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Yesterday I read a recent blog post on a retirement planning site. The headline read “ Can You Live Happily in Retirement With Just 66% of Your Work Income? (Yes! Most Do)“
As you can image, that caught my eye. I went to the source of the survey at T Rowe Price. Here is what the survey said in part.
“Living on less: Nearly three years into retirement, retirees report living on 66% of their pre-retirement income on average.
But that has not translated to dissatisfaction with their lifestyle: 57% report they live as well or better than when they were working.
And 85% agree with the statement, “I don’t need to spend as much as I did before I retired to be satisfied,” including 37% who say this describes them a “great deal.”
Most (65%) like not spending as much and see it as a new found freedom from “keeping up with the Joneses,” with 25% saying this describes them a “great deal.””
All that is quite a revaluation- especially to me. 🤑 However, a closer look at the survey which was presented as reflecting current retirees was taken in 2014.
In 2024, I’d like to survey those folks again starting with the question.
How you doin? Who knows, maybe just fine even after a 32% loss in buying power.
Three years before retirement I went to half time. Two years before retirement I went to quarter time. I got used to living on 25%, and when I started getting SS and pension I got back to 50%, and a, not spending that much.
When I read something like this I am curious and want to learn.
To clarify, during those years and now, all your spending on anything necessary or discretionary came solely from the part time work or now from only pension and SS?
Dick, you mentioned that: “The median income for retirement-age Americans is lower than average expenditures for that group, suggesting a savings shortfall that could threaten retirement for many.”
Well, first of all, median ≠ average. I assume you are comparing the median income for retirement-age Americans (age 65+) and the average expenditures for retirement-age Americans (age 65+). If so, I am sure that this age 70+ worker, and nearly 20% of the other older Americans who are still working, drive up the average while most of us are well above the median (if only because those of us age 70+ have incomes from Social Security and wages, and maybe even RMDs).
Second, national surveys tend to underreport income:
https://www.forbes.com/sites/andrewbiggs/2024/04/04/america-needs-a-fact-based-retirement-debate-part-2/?sh=52cc977e563a
Third, yes, consumption exceeds income, yet, somehow, some “worry” that people are not spending their nest eggs a trend that appears to have continued despite the pandemic. https://www.cnbc.com/2021/08/25/most-retirees-arent-tapping-nest-eggs-before-required-withdrawals.html#
Sure, many older folks wish they had saved more. But, at what cost? Life is not a dress rehearsal for retirement:
https://401kspecialistmag.com/maximize-outcomes-not-incomes-die-with-zero/
A much more useful guideline is to target 20-25 times your estimated annual retirement expenses, minus other sources of income like pensions and Social Security.