Thinking About Retirement

There is much expert advice out there (I use “expert” with trepidation) telling folks how to plan for retirement. Some experts tell you how much money you need, others say you need to track every penny you now and that you plan to spend and, of course, there is the amount you can take from your savings? My favorite is the advice telling you how your lifestyle must change in retirement to be happy.


Your retirement is unique to you, you should be able to live as you desire, not according to some formula. But that will take long-term planning, a bit of discipline, perhaps making tough decisions and a modicum of luck. Here are a few tips.

  1. Start by saving as much as you can and save before any and all spending. Yes, this may affect your lifestyle, but that’s reality. We are talking saving 15% of gross income, at least. No way you say? Yes way!
  2. Set a target to replace 100% of your base pay income in retirement. NOTE: this assumes your retirement income will be taxable as opposed to say, all Roth tax-free income. Exclude OT and bonuses, etc. Many experts say all you need is 70-80% replacement. I say be safe and aim for more. If I’m wrong, you have extra money to spend. If they are wrong, we’ll, there are no do overs.
  3. Routinely track what your Social Security benefit will be. You can easily get an estimate here. This benefit is part of #2.
  4. Think hard about what changes to lifestyle you would like to make or may have to make.
    1. Do you really want to leave your home?
    2. Do you truly want to relocate to Florida, Arizona or Montana 😱 or is living in a lower cost area going to be necessary?
    3. How far from family is acceptable to you (and your partner).
  5. Don’t assume just because you are retired, you are going to change. You’re not suddenly going to become an artist or ardent golfer or fisherman just because you are retired.
  6. If your dream is to travel, set aside separate funds for that so the money does not get mixed with ongoing expenses.
  7. You need an emergency fund in retirement and the ability to replenish it (that means some saving continues). The last thing you want is to take a large unplanned expense from your retirement nest egg.
  8. Think health insurance, especially if you will retire before being eligible for Medicare. In today’s dollars, a couple can easily pay $800 a month for Medicare Part B and D and for supplemental coverage such a Medigap. Depending on your retirement income, it can be much higher. Before being Medicare eligible always look to an Obamacare exchange first for coverage. You may even receive subsidies.
    1. At least give a passing thought to long-term care. A typical nursing’s home stay for a senior is in the neighborhood of $300,000 +
  9. Think about survivor income strategies, annuities, life insurance, total assets, if that applies to you.
  10. Have a good idea of how much money you need to accumulate to maintain the lifestyle you and your partner want over both your lifetimes. There are many free tools to help you. I like NewRetirement and you can try it here. There is also a NewRetirement Facebook group where there is lively discussion about all retirement issues. But here are the basics. If you would like a broad view of all things related to money from the perspective of over thrity writers, I urge you to read HumbleDollar every day.
    1. Let’s say your base income today is $70,000 per year. Adjusted for future inflation that’s what you want to target as retirement income. You must fund that amount less what you will receive from Social Security, or a pension if you are lucky.
    2. Let’s say you are going to be age 67 in 2027 earning $70,000. Social Security estimates your annual benefit at $27,780. It could be $41,670, if you are married. That means you would need to fund $42,220 (or less, if married) of what you need.
    3. Using a somewhat standard withdrawal rate of 4% of assets to start— many “experts” say that in today’s environment it should be 3% — over your working life you need to accumulate about $1,055,500. If you are married in this example, because of SS benefits, you need about, $708,250.
    4. Does this sound overwhelming? It’s not really. This person could easily reach their goal over a working lifetime. Give this future value calculator a try. I assumed a steady $70k income for illustration purposes.
    5. If you are lucky and have a 401k, your employer match may make your job a lot easier. Also, consider adding lump sums to savings such as tax refunds, gifts, bonuses, OT pay.

Hope this helps. To be successful in retirement you need a plan and you need to exercise discipline to make that plan work for you.

One final tip. On your road to retirement and in retirement, you need three separate pools of money; retirement funds, other investments and cash (ideally two or three years of expenses). You don’t have to be wealthy to accomplish this. It is all relative to your income.

One comment

  1. Thank You Quinn. One thing that worked for us is that we had no outstanding monthly payments other than utilities, food, etc. No mortgage, no car payments, pay bills and credit cards in full at the end of the month. Yep, we follow the Dave Ramsey ways and I know his name isn’t mentioned in the Facebook page New Retirement, but again as you said there are many “retirement advisors” and everyone has the “best” way. Ours fits our past and present life style but it won’t fit others.

    Have a great day!


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