# stuck on the basics...



## 4570 (Aug 2, 2009)

I just read yet another article on retirement income requirements.
It said typical retirement income levels should be 70% of pre retirement income.
Some may go as low as 50%.

But what does this mean?

Couple #1 earns 300 K per year. They max their RSP's and spend the rest. They 3 vehicles, all the toys, you know what I mean. All this "stuff" in constant need of upgrade. In addition they raise 2 kids who will expect the same from their parents. A car in high school, etc. 

Couple #2 earns 300 K per year. They max their RSP's and save lots more in buying and holding dividend stocks. No kids and only one, very basic vehicle. 
They put away over 100 K per year.

How can the 70% rule apply to them.


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## MoneyGal (Apr 24, 2009)

That's why Laurence Kotlikoff calls those artibitrary "rules" about income replacement in retirement "rules of dumb."


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## leslie (May 25, 2009)

Second that.


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## Wealthy1Day (Aug 30, 2009)

Outside of making the choice of downsizing during retirement, do people truly spend less during retirement?

More personal time equates to doing more of what you enjoying doing whether it be traveling or whatever it is you enjoy and doesn't that cost money?

Of course, if you're one who lives beneath your means then achieving a lifestyle covered by 70% or less of your income is achievable.

There are numerous ways that people to choose to live their life and one isn't necessarily better than the other. So a particular "rule" can't apply.


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## Ben (Apr 3, 2009)

Wealthy1Day said:


> Outside of making the choice of downsizing during retirement, do people truly spend less during retirement?


For some people, yes, for some people, no.

What's important is having the wherewithal to actually figure out which case you will be. Nobody should use a "rule of thumb" replacement ratio.


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## Wealthy1Day (Aug 30, 2009)

Exactly my point. I agree, Ben.

Since there are many choices for people to live their life, some will need less income during retirement and others will need more.

I think the best thing to do is to map out a budget for retirement and then see how that equates to your current lifestyle. At that point, you will then have found that "magic percentage". But the percentage isn't the place to start.

Also someone could choose to sell their 3000 square foot home, downsize to a smaller home or condo, and use the difference in proceeds of the sale towards retirement thereby requiring less income from savings. 

Another person may wish to continue to live in their large house. That can certainly work too since it would be fully paid for and, after all, it is the house they call their home.

The options are as different as their are people. So definitely mapping out a budget for the retirement years is better than using a cookie cutter percentage.


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## Ben (Apr 3, 2009)

Wealthy1Day said:


> But the percentage isn't the place to start.


Right. Better to stick with dollars than percentages.

Know how much you spend today, and on what, and compare it to how much you will spend in retirement, and on what. Simple.


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