- Experts recommend having enough money saved to live on 80% of your pre-retirement income.
- My husband and I hope to retire in a few years, so we’re doing a “test run” this year.
- This article is part of the “Re/Thinking Re/Tirement” series focused on inspiring financial planning for a different kind of future than the 9 to 5 life allows.
My husband is eligible to retire this year, but he’s not ready to hang up his button-down shirts and occasional tie. For now, we are reading, preparing, talking, and experimenting about what retirement will look like financially for us. We’re treating this year as a retirement test drive, keeping a close eye on our spending to see how we can afford to make retirement work.
In addition to talking about our love of road trips and the ability to do more, we read that most experts recommend that you have 80% of your pre-retirement income available when you retire. Those experts say that if you make $70,000, you need access to $56,000 a year in savings and investments to live comfortably. If you make $100,000, you need to have $80,000. We don’t plan to fully retire, continue to work at least in some capacity, but we don’t want to be tied to jobs, so we need to have a good idea of how much retirement will actually cost.
We track our spending to see how much we really need to have saved
In our case, the numbers seem almost impossible, so we’re spending our “test” year tracking our spending to see how much of our income we spend and how much we’ll need to have saved to retire comfortably.
For starters, we’re keeping a close eye on our spending, looking at our bills for groceries, takeout, and entertainment expenses (
services and cultural events such as museums included). We’re also keeping track of bills, like homeowners and
, cell phones, electricity, the occasional trip to see family, or a short vacation. This year we are not cutting anything because we want to see how much we spend in a typical year. We’re trying to see if we live the way we want to live, how much does that cost?
The biggest problem with our plan is guessing the monthly cost of health care. How can anyone predict how much it will cost to get older, with office visits, medications, surgeries, etc.? So we’re factoring in our insurance costs plus $300 a month for copays (our copays average $35) and medications (our medications now cost about $15 a month). Medication is tricky, though, because if my husband needs a new EpiPen for an allergic reaction or an inhaler for breathing, that could easily end up a month or more than we’re anticipating.
There is room to cut
One place we know we could cut back if it turns out we need to is entertainment. For example, we don’t need two streaming services when one has more than we could watch in a year. Plus, we could cut back on takeout and buy annual passes to our local attractions like the zoo and museums, and that would give us fun things to do on any given day in retirement, but it would only cost us one fee instead of paying repeatedly every time. we wanted to go.
Another way to save that we’ll be looking into, even if it turns out not to be necessary, is to look for less expensive providers for our insurance and possibly drop some coverage (like earthquake) altogether because it’s so expensive.
I expect that by December 31st we will find that we are living below 80% of our pre-retirement income. Still, if we don’t, we’ll be able to figure out how much money we’ll have to bring in each month from side jobs to live comfortably, because neither my husband nor I plan to retire 100%. These figures will be valuable to know how much we both have to work in our retirement. It could be the difference between working when we feel like it and accepting a steady 20-hour-a-week job.