with the grandkids-as long as you paid cash for your new home. If you still have a mortgage, you might have to trim some of the extras., such as annual theater subscriptions or season tickets for your local team. The rate of return on your investments will determine how long your money will last. You might want to use some savings to buy an annuity.
$2-Million Nest Egg
Annual Income: $130,000
($30,000 from Social Security;
$20,000 from a Pension;
$80,000 from Personal Saving)
Lifestyle: You might want to trade in your big house for two condos – one in a warm-weather destination. You shouldn’t have to worry about running out of money, even with a 50% chance that one of you will live to 92 or beyond. Take advantage of the market downturn to gift more stock to family members while reducing the size of your taxable estate. Pay attention to estate-tax changes and adjust your plans.
Look at my Net Worth. In the negative. 🙁
But, I am going to fix this right? 🙂
But, I am wondering what it is going to take to build $1-Million in Assets to satisfy the medicore lifestyle.
A mortgage, of course. A rental property or two… depending where you live (I’m in the 1/2-million or more state of CA). But, then I need time to build equity in the homes to sell and make the large Personal Savings.
Or should I keep buying more rental properties to pass to my kids. Hopefully, there will be equity in them. Then the ‘rent’ paid by the tenants can be a passive source of income.
Thoughts to ramble in my head.
So tell me, what do you think it will take to reach the Retirement Lifestyle you Want? And don’t forget to place yourself in the fact you still have the everyday lifestyle to still support. I would love to hear some tossed thoughts from your mind.
I really wonder how all these finance experts expect us to financially fulfill every category (kid’s college, weddings, buying a house, saving for retirement, etc…)! But, I did come to the conclusion that maybe its time to whip out the Monopoly game again and polish my skills.
I assume that my retirement costs will be the same as currently but without any mortgage or debt repayment. Maybe with only one car but otherwise pretty much the same. My pension is a final salary pension which will pay a maximum of 60% of my final salary. Assuming I work for another 15 years I will have aquired 30/60 of my possible pension. Bearing mind that I pay 3/4 of my salary to debt/mortgage then it should be just fine. Finding an employer with a good pension scheme was important but the main thing is really enjoying the simple life means I dont need to spend. Travel, books, somewhere to live, thats it. I dont mean to sound too pleased with myself, just encouraging. If you plan from an earlish age and have reasonable expectations then it will all work out fine.
Just a question – how do you calculate the value of your vehicle? I’m guessing mine is not worth much at all, but I’m curious.
@ Lizzie: I like the travel part. I can live with simple means too. But want to make sure I have enough, just in case. Health insurance will be a rather important to me at retirement time, too. Thank you for your thoughts. They are good ones.
@ Saver Queen: In the U.S. we have the Kelly Blue Book to use for auto value. I am sure it would work in BC (that is where you are at, right?) to get a general idea. But, don’t hold me to that.
you know, i generally don’t think in terms of retirement. if i accomplish the goals i’m trying to accomplish in the next 10 years, then i’m certain that my retirement will be a-ok. i hope to pay my mortgage off within the next 5 – 10 years, i contribute 15% of my income to retirement accounts and i have other investments and no other debt. i guess i’m on auto pilot. i don’t have a pension and i’m not expecting social security to be around. hmmm, perhaps i need to look a little past 10 years and see if i’m on track for retirement. good post.
I’m surprised they figure in pension. Around here, at least, it’s kind of rare. I definitely won’t be counting on one. And social security. I imagine they have to fix the system but I won’t bet my retirement on it. Guess I’m in for a long haul.
I’m doing what I can by living on the cheap now and slowly increasing my retirement contributions. I hope to have rental properties in the future, as you mentioned.
@ Ms. MoneyChat: I know what you mean about Social Security. I am not counting on it. Wow, you are doing really great. It sounds that you may just be A-Okay for Retirement! You remind me that I really need to find a way to increase my retirement contribution!
@ Mouse: It’s sad how we have no faith in Social Security. Yet, we have to keep paying them our hard earned dollars.
A pension, I will have. But I was along the same thoughts that it may not be a common factor. I am sure if we keep pf smart, we should do okay. 🙂
Hi there-well, if all else fails, you’ll never go hungry being such a fabulous cook my dear 🙂 Seriously, you are going in the right direction and by planning and organising finances now, I’m sure you will be able to start addressing the pensions side of things before long, good luck and a good post!
Talk of health insurance makes me realise I take the National Health Service for granted. I wasnt (and still amnot) thinking of contributing at all to private health care. Ill health would be bad enough without having to bankrupt yourself for it.
Good luck, you are doing great.