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How much should we rely on studies, surveys, academically-generated tools and guides? I’m not sure, but they are used by policy makers so I guess we should pay attention.
However, that doesn’t mean they are meaningful in personal retirement planning- that is unless you are average or typical. I’m guessing HD readers know that, but just I case.
Consider the Elder Index from the University of Massachusetts. According to their website:
“The Elder Index can be a powerful tool for state and local advocates and aging service providers to educate policymakers, donors, and funders about the economic realities that older adults face.The Elder Index tool shows how much income older adults need to meet their basic needs and age in place with dignity.”
Really? There are a number of assumptions in that index that many retirees would not find acceptable or practical-including possibly you and definitely me and likely every retiree on the north side of average. I didn’t retire with the goal of meeting basic needs only.
The index says Miscellaneous spending (couple/no mortgage) is $ 527 per month but does not allow for recreation, entertainment, gifts, or savings. Is that how a retiree wants to live?
Health care is estimated at $940 a month for a couple 65 plus in “good health” and includes Medicare and supplemental premiums and out of pocket costs.
For very average retirees, the Medicare B and D premium plus Medigap coverage will be at least $840. Yes, there are tremendous variables. Even modest use of prescription drugs could easily exceed the $940 total. Of course, IRMAA presents a very different picture, but of course they are not average retirees.
For my county in NJ the Index says a couple with a house, no mortgage and good health needs a gross income of $50,124-132% above the national average of $37,944.
With the median home value in Essex County at $335,900, the typical annual property tax bill reaches $11,297. That’s typical, but what does that mean?
Let’s assume that all taxes from the $50,124 equal only 10% leaving net income of $45,111. Subtract their typical property taxes and spendable income is $33,000. Living in one of the highest cost counties in a high cost state, a family income at that level is indeed very basic. NJ defines poverty level for two people as $20,440.
The town where we lived has a average property tax of $13,258 with neighboring towns at $24,947, $22,605 and $21,415.
So, keep up the good work with your retirement planning based on what is right for you, spreadsheets and all. Be especially careful with those assumptions. The chances are you are not and don’t care to typically average. 🤑
I’m not sure I see a big problem. The point of studies that provide average data points is that they reflect almost precisely no-one’s specific personal circumstances.
They simply act as a reference point that leaves it to individuals to weight how much they may differ from norms.
I, for one, find various studies helpful. I know what I spend now but I’ve no idea what I will spend ( in today’s $) at 70,75,80,85. Data which reflects the slow/no go and the cororally of increased medical/care costs is valuable to everyone in planning their own journey.
I took a look at the number for my county for a single home owner with no mortgage. Then I looked at my actual expenses (from Quicken) for the first six months of 2022. They were headed for twice as much, and I was not living extravagantly.
BTW, my property taxes were around $3,000/year.
Thanks for this, Dick. I tried the Index for the county we live in. I did think the housing was a little outdated as property taxes have gone up a lot in the last couple of years, as have utilities. The food part was just for groceries and it was close to what we spend. I wonder if the transportation was for 2 cars? I thought it gave some good basic numbers, but not a lot of extras, like you said. Chris
My property tax is about $2500. Maybe you should consider a change in latitude.
No need as RDQ’s income is allowing him to save money in his 80s
That’s true, but shouldn’t you explain why? If i do I will get hollered at.
Ummmm, I think I’ll let that dog lay.
Our four children and 11 grandchildren all live within an hour of where we have lived all our lives. The idea of picking up and relocating just because we retired is a non starter.
There’s a key to retirement planning. Not needing to change latitude unless you want to.
I think that the purpose of the Elder Index is to support political or legislative goals of supporting those 65+ that are in the bottom half of the normal curve.
A key part of any study is knowing who paid for it and what their goals are. Those studies on sugar substitutes that scared everyone, were paid for by big sugar.
Yes, that is their stated goal, but i only found it referenced in an article telling people how to determine their own status for retirement.
The index’s numbers seem to reflect the economic reality that the typical senior confronts. It doesn’t appear to be a recommendation that folks should use to guide their retirement planning.
I guess if you are typical maybe, but i don’t think some of these assumptions even do that. It’s not a recommendation, but people tend to look at data and reports and apply it to themselves sometimes without looking at the details. Things like “basic needs”. It’s like you need $1 million to retire that frequently thrown around.