I think I’ve had it with this statement. Oh yeah, life in retirement—kicking back, or go-going—will be amazing and you only have to plan on living off 80% of your pre-retirement salary.
Ok, I will concede that normal retirement after the long 9 to 5 to 65 work cycle, living paycheck to paycheck, keeping up with your neighbors/peers/etc may fall into this category. However, I think that structure may cost normal folk more along the lines of the 90% plan—the 100% of income minus 7.65% to employment tax, save a few percent and spend the rest, living the way people feel they “deserve” to live.
But I write my random thoughts about LifeInFIRE. I write to those reading who live a little different—or maybe drastically different—thought process than the common fold. Those of us with the FIRE mentality do not have any concept of living off an entire paycheck—unless of course, we save the other paycheck that month (50% of income).
Us FIRE folk instead seem to live life with intention of happiness and enjoyment and fiscal control. We give serious consideration to the future—some are fully engrossed in the future—while enjoying today prudently.
Let’s say for example a dual professional household. So in my time, these folks may have been called “yuppies.” That sounds really strange to me now, and even stranger typing the word “yuppies.” So anyway, these two professionals earn great incomes of $60k, or $75k each (maybe even more with wage inflation). This household income could earn $150k+.
(Let’s ignore income taxes for now)
So I break out my mental calculator and find that 80% of $150k equals a $120,000 per year lifestyle. That seems like a GREAT, $10k/month, lifestyle. I’m thinking wow. In retirement, that family can live an amazing life of spending.
If you are a FIRE mental person (I think that phrase stands strong) earning $150k household income in a fair cost of living location, do you spend $120k or do you try and pack away $40-50k+ per year for an RE lifestyle?
Gee, if you’re in a position to earn so well, do you see the opportunities of changing your work structure in the future and using your financial wisdom (saving) to buy your life/time back for yourself?
Do you think there are FI planning households earning $150k/yr that live on $60-75k/yr while working in their careers? Is $5-6k/mo feasible in a fair cost of living locations? So roughly, what is that, living off 45-50% of their income?
I am 110% sure I believe the cost structure in retirement should be based on the amount of expenses your household incurs. I don’t feel “income” has anything to do with how you will live in a wisely planned retirement. Yes, it can be true that some people are required to live off just their pension (?) + social security income if they do not have savings. But again, that has nothing to do with “80% of salary.”
Know what your lifestyle costs over time. Build a retirement spending plan based on those historical, and future goals of spending.
One final thing, I stated “110% sure” above, it’s very possible you will spend more money in retirement than you do working since you have so much available time to live your dreams. This is a very important concern to plan for. A super great plan has you crushing your GoGo years instead of sitting around not able to afford any experiences.
Live your dreams, enjoy each day!
*** Nothing in this article is to be construed as financial advice. I am not a financial planner, nor do I pretend to be. You should always consult your own professional when seeking advice.