Most retirement specialists say you need 80% of your current income to live comfortably in retirement.
But over the next two minutes, Steve McDonald reveals that a growing number of specialists are challenging that idea.
A growing number of retirement specialists are challenging the idea that you need at least 80% of your current income to live as well in retirement as you did during your working years.
In fact, the numbers of 50% to 65% – not 80% – are popping up everywhere. And the surveys of retired persons are supporting the lower estimates.
Well, once you retire, you aren’t saving for retirement anymore. That can be as much as 10% to 25% of your pretax income in some cases.
And your income tax bill should come down in most cases. Most of us won’t be in the higher brackets anymore. And moving from just the 28% or higher to the 15% brackets is huge.
You’ll be saving about 7.5% by not paying into Social Security anymore.
And Social Security is tax free if you stay under the earnings limits. But, even if you don’t, it is still a good tax deal.
Those four alone are significant amounts of money. But here comes the big ticket item.
The kids. They cost a fortune. They are finally off the household payroll. Or, at least, I hope they are.
Through college, assuming you don’t send them to one of the top-dollar schools, they run about $350,000 to $400,000 each. If they happen to do well in school – but not well enough to get a full ride – and go to a big-name school, add at least another $100,000 to $150,000.
That’s around $17,000 per bundle of joy per year assuming Harvard or Penn are not in their future.
And mortgages – if they aren’t paid off, hopefully they are under control. I mean, you’re not stuck in a 7%, 8%, 9% mortgage.
Yes, more retirees are carrying mortgage debt into retirement. But many are paying it off as soon as possible in their early retirement years.
Now, if you saw the segment I did a few weeks ago, you know that has its pluses and minuses. But let’s leave that issue alone for now.
But, in most cases, it is still a positive to get rid of it. And it makes a lot of cash available every month.
So, for the average guy earning $70,000 a year, 65% is about $45,000 a year versus $56,000 at 80%. While it doesn’t take away all the pressure to fund your golden years, it is a bit of a reprieve.
But depending on how much you withdraw each year and how much you can expect from Social Security, you have to have still saved somewhere between $300,000 and $500,000 to make this work.
Make sure you consider all the cost savings being permanently unemployed can offer.
And lastly, The Oxford Club’s Private Wealth Seminar is already sold out. I hope you’re one of the folks who got in on it. I’ll be there. And I hope to see you out there.
Editor’s Note: If you weren’t able to get in on The Oxford Club’s Private Wealth Seminar in Beaver Creek, Colorado, you’re still in luck. There is another Private Wealth Seminar in September in Southampton, Bermuda.
For all of the details about the upcoming event, click here. We hope to see you there!