Retirement planning….does it getting any more exciting??? Of course not!

But here’s the problem with almost ALL retirement planning I’ve seen, expenses are secondary, income is primary.

That is exactly the opposite of how this should be. Expenses drive EVERYTHING!

In this video, I share two EBRI reports from one of the best researchers out there, Jack Van Derhei. The reports are actually very optimistic…IF you take the time to read them.

However, these report still leave much to be desired when they simply gloss over the fundamental aspect of retirement planning, expenses.

Don’t do that in your own planning. Put expenses FRONT AND CENTER.

https://www.ebri.org/docs/default-source/ebri-notes/ebri_notes_06_june-12.pdf?sfvrsn=268f292f_0

https://www.ebri.org/docs/default-source/ebri-notes/ebri_notes_06_june-14_shrtflls-hsas.pdf?sfvrsn=6b27362f_0

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13 replies
  1. Scott Engh
    Scott Engh says:

    Thank you, sir. You're in an elite quartile of financial experts. Main stream are trying to sell something. Mostly positive projections. The lower income people just work longer. Heck, 90% of the higher quartile drive BMWs and live fancy and have less saved than the mids.

    Reply
  2. Carl Horoho
    Carl Horoho says:

    I understand the focus on retirement income rather than expenses. 25 years ago – when I first began attempting to estimate our retirement income needs – I quickly became overwhelmed with unknowns. How does one estimate costs? Mortgage – will I have one? Balance? Monthly P&I payment? Escrow? Same for car payment. How much will utilities cost? Health care? And on and on. What I did know was every penny of income at that time was "spent". Some for household living expenses. And the rest was saved – some for retirement – the rest for future events such as vacations. Knowing that, I could then estimate my income out at my retirement year. It was then easy to create a spreadsheet calculating 90%, 80%, 70%…of that final year of income. That gave me a target at which to aim for an initial retirement year income – again assuming we will "spend" all of it. Again, some for actual costs and the rest in to savings. Yes, we can then adjust lifestyle as needed to reduce costs if needed.

    Reply
  3. Big_A
    Big_A says:

    It's strange how people have been able to live out the later years of life for 1000's of years just fine. But within the past 50 yrs or so the more the bankster's put a strangle hold on people now all of a sudden you have to work till your last breath bc you'll run out of money. When the neighbor goes and buys a new Maserati and then you go and buy a Ferrari to try and show him up if you then run out of money in retirement you kinda had it coming to you.

    Reply
  4. Robert Lindefjeld
    Robert Lindefjeld says:

    Part of the problem with nailing down expenses is that too many planners assume that the retiree plans to “retire in place,” surround themselves with grandkids, and NOT do something radically different. Some retirees may choose to become expats and live in another country. Others may choose a “second career,” like opening a flower shop or starting a YouTube channel and incur expenses that they have not previously incurred. Still others may may choose to buy an RV and travel the country. In my case, I plan to buy a sailboat and travel the world.

    I do agree that the first step is to nail down expenses and go from there. But that task isn’t as easy as it might seem for many who are planning on an alternative retirement lifestyle. Planning projected expenses is critical. But in the end, at least for people who plan to live a “second lifetime” after retirement, it will always be only a guesstimate. In an odd way, doing things the reverse way and figuring out what a reasonable draw (income) might be and then asking “okay, what can I reasonably afford given my projected income going forward” might be useful as well.

    Tomato, tomahto.

    Reply
  5. John C
    John C says:

    Average expenses are derived from their Ouija boards; other data appears from answers to questions they ask their 8-Balls. "If you have to ask, then you can't afford to retire!"

    Breaking news! If you have enough money (whatever that amount is), and if your income (from all your sources) is more than your expenses, you'll do okay in retirement.

    Bottom line: This is the way many academics (and pundits) earn their daily bread: Spinning out worst-case scenarios. (Hidden meaning: Turn over your lives and $ to the government, and everything will be redistributed, and harmony will result with hugs for everyone. "From each according to his ability, to each according to his needs.")

    Interesting review of yet more turgid, vague output from the intellectual chattering class. Thanks.

    Reply
  6. Kevin Huff
    Kevin Huff says:

    Food, Shelter, Clothing, and Medicine are the only costs that should be considered as what you need to retire. I say this because they are the only costs you can't avoid. You can adjust them but not eliminate them. I don't consider taxes because at low incomes they can be minimal. Pay your house off and move to area with low or no property taxes and housing becomes minimal. Proper exercise and nutrition can minimize medical costs. People talk about "Little Old Ladies" because big ladies don't live long.

    Reply

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