"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:jv6dncmjOLJkkdDbnZ2dnUVZ_hqdnZ2d[at]comcast.com...

- quote -

On the other hand, it's not unknown that if you're saving 5% of your income,
increasing that to 10% will increase your standard of living in retirement a
lot more than it will decrease your standard of living now. So if you're
not willing to accept that decrease now, why do you think you will be any
happier about it when you're retired and have no choice?

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote
- quote -

Safety first. Advise aiming for the worst case scenario, and
add that nothing is certain, so even this might not be
enough savings.

My motto: Honesty always wins. If one just does not know
w/certainty what will work, say so. Your clients will keep
coming back, generally.

(I bet you know this but just needed some nudging. No one
likes uncertainty. Yet it's a reality of financial
planning.)

The Wall Street Journal story I referenced in this thread pulled its
data from a Fidelity study dated 2007, it can be downloaded at;

http://www.fidelityresearchinstitute...ment_index.pdf

While I don't ever expect to find complete agreement on any topic, I
find myself more curious on how one begins to advise a client on this
topic when the range of replacement income needed is so wide. It's one
thing to deal with the other variables, time till retirement, rate of
return, etc. These conflicting articles suggest that even the end goal
is an unknown.

JOE

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:OZ-dnTJEmN1hJdXbnZ2dnUVZ_o6gnZ2d[at]comcast.com...
- quote -

Sorry, Joe, I see it now. I was looking at your first line, that says
expected on the left, then actual on the right and therefore read the
statistics in that order. We're spending about what I expected in
retirement. Our grocery expense is about the same and our utilities haven't
changed much, but I think in every other respect the budget is different
than the pre-retirement one. We spend more on some items, less on others.

Elizabeth Richardson

Elizabeth Richardson wrote:

- quote -

actual vs (expected). So 10% expected sig lower, and 8% were actually
sig lower. 18% total expected somewhat higher or significantly higher,
but 39% experienced that. The above were the numbers from two pie charts
printed in WSJ, an expected vs actual, set of charts.
It spoke less to the actual percent pre vs post retirement, and more to
how people underestimated their needs.
JOE

In article <mradna8UHZuN-NXbnZ2dnUVZ_oGlnZ2d[at]comcast.com> ,
joetaxpayer <joetaxpayer[at]nospam.com> wrote:

- quote -

spend in retirement is too important to use "averages" Remember that
the average human has one ball and one teat. The percentage of earnings
that you will need depends on you and your economic status.

I'd start with your adjusted gross income (it appears at the bottom
of the page 1 of your 1040)

Then I'd add up the expenses that you wont have in retirement such as
a) Social Security and any other wage taxes
b) after tax savings if any
c) cost of your children (clothes, food, child care)
d) big expenses associated with work (big commute, expensive lunches
etc)
e) mortgage if paid off by retirement.

Now add in the extra costs of being retired
a) health insurance (medicare and a supplement run $250-300 per
person)
b) that extra golf game each week (or what ever you plan to do
between 8 am and 6 pm
c) travel

Subtract the extra costs of being retired from the expenses that you
wont have and make the adjustment for the marginal tax rate. Subtract
the result from your adjusted gross income and that is the number that
you will spend before taxes in today's dollar.

Where will that money come from. Some possibly from a pension at
work, some from social security and the rest to be drawn from your
savings which you have hopefully invested wisely.

How much savings will you need - about 25 times what you plan to
withdraw from your savings. - 33 times if you are super conservative)

Will there still be a pension, will social security still exist, what
will inflation be? No one knows but you should have a reasoned opinion.
You must recalculate every few years or after a major life change
(marrying a young lady when you are 50 and starting a new family).

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:mradna8UHZuN-NXbnZ2dnUVZ_oGlnZ2d[at]comcast.com...

- quote -

I must be interpreting the above results incorrectly. It looks to me like
33% of retirees estimated their retirement expenses would be lower, while in
actuality 48% of retirees found their expenses lower. At the other end, 29%
estimated their expenses would be higher, while only 18% found them actually
so. On both ends of the curve this looks like expenses were lower than
expected, or an original overestimation.

Elizabeth Richardson

bowgus wrote:
- quote -

The CNBC story I cited was then a two page spread in the weekend Wall
Street Journal. The punchline was they included two pie charts,
"expected expense" and "actual expense"

significantly lower 8% (10%)
somewhat lower 25% (38%)
same 28% (34%)
somewhat higher 27% (15%)
significantly higher 12% (3%)

Above, are actual vs (expected). It appears from this survey that people
tend to underestimate their post-retirement expenses. And this survey is
in contrast to the other stories suggesting lower expenses at
retirement. Also in contrast to the Scott Burns article published and
posted at his paper's site on 5/13/07.

JOE

- quote -

Joe wasn't talking about that ... I just thought I'd bring it up. When
I retire, the first thing I plan to do away with is a car. Knowing
this, and since I track my expenses, I can say with great certainty
that my expenses in that area will drop by $6K/year (operational). I
also know my business expenses are $10K per year, so I know my
expenses in that area will drop my $10K per year, and so on.

If one tracks ones expenses, and is thoughtful about the expected
expenses when retired, then it's possible to come up with a "budget"
for retirement ... a financial plan as it were ... which I have done.
Why? A few years ago I was considering retirement and so tracked my
expenses for a year to see if I could afford to. And so I now have a
real good idea what my budget will comprise when retired.

Or one can be cavalier about it which is what I'm saying most people
are, and say I'll wait till I retire, then see what the difference is
e.g, ... I spent $50 last year of working, $40K first year of
retirement ... so that 80%. But next year I'll need a new car at
$35K ... oops ... that's $75K.

On May 13, 1:19 am, bowgus <bow...[at]rogers.com> wrote:
- quote -

Am I right in saying then that you burn 25 gallons a week? So drive
750 miles/week?

Ouch. Unless you are a salesman.

- quote -

Lots of empirical research to show what people do and don't recall.
There is a phenomenon in grocery store retailing called 'Known Value
Item': there is a basket of 30-100 items that the average shopper has
very good recall on the price they paid last week, or the price they
paid at A&P across the street (milk, gasoline etc.). The trick in
supermarketing is to be competitive on those prices, and get the
consumer to add to his shopping trolley with other, price insensitive
goods. *men* are much better targets for this than women-- apparently
they don't stick to their shopping lists as much.


======================================= MODERATOR'S COMMENT:
Posters to this thread should relate comments to general financial planning.

"bowgus" <bowgus[at]rogers.com> wrote in message
news:1179002544.456202.101270[at]q75g2000hsh.googlegroups.com...
- quote -

I didn't see that Joe was talking about how much was spent on gas, or food,
or entertainment. You don't have to track your expenses to know you spent
$50k in 2005, but in 2006 you spend $45, and be able see that you're
spending 10% less now (or the reverse, if you will).

And, frankly, when you're no longer in the accumulation phase, it's a heck
of lot easier to see how much you spend. I take what I need from my IRA to
cover expenses, and I don't take an extra $500 distribution just because.
(Although my CC bill often includes a few things I spent "just because.")

Elizabeth Richardson

Fwiw and imo, the majority don't track their expenses while working
anyway, so on what is this 8%, 25%, ... based? Was sitting in
theoffice and said ... look at that, I spent $4000 on gas last year
(all gas purchases go on the credit card, so it's easy to reconcile at
years end ... nice of them to track of my expenses for me) ... and
asked ... how much did you guys spend? Answers varied from ... ????
to ????.

The Wall Street Journal will publish an article in their weekend edition
which states pretty much the opposite of the Barron's article we
discussed here a few weeks back (isn't Barron's owned by Dow Jones who
also owns WSJ?)

The story, previewed on CNBC, interviewed retirees after the fact (i.e.
already retired) whose spending averaged, post retirement;

significantly lower 8%
somewhat lower 25%
same 28%
somewhat higher 27%
significantly higher 12%

Looks like a bell centered on 'same', which the interview didn't
quantify, but logic would say that's 75-80% post tax, SS, and saving for
retirement. As with any set of data, it's easy to draw whatever
conclusion you wish. The 'significantly higher' may be the 12% of the
people who worked so many hours and made so much money they simply
didn't enjoy them selves and now they realize they may as well spend it.
It doesn't necessarily reflect that a random 1000 people now would need
to plan this way.

JOE