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March 24, 2012


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We've heard so many different views about how much money you need when you retire. I'd love to know how you arrived at 65% of your previous spending level. Does it include cost of medical insurance; do you include a mortgage in your cost of housing; and how do you figure taxes? Thanks for your insights!

Retired Syd

@Sightings: It seems you have read my subliminal message--the orderly stacking of wood in the photo. I didn't arrive at the 65% by using some sort of formula. I just took our existing spending while I was working (we tracked it for two years before I retired) and added and subtracted things I expected to change.

I decreased things that were likely to go down on their own like taxes, lunches, commuting costs, and clothes. I decreased things that we would be willing to let go down like dinners out, housekeeping/gardening (we do it ourselves now), gym memberships, and some maintenance and repairs (again DIY).

Then I increased for the things I knew would go up like health insurance (I got quotes--I didn't guess), utilities (from being home more), and groceries (from eating out less). Something you might expect to go up would be travel--we wanted to do more travel. But I tripled our travel on the same budget by home-exchanging, looking for deals, and giving up luxury ocean-front accommodations.

I built the budget from the ground up and it landed at 65% of what we were spending the year before (while I was working.)

I don't think those standard rules (70% of your income or x% of your current spending) work. You have to do the work and go line-by-line, as they say in politics, and build the reality you are willing to live with.

As it turned out, the first three years, we have lived on less than I projected. Last year, I loosened the purse strings because I had the extra income from a part-time consulting gig, so we spent more than that.

(By the way, we do have a mortgage. I was considering paying it off, but I felt better about holding on to the cash over these first few years since the market was tanking, and I didn't want to have to use up all my cash while we waited that out. Our variable rate keeps dropping, it's now 2.875%, so I'm not really in a hurry to pay it off. While the total payment represents 12% of our budget, the interest portion (the part that's not going directly back to me in the form of equity), is only half that %. So, I'll just make a year-by-year decision depending on the interest rate it adjusts to.


I completely agree with the "woodpile". The % figures are too general. Need to track expenses, and then try and forecast future expenses, realizing that is an estimate, but hopefully an accurate one.


Using a percent of income to estimate a retirement budget never made sense to me. This was because the income in my workng years got reduced not once but twice due to a voluntary reduction in my weekly work hours. So, which income level should I have used in my estimate?

My retirement expenses initially were sbout the same as what they were in my last working days because the added cost of health insurance was around the same as the savings from the elimination of FICA taxes an commutation expenses. [Since that time, I have reduced my HI costs so my current expenses are slightly lower.) The rest of my budget is pretty much the same.

fred doe

nice picture. the trees draw you to the center as a frame. the barn has that aged weathered patina. what are those little white flowers, clover? you do have some good pictures on your blog. then you said it was subliminal (i think more allegorical) i thought? hmmmm there are no accidents in art?

Retired Syd

@fred: All the best photos on my blog were taken by my husband. But I got a new camera for my birthday last year and I'm starting a photography class next month, so hopefully some future good ones will be mine!


Syd -- Thanks, guess I've got some homework to do!

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