126% of Final Pay for Retirement

**disneysteve** · 07-01-2008, 05:33 PM

I have always based my retirement planning on accumulating 100% of pre-retirement income (and I don't count Social Security). I'm hoping to reach that goal and for that to be enough.

**Snave** · 07-01-2008, 05:37 PM

Nothing was mentioned about ss in the article. I agree with you. I don't count it nor do I count my pensions (1 from former employer and current one) and am shooting for 100%+ as well. Everything else will be a bonus. Or, if the article is correct, everything else will be needed!

**disneysteve** · 07-01-2008, 05:41 PM

A big factor is how much of your income you actually live on while working. We currently invest about 22% of income, meaning we only live on 78%. Being able to retire on 100% plus SS should be plenty for us.

Also, a lot of retirement income will come from our Roths which will be tax-free money.

**Snave** · 07-01-2008, 06:09 PM

That is true. We save a ton, so that can be factored out. The mortgage will also be paid off, so that drops off that % as well. We just got a roth 401k at work this year also, so that certainly is a bonus on top of things also.

**cptacek** · 07-01-2008, 08:46 PM

Originally posted by Snave View Post

Article in the USA Today on Tuesday stated that Hewitt Associates is saying that people will need 126% of their pre-retirement income when it comes to retirement. They are saying that increasing healthcare costs (more being shifted to the empolyee) is one reason. In the articel, T.Rowe Price suggests the older 75%, but did say they will probably inch higher. Fidelity states 85% currently. Any way you look at it, the projections continue to go higher in regards to the % of income you will need in retirement. I keep thinking that I am on track (except for the recent bear market), but I will need to review what we are saving to make sure.

Could they be trying to scare everyone so people will be more amenable to universal health care?

**Snave** · 07-02-2008, 05:22 AM

Originally posted by cptacek View Post

Could they be trying to scare everyone so people will be more amenable to universal health care?

If anything they T. Rowe Price, Fidelity, etc...) are trying to scare people into using more of their products.

**disneysteve** · 07-02-2008, 05:47 AM

I think they are just trying to give people a slap in the face and make them wake up and realize that they need to start saving for retirement if they have any hope of ever retiring before they die.

**aida2003** · 07-02-2008, 08:42 AM

Well, I sort of think that financial industry tries to make more business for themselves by spreading more fear about the retirement.
IMO, each person's financial well-being greatly depends on his/her lifestyle and health before retirement. One person can live fine having $25-30k/year cash, but another will go through $80-100K/yr cash like a knife on the butter and also have a CC debt.
Yes, the health part is the most unpredictable

...

**disneysteve** · 07-02-2008, 08:49 AM

Originally posted by aida2003 View Post

Well, I sort of think that financial industry tries to make more business for themselves by spreading more fear about the retirement.
IMO, each person's financial well-being greatly depends on his/her lifestyle and health before retirement. One person can live fine having $25-30k/year cash, but another will go through $80-100K/yr cash like a knife on the butter and also have a CC debt

Certainly everyone's needs in retirement will be different, but I do think people need to keep hearing the rules of thumb about planning and saving. The simple fact is that a great many people are living the good life today and aren't saving nearly enough to maintain their current lifestyle in retirement. Lots of people are going to be very upset when 65 rolls around and they just don't have enough money to stop working. Folks need to trim the fat now and simplify their lifestyles and spending patterns so they can put more money away for future needs.

**jIM_Ohio** · 07-02-2008, 09:48 AM

If you spend more than you earn, th 126% sounds about right to me.

I base my planning on two things
1) my expenses
2) my taxable income

I assume I have between 80-90k of expenses each year. I don't know for sure... but I also know my mortgage is 30k of that per year.

My taxable income is less than 70k, and I think that reflects spending more... because of 401k and Roth contributions, plus other deductable expenses which should be eliminated prior to retirement.

**tripods68** · 07-02-2008, 11:21 AM

As a public servant for life, I could work till i'm 65 yrs old to reach pension final comp @ 110%. Unless the State of California goes bankrupt, I still plan to retire at age 60 for now.

However, i do admit this market turmoil really puts a damper on other retirement accounts. We currently sock away about 20% towards deferred comp; 403b and 457. However, we also sock away another 15% after tax towards taxable accounts ROTH, IRA, MMAs. The lack luster return has to be compensated with double returns in (20%) IMO in the next several years or increase our contribution percentage closer to as much as 50% just to make up what we'd lose in value so far. There's only so much % we can add more. But I will not be dissappointed either if we don't. We could always work little bit longer i guess.

**LivingAlmostLarge** · 07-02-2008, 01:14 PM

I would love to live on 126% of income. You can never had too much. Although you can have too little.

126% of Final Pay for Retirement