Save ’Til It Hurts

Richard Quinn

I FREQUENTLY FIND myself criticized when I state my fiscally conservative views on saving and spending in retirement. One fellow recently said I had no compassion and I was scaring people.

If folks are frightened by my urging them to retire with the ability to replace most of their preretirement income, then perhaps they should be scared.

I’m also criticized because I have a pension, and so don’t rely on investments for my income. As a result, I’m told, I don’t understand most people’s situation today.

I do know what it means to make ends meet, however. My monthly pension in 2021 is the same as it was in 2010 when I retired, and that’ll never change.

Today, most workers are on their own, with no pension plan to count on. They need to accumulate a large pile of savings to generate their desired retirement income. To me, that’s even more reason to aim high, and preferably for 100% income replacement.

When I bring up the topic of income replacement, an underlying issue frequently pops up. Individuals want to retire in their 50s or early 60s. They conclude that, if my ideas are followed, they’ll have to work longer. Maybe that’s what’s scary to them.

I retired at 67. By working longer, I knew my pension would replace 100% of my base salary. If you retire at 55, the numbers are much harder. If you start with 70% income replacement and think it’ll get you through 30-plus years of retirement, you’re dreaming—unless, that is, your idea of a retirement lifestyle means significant changes, and not for the better.

There’s another area of confusion: expenses versus spending. They aren’t the same. People who create detailed retirement budgets based on their expenses are shortsighted. Expenses are what you need to live. Spending is how you want to live, and can include any number of extras—from travel to home remodeling to helping children and grandchildren.

Should the goal of retirement be just to cover the bare essentials? I understand the challenge of creating 100% income replacement. But remember, Social Security alone may get you 35% to 40% of the way there. Besides, what’s wrong with having some money left at the end of the month? That extra cash could help you cope with an emergency, deal with high inflation or wait out a lengthy market downturn. And what about having extra money just for fun?

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