Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Scott Burns: How Much Retirement Income Do You Need?

FYI: Will you suffer if your retirement income is only 60 percent of your earnings before retirement?

A recent article on the website suggests just that. I beg to differ--- as I have for decades. The financial services industry claims that we need to replace 70 to 85 percent of our pre-retirement income. But simply isn’t true for a great most people.


  • Okay, read this article in our local Sunday paper and similar articles in the past...and I tend to agree.

    After subtracting our total payroll deductions, mortgage, IRA contributions and a student loan payment, we are left with 46.3% of our gross income. A current car payment (presently have 2 cars but in retirement?) would subtract another 3.7% for a total of 42.6% of our gross left over to be replaced according to Burns.
  • Be careful. I'm guessing that those payroll deductions include income taxes. Despite Burns' calculations, it is likely that most retirees will owe some income taxes (though likely less than when working).

    Here's a SS Issue Paper, dated Dec. 2015, that projects 52% of SS beneficiaries will owe income taxes on their benefits in 2015.

    Here's a CBO paper from Feb 2015 saying roughly the same thing ("about half of all SS beneficiaries owed some income tax on their benefits in 2014, CBO estimates").

    If most (over half) of SS beneficiaries owe taxes on SS, then most retirees are above the 0% income tax threshold. That means the traditional IRA distributions taxed too.

    Mortgage payments aren't going to stop just because you retire. For some people, they stop years before retirement; for some they continue into retirement. That need for cash doesn't change at retirement. Same thing for most of the other expenses Burns mentioned. It's time/age, not retirement status that makes them go away.

    On the other hand, it is true that one won't be saving for retirement once one retires; nor will one be paying into SS - rather the opposite.

    The bottom line is that what happens is very individual. I expect to spend more in retirement than while working - more time to do more things. I also expect medical expenses to go up, without an employer paying for insurance (even Medicare/Medigap can cost a few thousand dollars).

    Worst of all, I'll have to buy my own pens.:-)
Sign In or Register to comment.