The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: LiseE on May 06, 2014, 08:12:55 AM

So I received a mailing from my company regarding my current balance and if I'm on target to retire with enough money ... why do they calculate that I will need 85K a year to live on after retirement???? Where do they get these numbers? I've calculated that our expenses will be at most 3K a month after our mortgage is paid off. Even if I bulk that number up considering in our early retirement we might want to explore some hobbies, etc .. that 85K is a crazy high number, no? I just wonder what they are basing it on?

Inflation?

They quote some statistic of retirees living on 7080% of preretirement income. So, they look at your current income (because they know the % investment rate of your retirement account, and how much money goes in), and calculate a percentage of that.
Of course, this is silly for many reasons that this blog addresses. The first main assumption that is wrong is that your current living expenses are basically your income minus how much you put into retirement.

They quote some statistic of retirees living on 7080% of preretirement income. So, they look at your current income (because they know the % investment rate of your retirement account, and how much money goes in), and calculate a percentage of that.
Of course, this is silly for many reasons that this blog addresses. The first main assumption that is wrong is that your current living expenses are basically your income minus how much you put into retirement.
This is what I was thinking as well. I think they estimate that way because most people do live on 70%80% of their income while working.

They quote some statistic of retirees living on 7080% of preretirement income. So, they look at your current income (because they know the % investment rate of your retirement account, and how much money goes in), and calculate a percentage of that.
Of course, this is silly for many reasons that this blog addresses. The first main assumption that is wrong is that your current living expenses are basically your income minus how much you put into retirement.
I make 35k a year, spend 15k of that, and my 401k says I'm off track because I will need $5200 a month to live on in retirement. Over $62000 a year? Will I retire to a yacht?