You need 80 percent of your pre-retirement income to maintain your current lifestyle during retirement
Talk to your old man or your grandma and they’ll nag you to the ends of the Earth about preparing for retirement. But while these money-saving tips seem smart on the surface, John Deglow, CFP, AIF, at Unified Trust Company, says the reality is many retirees live well below their means and this figure greatly overestimates the income they’ll actually need once they put in their notice.
As an example, a couple might make $100,000 a year after taxes, but once the kids have flown the coop and the mortgage has been paid off, they actually spend $50,000 annually on expenses. So why would they suddenly need $80,000 to make ends meet when they’re job-less? “A better assumption might be that you would need 80 percent of your current expenses—not income—during retirement,” he says. Even so, make sure to book a one-on-one with a trusted financial professional who can help you better understand the effects of inflation and accommodate other issues unique to your situation, he adds. Here are 12 more common money mistakes people make in early retirement.
Make a pro/con list of major expenditures
When it comes to signing on a dotted line, you shouldn’t have any doubts, says David Rosen, licensed associate real estate broker. “Often, people advise making a list of pro’s and con’s to decide which home to purchase,” he says. “However, if you feel uneasy about an investment or a savings platform, then you are right. Just don’t do it. That list is there to trick your intuition, but your intuition is keenly aware of what’s likely to be a poor investment.”
Want to buy a home? Follow this 10-step plan to buying your first house in five years.