Will We Spend Less in Retirement?

About nine years ago, when Mr. ThreeYear and I began to wise up about our finances, we visited a financial planner and filled out a detailed survey. We didn’t have many assets to speak of, at the time, since we’d just gotten out of debt, but if the dude had been wise, he would have nurtured the relationship with us because he could have had very good future clients. He was not and we now manage our own investments, a scenario I am more than happy with. 

Even so, it was interesting to hear his predictions that we’d need about 80% of our income at retirement. Where did that number come from? In the years that followed, as I filled out online retirement calculators, I heard the figure repeated. 

Then, I began to learn more about the 4% rule, the oft-cited retirement rule-of-thumb (based on the Trinity Study) that cites evidence that if you withdraw 4% of your portfolio per year in retirement, adjusted annually for inflation, then your portfolio should easily last you 30 years (or more). Another way to look at the rule, popularized by the incontrovertible Mr. Money Mustache, is that you’ll need 25 times your annual spending invested in order to retire. This rule assumes that you’ll keep your spending relatively level in retirement, that is, you’ll spend a similar amount in retirement as you do now.  

Continue reading “Will We Spend Less in Retirement?”

Will This Plan Give You More Money in Retirement?

I recently ran across a USA Today article called “How Not to Run Out of Money in Retirement.” In it, the author shares the details of a new retirement plan, the brainchild of an actuary who’s been studying retirement for three decades.

It’s called the “Spend Safely in Retirement” plan, and the premise is simply that you wait until age 70 to claim Social Security and use the IRS’s required minimum distribution table to determine how much to take from savings each year. The Stanford Center on Longevity, working with the Society of Actuaries, published a study of hundreds of ways to create income in retirement, and this plan, one of the simplest, ended up being the most sound (surprise, simple things work well. Who knew?). Continue reading “Will This Plan Give You More Money in Retirement?”