The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Guizmo on October 09, 2014, 09:56:32 AM
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https://retirementplans.vanguard.com/VGApp/pe/EducationNewsCenter#al=false&st=Featured&sst=ALL&articleId=14047&smt=ALL&ps=0&tab=libraryTab&libView=AllTopics&po=10
Nothing too crazy here but an interesting read anyways.
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It always seems weird to me to see recommendations like this in terms of income. Let's say you have two people with a $100k income per year.
Person A spends $50k per year and saves the rest.
Person B spends $99k per year and saves the rest.
Both of them are advised here to save the same amount of money to be able to retire.
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There are a lot of assumptions, both spoken and not.
"If you want to maintain your lifestyle once you retire, you will need to match a large percentage of your pre-retirement income. For a retiree used to an income of $100,000, for example, the goal should be to generate $85,000 in income from Social Security and savings."
Based on that, they are assuming a 15% savings rate. They are also assuming social security, which means typical retirement age and a typical retirement length (<30 years). For the majority of folks who will read the article, they are not far off.
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It always seems weird to me to see recommendations like this in terms of income.
Typically when someone is doing a recommendation like this, they base it on the average person. Every individual's situation will be different.
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There are a lot of assumptions, both spoken and not.
"If you want to maintain your lifestyle once you retire, you will need to match a large percentage of your pre-retirement income. For a retiree used to an income of $100,000, for example, the goal should be to generate $85,000 in income from Social Security and savings."
Based on that, they are assuming a 15% savings rate. They are also assuming social security, which means typical retirement age and a typical retirement length (<30 years). For the majority of folks who will read the article, they are not far off.
Most of the conventional "retirement calculators" use this scenario as their formula. The only 4% SWR calculators or anything like them I've seen are the indie apps like the ones shown here on MMM.