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https://archive.ph/2025.09.05-153056/https://www.w...

Excerpt:
“The average since 1793 is 6.1%.

If you expect to work for 30 years and be retired for 30 years, says Bernstein, “you’d better save a truckload of money—and you’d better be lucky.”

Over the three decades ended in December 2023, U.S. stocks returned an annualized 6.9% after inflation. Over the 360 months ended in July 1982, however, they earned only 4.7%. And in the 30 years ended May 1932, stocks gained only 0.9% annually after inflation.”

Jason Zweig is one of the best finance writers out there. I do have slight quibble with this:

One popular rule of thumb is that you will have to cover only 70% to 80% of your pre-retirement spending. (Another version says you will need to replace about the same amount of your pre-retirement income.)

I've typically heard a hybrid of those: you will need to replace 80% of your pre-retirement income. That make sense because if you on are track to FIRE or even RE comfortably you necessarily need to have a high savings rate, on the order of 15-20%. In retirement taxes drop typically significantly do to favorable treatment of capital gains and retirement accounts and lack of FICA.

Since you are no longer saving and one of your biggest expenses is reduced, so the need for income is also reduced. Spending is controllable too. The article quoted a gentleman who wound up spending just as much as he did when he was working because he was out doing things. That's a choice. You can spend more in retirement if you like, but you have to work longer.

“ Several studies have shown that, on average, people spend around 93% to 97% as much in retirement as they did when they were working.”

When I do fully retire - planning on next year when the youngest kiddo graduates high school - if we are spending less then we do now something has gone wrong.

...if we are spending less then we do now something has gone wrong.

Maybe not. Depends on your housing situation. We paid off our house, so we don't have the monthly mortgage payment today.

We drive a lot less, so less auto expenses (gas, tires, maintenance).

But we do spend more on vacations now, because we have time for vacations now. Before, we had only 4 weeks paid. Now we can be gone for two months without a problem.

I'd say we are about even, factoring in inflation.

“ But we do spend more on vacations now, because we have time for vacations now. Before, we had only 4 weeks paid. Now we can be gone for two months without a problem.”

That’s it. I hope to take more trips, and these kind of trips are expensive. I did an eight day cycling tour in Alaska and Yukon this year. Cost about $8k. I want more!

I work from home and do work travel on the clients dime. Paid cash for the house years ago. I’ve been looking at a volunteer gig that will increase my car mileage.

“ I'd say we are about even, factoring in inflation.”

Agree, maybe slightly more here. Retirement allows me to be out & about more (a lot more coffee shop time, golf, lunches/ dinners out with friends, nicer & longer vacations) with more expenses and more opportunities to spend vs. while working. Aging kids adds more expenses. Btw, I cannot even think about cars and insurance costs when they turn 16yo!

“ Several studies have shown that, on average, people spend around 93% to 97% as much in retirement as they did when they were working.”

When I do fully retire - planning on next year when the youngest kiddo graduates high school - if we are spending less then we do now something has gone wrong.

At least this study talks about percentage of pre and post retirement spending, rather than needing a % of your pre-retirement income. It used to be that the convention was you should expect to need IIRC 80% of your working income in retirement. Considering we spent less than 50% and saved the rest, we certainly were going to need less than 80%. That fact actually stumped a few very recommended financial planners we had try to get our business, until I pulled out the spreadsheets and showed them why indeed we could retire at 55. I am sure there are a few gems in that professions, but the FPs we encountered were salesmen using false truisms to show how smart they were.

The one expense I expected to pay a lot less of in retirement is taxes, but because of our earning years having been in the age of Traditional IRAs, with Roth only coming at the very end, we throw about $100K in taxes a year to the various gov'ts for Roth conversions. I guess I should have put more thought into it when IRAs came about, and listened to the guy on TMF who was talking about it being better just to hold stock in a taxable account, but we simply threw the max in our 401K and IRAs, where we invested it. We counted on our kids simply getting the inherited IRAs, which they could then use with RMDs, but those are no longer able to be passed down as originally detailed and must be drawn down in 10 years. This would result in a huge tax bill for our kids, so we are trying to minimize that with conversions.

It's a first world problem when it comes to retirement.

We did not pay off our mortgage. I like the inflation hedge of a 30 year fixed rate mortgage. I love paying our 2% mortgage while the cash to pay it off earns 4.25%. Having a mortgage also makes it more difficult for someone to fraudulently sell your house from under you, which bizarrely is a thing that is apparently without recourse.

If you count saving for a retirement as an expense, and had we avoided the TIRA tax issue, we absolutely would be spending much less in retirement than we did on the way here. No more college expenses, way less commuting, clothing purchases are discretionary. We do travel extensively, but for us that means renting apartments rather than hotels. Health insurance is a higher cost for us now that DH is on Medicare and we lost retiree health care. Even when I get on Medicare, it will be more expensive than retiree healthcare was for the 2 of us, but it was a great perk of the job and not applicable to most.

I guess that's a long way of saying to look at your retirement accounts for future taxability. See where your potential liabilities are and analyze your best path to minimize them.

IP

{{ ...if we are spending less then we do now something has gone wrong. }}

I own a home I bought for cash in a state with low property taxes and no state income tax (WA State). As a retiree living off an investment portfolio managed to reduce dividends and concentrate on capital gains, I almost have to volunteer to owe any Federal income taxes.

I started my SS benefit last month. That combined with 2 small pensions I'm getting from jobs I had more than 30 years ago, will more than cover my monthly expenses. Over the last 10 years, my portfolio withdrawals averaged 3/10ths of 1%.

It very possible I won't make a portfolio withdrawal until my RMDs start in 3-1/2 years at age 73.

intercst

I just saw a youtube video about that: "Why Having a Pension in Retirement Changes EVERYTHING"
https://www.youtube.com/watch?v=h7t2FKd4It4


I almost have to volunteer to owe any Federal income taxes.
Probably not anymore.

Be aware that even though you can wait until 73 to start RMDs, you jump into the table at the age 73 rate. Age 73 rate is 3.8%. That "3/10ths of 1%" withdrawal will be long gone.

You might want to start taking IRA withdrawals early so as to reduce the amount of the mandatory withdrawals at 73 & after. Pay a little more tax now at lower rate to save a much larger rate later.

I own a home I bought for cash in a state with low property taxes and no state income tax (WA State). As a retiree living off an investment portfolio managed to reduce dividends and concentrate on capital gains, I almost have to volunteer to owe any Federal income taxes.

I started my SS benefit last month. That combined with 2 small pensions I'm getting from jobs I had more than 30 years ago, will more than cover my monthly expenses. Over the last 10 years, my portfolio withdrawals averaged 3/10ths of 1%.

It very possible I won't make a portfolio withdrawal until my RMDs start in 3-1/2 years at age 73.

intercst


It can vary a ton. I did well saving but I was never planning to get married and I ended up marrying someone who is a great person and has a great family but not much money wise so we are mostly living off of my savings. I know our spending is a lot higher than I ever expected. Every time I think oh, we are doing well this month something happens or I forget about homeowners insurance (there goes a few thousand), car insurance (a few more), etc.

I thought with a paid off house we'd spend on the low end $3-4,000 a month excluding taxes but it is way higher. Things like insurance (all types) have skyrocketed, any type of home repair that you can't do yourself seems to have doubled or tripled in cost, etc.

This is a bit off topic but I've had some adventures with my hvac system which is critical in the Phoenix area. I found a solid company and was talking to the guy who is also the owner. He worked at another company for a long time and they were valued around $15M but the owner wanted to take it to $20M before selling it. In order to try to get there he or maybe with consultants decided every tech has to have an average bill of $700 at the end of every month. This guy I was talking to said he was the lead and he would have to do the firing and he thought it wasn't right so he left and took several of the best employees with him to start his own company, the other company has dropped to $9M valuation.

But this is why people are get screwed by many contractors. Either private equity or other demands that require the technician/contractor to make $x per month and causes many of them to recommend work that is completely unnecessary.

Rich

I thought with a paid off house we'd spend on the low end $3-4,000 a month excluding taxes but it is way higher. Things like insurance (all types) have skyrocketed, any type of home repair that you can't do yourself seems to have doubled or tripled in cost, etc.


Our experience has been pretty much the same, so much so that our monthly base budget now also includes $1000 - $1500 in what I think of as "oh, ya, that" expenses: semiannual homeowner insurance one month, comprehensive auto PM (e.g. all fluids, or new tires) the next, then semiannual propane tank fill or new HVAC blower motor or...

Just about every month it's something, so having it built-in helps keep the agita away.

I can't quite figure out homeowners who say they are getting by on a $4K monthly retirement budget. It's what they say about theory v practice, or maybe the Mike Tyson quote that "everyone has a plan until they get punched in the face".

--sutton

Yup.

Heat pump inside unit springs a pinhole leak. Replacement $4000.
Heat pump outside unit goes bad. Replacement $6000.
Driveway disintegrates, replacement $12,000.
105 gallon water heater breaks. $5000

Roof replacement, $20,000.

Water line from street to house springs a leak. $600 to locate the leak, $1900 to dig up and repair leak. Better than $22,000 to run a new line.

I can see spending:

1.5K/month on insurance (car, homeowners, health, etc.)
0.5K utilities (electric, gas, etc)
0.5K groceries and gas
0.5K medical

That is $3K without any home repairs, eating out, entertainment, travel, clothes, car repairs/registration, taxes.

Any couple doing it under $6K is doing things very efficiently.

I think somewhere around $8K is more realistic.

I know others are making do with less but they must have a small house, grow some of their food, have a single car, minimum insurance, etc.
We aren't big spenders with clothes, jewelry, cars, etc. And we have been doing well with various restaurant email programs to save a bunch.

Fortunately despite the spending and a conservative portfolio, the spending hasn't caused it to go down over the couple of years of retirement.

Rich

1.5K/month on insurance (car, homeowners, health, etc.)

1 Medicare, 1 Bronze level ACA, close to $1,400/month. No subsidies. Add to that insurance on 2 vehicles, and an umbrella policy, (super cheap,) house insurance part of mortgage but about $2,300/y. Home and vehicle insurance has skyrocketed in the past few years, even without incidences on our homes/vehicles, nor local issues. Valuation of home has skyrocketed, so insurance has too, but vehicles have declined in value yet basically doubled a couple of years ago. Replacement costs on home.

FWIW,
IP

{{ Be aware that even though you can wait until 73 to start RMDs, you jump into the table at the age 73 rate. Age 73 rate is 3.8%. That "3/10ths of 1%" withdrawal will be long gone. }}

Not really. My traditional IRA is only about 10% of my net worth. Most of my assets are in my taxable account.

{{ You might want to start taking IRA withdrawals early so as to reduce the amount of the mandatory withdrawals at 73 & after. Pay a little more tax now at lower rate to save a much larger rate later. }}

I've been doing Roth conversions since age 65 to pare down the size of my IRA.

intercst

{{This is a bit off topic but I've had some adventures with my hvac system which is critical in the Phoenix area. I found a solid company and was talking to the guy who is also the owner. He worked at another company for a long time and they were valued around $15M but the owner wanted to take it to $20M before selling it. In order to try to get there he or maybe with consultants decided every tech has to have an average bill of $700 at the end of every month. This guy I was talking to said he was the lead and he would have to do the firing and he thought it wasn't right so he left and took several of the best employees with him to start his own company, the other company has dropped to $9M valuation.

But this is why people are get screwed by many contractors. Either private equity or other demands that require the technician/contractor to make $x per month and causes many of them to recommend work that is completely unnecessary. }}

So far, I've been able to do all my own HVAC repairs. If I have to bring a contractor to the house, I regard it as a failure.

intercst

So far, I've been able to do all my own HVAC repairs. If I have to bring a contractor to the house, I regard it as a failure.

Then you haven't had any serious AC problems.

The most common failure is when the capacitor goes bad. Trivially easy to fix. Order a capacitor from Amazon (~$25-$35) so you have it on hand. HVAC company will charge $100 for the part and $150 for the service call.

Small freon leak, you can't even find it without special equipment. Which a DIYer won't have.

Bad blower motor, you can replace yourself. But most people won't be able to DIY.

Bad compressor or bad exhaust fan on the outdoor unit -- maybe you can DIY replace the fan, but the compressor or control board you cannot.

We had a nearby lightning strike take out our heat pump. I tried everything then called the HVAC service. Turned out the surge scramble the brains of the thermostat.

$4,000/mo is WELL below the median household income. A more reasonable target is $6500/mo.

$4,000/mo is WELL below the median household income. A more reasonable target is $6500/mo.


That certainly is true. I saw the estimated family income is 106,000 for 2024 which is roughly $8,900. Unless I'm missing something that is just gross income so a large chunk of that is taken up by federal, state, medicare, social security, etc so maybe $6,000 get to the checking account although that assumes zero for 401Ks, etc.

Rich

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