re: Goal for retirement savings as a ratio of salary

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I think that it is risky to assume that your expenses will go down in retirement years.

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Why? It's normal for spending in retirement to be less.

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My monthly expense will go from 14k to around 8k,

That is living the same lifestyle, inflation is a factor that is harder to predict.

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But what are you going to do with your extra 40-50+ hours of free time each week?

Your expansion of current hobbies, new hobbies, travel expectations…will now need to be added back to your reduced expenses based on a similar lifestyle

WHAT ARE YOUR EXPENSES GOING TO BE?

DO YOU WANT POSITIVE MONTHLY CASH FLOW TO COVER EXPENSES OR WILL U DRAW DOWN A LUMP SUM?

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I don't subscribe to this line of thinking. Do you know your current spending? Can you forecast how that will change over time? Can you put placeholders for major expenses (car, roof, air conditioner, etc.)? Can you make assumptions about how things that are important to you will impact finances at different stages of your life (e.g. travel)? Sure, you may not get this 100% accurate, but you can get it good enough to assess your ability to fund it.

People just live differently. Adopting a specific ratio of salary may work for some, but also goes off into the weeds if your income skews one way or another.

Personally, if I'm thinking about retirement then I'm DOING THE WORK to identify what I expect as expenses into the future and I'm using that -- not some ill-tuned ratio that doesn't work for everyone.

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Good grief, it's just a rule of thumb for people to get an idea of how much longer they need to work and save. See the comments in my edit on the original post. I'm not suggesting that people do no planning.

The Mrs and I approaching that age. Our 401k isn't 3 million but we both get a pension. Our pension payments plus SS taken at 62 will almost meet our current budget. We just need to hit 62. I am 59 and she is 56.

Our formula is different. The present value of our annuities come to about 3 million.

Every situation is different.

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But what are you going to do with your extra 40-50+ hours of free time each week? Your expansion of current hobbies, new hobbies, travel expectations…will now need to be added back to your reduced expenses based on a similar lifestyle

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Plenty of hobbies are not expensive or maybe even make money. I’ve said this before but my dad got into bee keeping and I have no idea what he was making but he was doing over 100 bee removals a year at $300-400 pop. Just a completely random $40,000 of income that paid for his truck, tools, etc and kept him busy. And btw he loved it. Worked harder the past 5 years than probably any other 5 in his career.

I know that’s anecdotal, but a golf membership for example at a reasonable place could be just $4,000 or so for almost unlimited play. That’s under $100/ week for 2-3 rounds. I know multiple people that do that.

Everyone is different. It’s really hard for anyone to gauge someone else’s expected expenses. But that’s why I really think this idea of just planning on doing absolutely nothing to earn income in lower 60s is somewhat ignorant.

I agree somewhat but if your mortgage interest rate is say 3% or so and you are earning for example 8% why would you give up that 5% difference to pay off your house?

Salary ratio is a really silly metric to even consider using. It deduces some expected amount of spending based on income level to back into an estimate…just a poor way to evaluate an important decision.

Wife and I are in mid 40s. Our gross monthly income is 25,000 before bonuses etc. We currently put 20% into 401k, 7.5% into my pension fund, and 7.5% into social security. We are also paying a mortgage.


When we retire my pension and both of our social securities will pay us about 12k a month. That 35% we are paying disappears as does the mortgage. So we would almost be where we are now with no draw on 401k. Of course my target is 6 million as I want to have stuff for my kids to set them up.

I’m at 5.2 million just turned 60. Probably retiring this fall. I’m so glad I listened to my father at age 18.