The answer is 85% of pre - retirement income. I want to know how that is determined, please.
2006-10-31 22:50:19 · 5 answers · asked by davidbeneway 1 in Business & Finance ➔ Personal Finance
There is no specific formula...
It really depends on your goals and what lifestyle to expect to live.
There is also a health factor. If you are a sickly person, then you'l expect your cost of living to increase.
Overall, it could be more or less (inflation adjusted) than your current income...
2006-10-31 23:23:41 · answer #1 · answered by corey j 1 · 1⤊ 0⤋
That is a stupid answer. It assumes that you will be sitting at home when you retire and that you won't have to but new clothes and pay to drive to work.
I always suggest that you try to get the same income in retirement that you had before. You will be traveling more, taking up hobbies etc.
An example would be that if you earn $50,000 a year before retirement you will need investments that pay you $50,000 a year after. $1 million returning 5% will give you $50,000 a year without touching principle.
2006-11-01 12:15:32 · answer #2 · answered by waggy_33 6 · 0⤊ 0⤋
It mostly depends on individual circumstances. I think Derek gave you an excellent answer. What a retiree plans to do in retirement and their family circumstances will play a huge role in what their retirement income needs will be. The 85% is a rule of thumb, not a bad one, but not entirely accurate either.
2006-11-01 08:12:07 · answer #3 · answered by Adios 5 · 0⤊ 0⤋
That 85% rule is based on a few key facts for most people:
1. Most folks won't be adding to their retirement accounts
2. Most people won't have a mortgage payment
3. Most won't be updating their wardrobe all too often
4. Early bird specials
5. AARP discounts :-)
6. Lower tax brackets
Some folks actually see their expenses increase in retirement (hobbies, leisure, travel, etc.). Others see their expenses drop dramatically.
That 85% rule is more like a "rule of thumb" indicator. If you want to know what YOUR retirement needs are, then you'll need to look at YOUR situation.
2006-11-01 08:04:09 · answer #4 · answered by derek 4 · 1⤊ 0⤋
Well by then you should have your house paid off or close to paid off. That's part of the reason why it is less. However, you have to take into account the price of things rising.
2006-11-01 07:28:41 · answer #5 · answered by devilishblueyes 7 · 0⤊ 0⤋