How People Underestimate Spending in Retirement

[danielu]

Interesting article talking about framing effect and behavioral stress test.
 
”The 70% rule leads us astray because it fails to address the emotional cost of losing 30% of our income. Most people fokus on the 70% they will keep, not the spending they will give up. They aren’t prepared for the changes that will be required in their lifestyles. When they eventually are confronted by the specifics they have to cut, they are unhappy. In short, the 70% rule makes the future seem secure and comfortable, even when it’s not.”
 
http://www.wsj.com/article_email/how-people-underestimate-spending-in-retirement-1459130758-lMyQjAxMTI2NDI1ODIyMzg4Wj

[steveo]

I don't see this as a problem for me personally and I don't think it should be for anyone on here either.

I think that article is based on you spending all your income and then having to cut back on 30%. Personally I don't really care about my income but I care about my spending. So if I spend $40k now and I spend $40k in retirement I don't see any issues.

[Bertram]

But there should not really be a 30% decrease in spending necessary.

There is stuff that you use your income which goes away when you switch from working to retirement:
- commuting to work
- saving for retirement

I mean the article spcifically talks about "70% of pre-retirement income" and then fails to talk about the money that people save for retirement from that amount?

edit: Oh, hey, the article is from Shlomo, the "Save more tomorrow" guy.

[SwordGuy]

Well, our savings rate is 67%.

Living on 70% of our income would be a substantial raise.


Someone who is saving 20% would save another 5 to 10% on non-work costs should not see any real cut in spending.

Now, people who don't save and will have SS at 70% of their income will feel the hurt.

[Playing with Fire UK]

It seems like this article has totally missed the point.

Along with Bertram, I'd always assumed that the '70% of income' target was a back of an envelope calculation to use decades out to account for some or all of:
- Not paying for work related expenses
- Not paying off debt
- Paid off house
- No longer saving for retirement

If someone is hitting the retirement lever and hasn't done more detailed planning than someone else's generalisation is it possible they'll have more problems than loss aversion.  Did I miss the article that said "I 100% guarantee that if you can generate 70% of your pre-retirement income you will be 100% fine in retirement and never have to worry about budgeting, or in fact never worry about anything except running out of butterscotch" ?

In other breaking news, keeping your debt payments to under 30% of salary (or whatever bullshit is today's rule of thumb) won't save you if you spend 300% of salary on candyfloss.

[Monkey Uncle]

If people made the effort to track their actual spending and subtract out the expenses they will no longer have when they are retired, they wouldn't have this problem.  But I realize I'm preaching to the choir here.

[redcedar]

"They aren’t prepared for the changes that will be required in their lifestyles. When they eventually are confronted by the specifics they have to cut, they are unhappy. "

I find this to be the crux of the article which is very different from the many paragraphs on "framing". Besides someone who is truly forced into retirement unexpectedly, most people should have months or even a few years to prepare for the changes coming in retirement. Something as big as income reduction should not be a surprise.

[jim555]

Spending should drop a lot, much lower taxes, no commuting, no work clothing, no going out to lunches, no more saving for retirement, etc...

This "whole you need __% of income" is so dumb.

[Parizade]

Interesting article talking about framing effect and behavioral stress test.
 
”The 70% rule leads us astray because it fails to address the emotional cost of losing 30% of our income. Most people fokus on the 70% they will keep, not the spending they will give up. They aren’t prepared for the changes that will be required in their lifestyles. When they eventually are confronted by the specifics they have to cut, they are unhappy. In short, the 70% rule makes the future seem secure and comfortable, even when it’s not.”
 
http://www.wsj.com/article_email/how-people-underestimate-spending-in-retirement-1459130758-lMyQjAxMTI2NDI1ODIyMzg4Wj

If you have been living below your means and putting 50% of your income into savings and investments, then a 30% reduction in income merely reduces your savings and investments rate. It would not impact your day to day lifestyle at all, so zero emotional cost.

[Cranky]

If you've been living on half your net income, then it shouldn't be a change for you.

But most people don't do that - they retire with the same mortgage, the same debt, and they want to increase their spending by doing the "fun" stuff like traveling or moving to Florida and playing golf every day.

My spending probably won't decrease when we retire because we already don't have those high expenses...

[ender]

If people made the effort to track their actual spending and subtract out the expenses they will no longer have when they are retired, they wouldn't have this problem.  But I realize I'm preaching to the choir here.

+1

[Spud]

This is another reason why reducing expenses (financial defense as it's called in The Millionaire Next Door) is so much more powerful than simply trying to increase your income (financial offense) in order to retire early because by consuming less and spending less, you're already acclimatizing yourself to living using a much proportion of the money available to you. By the time you retire it shouldn't be a problem. As others have said, your expenses in retirement, especially if you're free of a commute and a mortgage are massively reduced.

[boarder42]

the underestimate b/c dumb financial planners tell them to plan based on a percentage of their salary.  God forbid we actually ask them to track what they spend and then come up with a plan around that spending to tell them what they will need to retire. its a simple equation

you make 100k - you save 50k ... you're spending 50k you're gonna need 50*25 or a little more depending on your risk tolerance to last you the rest of you life.  maybe a little less depending on what the Schiller EP ratio is which remarkably tracks very well with a 30 year SWR and if you multiply by .995 gets you a 40+ year SWR.

[teen persuasion]

So, reading between the lines, this article assumes that people can and do spend exactly 100% of their income.  They don't apparently pay FICA or save anything for retirement!!?

The behavioral psychology side of it is interesting, but completely misses the point (and real math) that employment expenses go away in retirement, accounting for roughly that 30% difference in "needed income".

I thought it was interesting reading the comments - no one sided with the author.

[pbkmaine]

I find that we spend much less in retirement. Our house is paid off, we cook elaborate meals at home instead of eating out because we have the time, we traveled widely for business and so are happy to stay put, we frequent thrift shops for clothing and household items. We bought big stuff like furniture years ago, and we bought for durability, so it should last our lifetimes.

[BlueMR2]

If people made the effort to track their actual spending and subtract out the expenses they will no longer have when they are retired, they wouldn't have this problem.  But I realize I'm preaching to the choir here.

I'm a bit concerned and will be interested to see how it works out for us.  While the commute expense will go away, it's really very low for us now.  OTOH, having to pick up our own health insurance looks really scary.  The numbers I've heard from self-employed friends are brutal.  One of them is now going to work for "the man" just because health insurance is so out of hand.  In a very sad case, one of my early retired friends from work recently committed suicide due to his concerns over money, prompted primarily by his skyrocketing health insurance costs.  :-(

[Fishindude]

I've got a self employed friend approx. 60 years old that tells me private pay insurance for he and his wife runs +/-$12,000 per year with a hefty $5-10,000 deductible.

[fattest_foot]

If people made the effort to track their actual spending and subtract out the expenses they will no longer have when they are retired, they wouldn't have this problem.  But I realize I'm preaching to the choir here.

I'm a bit concerned and will be interested to see how it works out for us.  While the commute expense will go away, it's really very low for us now.  OTOH, having to pick up our own health insurance looks really scary.  The numbers I've heard from self-employed friends are brutal.  One of them is now going to work for "the man" just because health insurance is so out of hand.  In a very sad case, one of my early retired friends from work recently committed suicide due to his concerns over money, prompted primarily by his skyrocketing health insurance costs.  :-(

It depends on how much you're pulling per year in "income," but for most of us that number is low enough that the ACA subsidies will kick in to substantially lower the out of pocket costs. Granted, this is under the assumption the ACA is still around for x number of years.

GoCurryCracker had a good article about it: http://www.gocurrycracker.com/obamacare-optimization-early-retirement/

[boarder42]

If people made the effort to track their actual spending and subtract out the expenses they will no longer have when they are retired, they wouldn't have this problem.  But I realize I'm preaching to the choir here.

I'm a bit concerned and will be interested to see how it works out for us.  While the commute expense will go away, it's really very low for us now.  OTOH, having to pick up our own health insurance looks really scary.  The numbers I've heard from self-employed friends are brutal.  One of them is now going to work for "the man" just because health insurance is so out of hand.  In a very sad case, one of my early retired friends from work recently committed suicide due to his concerns over money, prompted primarily by his skyrocketing health insurance costs.  :-(

go to healthcare.gov enter your annual spending and look its not a big secret. you can predict your retirement healthcare expenses.

[MayDay]

Man, I thought this was going to be an interesting list of things like Depends that old people have to buy and cost a lot.

Depends
Barber/Hairdresser (no way am I going to be cutting my hair at age 75)
Denture glue

Seriously though, pre-MMM, H would sometimes freak about how we needed to save enough to have 100% of our current income in retirement.  Then I would remind him that we were already saving ~20% to retirement, plus house payments that would be done by then.  So really, we were already living at ~80% of income or less.  And at this point we are living at about 50% of income. 

If living off 70% of your income in retirement is a big pinch, then either you weren't saving at all, or you get a pension.  There are older teachers that I work with who "can't retire" for that reason- cry me a river. 

[Spork]

I realize I am young(ish) and have future medical needs many years out.  I realize I am very new to FIRE.  But geez... I figured out my retirement spending as "the same as pre-retirement spending".  This formula has, so far, left me pleasantly surprised.  Even with 2 REALLY BIG unexpected expenses, I am still slightly below pre-retirement expenses.  And I expect this to trend downward over the near future.

[fattest_foot]

I thought it was interesting reading the comments - no one sided with the author.

Seriously, that was one of the most refreshing comments sections to a financial related article I think I've ever read (outside of FIRE blogs). It literally looks like a bunch of ER folks decided to spam the comments section about how ridiculous it was.

[Capsu78]

I've got a self employed friend approx. 60 years old that tells me private pay insurance for he and his wife runs +/-$12,000 per year with a hefty $5-10,000 deductible.

Thanks for sharing!  That is exactly the rough number I have been trying to pencil in.  As for comparison, we (slightly younger) spent $6000 last year with Megacorp middle tier plan with very low deductible.

[boarder42]

I've got a self employed friend approx. 60 years old that tells me private pay insurance for he and his wife runs +/-$12,000 per year with a hefty $5-10,000 deductible.

Thanks for sharing!  That is exactly the rough number I have been trying to pencil in.  As for comparison, we (slightly younger) spent $6000 last year with Megacorp middle tier plan with very low deductible.

i'm pretty sure its against the law to use age now to adjust your rates.  this guy is self employed and probably bringing in  a very large income so its not apples to apples.

[Spork]

I've got a self employed friend approx. 60 years old that tells me private pay insurance for he and his wife runs +/-$12,000 per year with a hefty $5-10,000 deductible.

Thanks for sharing!  That is exactly the rough number I have been trying to pencil in.  As for comparison, we (slightly younger) spent $6000 last year with Megacorp middle tier plan with very low deductible.

i'm pretty sure its against the law to use age now to adjust your rates.  this guy is self employed and probably bringing in  a very large income so its not apples to apples.

I'm pretty sure age *is* included in the rates.  Just go to healthcare.gov and get quotes for different ages. 


Edit:
Picked a random plan from Blue Cross Texas for a non smoking male born in 1955, 1965, 1975, 1985 for an example:
1955 blue advantage bronze hmo 006 $501/month
1965 blue advantage bronze hmo 006 $333/month
1975 blue advantage bronze hmo 006 $232/month
1985 blue advantage bronze hmo 006 $206/month

[boarder42]

I've got a self employed friend approx. 60 years old that tells me private pay insurance for he and his wife runs +/-$12,000 per year with a hefty $5-10,000 deductible.

Thanks for sharing!  That is exactly the rough number I have been trying to pencil in.  As for comparison, we (slightly younger) spent $6000 last year with Megacorp middle tier plan with very low deductible.

i'm pretty sure its against the law to use age now to adjust your rates.  this guy is self employed and probably bringing in  a very large income so its not apples to apples.

I'm pretty sure age *is* included in the rates.  Just go to healthcare.gov and get quotes for different ages.

Yep just did this and did it with a crazy high for an MMM withdrawal of 57k per year.  rates for the silver plan are the same whether i'm 60 or 30.  but increase that number to 75k income and you're not subsidized.  moral of the story spend less and your cost for healthcare is the same. 

2 adults used for both scenarios
results
75k
30 - 459/ month silver
60 - 1345/ month silver

57k
30&60 459/month silver.

[Spork]

I've got a self employed friend approx. 60 years old that tells me private pay insurance for he and his wife runs +/-$12,000 per year with a hefty $5-10,000 deductible.

Thanks for sharing!  That is exactly the rough number I have been trying to pencil in.  As for comparison, we (slightly younger) spent $6000 last year with Megacorp middle tier plan with very low deductible.

i'm pretty sure its against the law to use age now to adjust your rates.  this guy is self employed and probably bringing in  a very large income so its not apples to apples.

I'm pretty sure age *is* included in the rates.  Just go to healthcare.gov and get quotes for different ages.

Yep just did this and did it with a crazy high for an MMM withdrawal of 57k per year.  rates for the silver plan are the same whether i'm 60 or 30.  but increase that number to 75k income and you're not subsidized.  moral of the story spend less and your cost for healthcare is the same. 

2 adults used for both scenarios
results
75k
30 - 459/ month silver
60 - 1345/ month silver

57k
30&60 459/month silver.

See my edit above.  I get vastly different rates (not counting subsidies) for differing plans based on year.

[boarder42]

yes the rates vary if you remove subsidies but we're on a forum where you should be receiving them and so to accurately calculate your cost you should likely include your income level.  I assumed that could be inferred from the numbers and wording of my above post.

[Spork]

yes the rates vary if you remove subsidies but we're on a forum where you should be receiving them and so to accurately calculate your cost you should likely include your income level.  I assumed that could be inferred from the numbers and wording of my above post.

Subsidies vary with income.
Rates vary with age.

These are unrelated other than "older folks might earn more."

[jim555]

Federal law has "age range" limitations.  NY does not permit age to be considered with ACA policies.

[boarder42]

yes the rates vary if you remove subsidies but we're on a forum where you should be receiving them and so to accurately calculate your cost you should likely include your income level.  I assumed that could be inferred from the numbers and wording of my above post.

Subsidies vary with income.
Rates vary with age.

These are unrelated other than "older folks might earn more."

subsidies also vary with age as can be seen by the numbers i presented.

you're missing a key piece

[forummm]

Interesting article talking about framing effect and behavioral stress test.
 
”The 70% rule leads us astray because it fails to address the emotional cost of losing 30% of our income. Most people fokus on the 70% they will keep, not the spending they will give up. They aren’t prepared for the changes that will be required in their lifestyles. When they eventually are confronted by the specifics they have to cut, they are unhappy. In short, the 70% rule makes the future seem secure and comfortable, even when it’s not.”
 
http://www.wsj.com/article_email/how-people-underestimate-spending-in-retirement-1459130758-lMyQjAxMTI2NDI1ODIyMzg4Wj

Isn't most/all of that 30% taxes you are no longer paying? I don't see why that's a problem.

[Spork]

yes the rates vary if you remove subsidies but we're on a forum where you should be receiving them and so to accurately calculate your cost you should likely include your income level.  I assumed that could be inferred from the numbers and wording of my above post.

Subsidies vary with income.
Rates vary with age.

These are unrelated other than "older folks might earn more."

subsidies also vary with age as can be seen by the numbers i presented.

you're missing a key piece

No.  ACA subsidies are based on the FPL.  I really don't know where you're getting the age bit.  Family size matters (because that affects FPL).  Age does not.  Here is a good explanation of the subsidy formula:  http://www.valuepenguin.com/understanding-aca-subsidies

My original disagreement was with the blanket statement "i'm pretty sure its against the law to use age now to adjust your rates." 

It is not against US federal law and not against the laws in my state.  Maybe you have state laws that differ.  But that statement is not universally true in the US.

[jim555]

The ACA has a 3:1 age band, meaning the difference in premiums can't exceed a ratio of 3:1 between youngest and oldest.  States may make this ratio even lower.

[boarder42]

yes the rates vary if you remove subsidies but we're on a forum where you should be receiving them and so to accurately calculate your cost you should likely include your income level.  I assumed that could be inferred from the numbers and wording of my above post.

Subsidies vary with income.
Rates vary with age.

These are unrelated other than "older folks might earn more."

subsidies also vary with age as can be seen by the numbers i presented.

you're missing a key piece

No.  ACA subsidies are based on the FPL.  I really don't know where you're getting the age bit.  Family size matters (because that affects FPL).  Age does not.  Here is a good explanation of the subsidy formula:  http://www.valuepenguin.com/understanding-aca-subsidies

My original disagreement was with the blanket statement "i'm pretty sure its against the law to use age now to adjust your rates." 

It is not against US federal law and not against the laws in my state.  Maybe you have state laws that differ.  But that statement is not universally true in the US.

so if subsidies dont increase and you looked at my numbers explain why the 30 year old and 60 year old pay the same amount when their income is 57k but at 75k the 60 year old pays 800 more ... its b/c of the susidy there are two variables age and income level.  when we reduce income and they both come out the same the subsidy must have increased.

[jim555]

Subsidies don't vary with age, premiums do.  And remember the subsidy is hinged on the SLCSP.  The SLCSP might be higher due to age and this would make the subsidy go up.

[Spork]

yes the rates vary if you remove subsidies but we're on a forum where you should be receiving them and so to accurately calculate your cost you should likely include your income level.  I assumed that could be inferred from the numbers and wording of my above post.

Subsidies vary with income.
Rates vary with age.

These are unrelated other than "older folks might earn more."

subsidies also vary with age as can be seen by the numbers i presented.

you're missing a key piece

No.  ACA subsidies are based on the FPL.  I really don't know where you're getting the age bit.  Family size matters (because that affects FPL).  Age does not.  Here is a good explanation of the subsidy formula:  http://www.valuepenguin.com/understanding-aca-subsidies

My original disagreement was with the blanket statement "i'm pretty sure its against the law to use age now to adjust your rates." 

It is not against US federal law and not against the laws in my state.  Maybe you have state laws that differ.  But that statement is not universally true in the US.

so if subsidies dont increase and you looked at my numbers explain why the 30 year old and 60 year old pay the same amount when their income is 57k but at 75k the 60 year old pays 800 more ... its b/c of the susidy there are two variables age and income level.  when we reduce income and they both come out the same the subsidy must have increased.

I don't know how to explain the subsidies to you further than the article I included.  It is very detailed.

I can't tell you why the numbers came out the way they did since I didn't run them.    But again, my quibble was with "against the law to use age now to adjust your rates."  It isn't against the law.  You may find cases where in some states or with some insurance companies it just so happens that rates do not vary with age.  But it is not against the law.

[going2ER]

Part of the problem other than not saving and preparing is that people actually live on more than 100% of their salaries. This is why there is so much credit card debt. If people were living on just their salaries and even spending all of it, than some of the costs such as driving and lunches may decrease and they may not have to hard of a time relying on 70% of their income. Its when they spend over and above their incomes that they can't make it on 70%.

[MoonShadow]

This article sounds like nonsense to me.  How can you lose your quality of life on 70% of your working career gross income, when anyone who could retire should be saving 15-20% of their working income in order to retire, the kids are out of the house, they don't have to keep a second car to commute to work anymore, they should drop into a lower tax bracket, and they should be debt free (or close) when they do retire?  I'm planning on closer to 45% of my working gross income in retirement, since I've been averaging 60-65% of my gross income for a decade or so, and I shouldn't have any principal left on my mortgage when I retire; unless something goes seriously wrong in the meantime.

[Cassie]

Since we semi-retired 4 years ago some things went up a lot and some down. WE never had long commutes or needed to wear suits for work so this was not a huge drop for us. Our health insurance went from 2400/year to 10,000/year.  OUr house and cars were paid off but the 2 old cars died. We considered dropping down to one but we both still consult p.t. in our fields so decided not too.  In 10 years when one car dies we will go down to one.  Our travel has greatly increased as has our entertainment because we want to enjoy ourselves while we can. We have had numerous friends, relatives die or become disabled in 50's and 60's so aren't taking any chances. We cook a lot more because we have the time. We could cut out the travel and fun if we ever needed too.  Of course we are no longer saving $ for retirement either.  I think this is really going to vary for people.

[forummm]

yes the rates vary if you remove subsidies but we're on a forum where you should be receiving them and so to accurately calculate your cost you should likely include your income level.  I assumed that could be inferred from the numbers and wording of my above post.

Subsidies vary with income.
Rates vary with age.

These are unrelated other than "older folks might earn more."

subsidies also vary with age as can be seen by the numbers i presented.

you're missing a key piece

No.  ACA subsidies are based on the FPL.  I really don't know where you're getting the age bit.  Family size matters (because that affects FPL).  Age does not.  Here is a good explanation of the subsidy formula:  http://www.valuepenguin.com/understanding-aca-subsidies

My original disagreement was with the blanket statement "i'm pretty sure its against the law to use age now to adjust your rates." 

It is not against US federal law and not against the laws in my state.  Maybe you have state laws that differ.  But that statement is not universally true in the US.

Actually, the subsidies do effectively vary by age. For people at a certain %FPL, the ACA says you only have to pay X % of your income in premiums for the 2nd-lowest-cost silver plan and you get a tax credit for the rest. So in a non-expansion state if you are at 100% FPL, you only have to pay 2% of your income in premiums for the 2nd-lowest-cost silver plan and the rest is paid for with a tax credit. Let's take the example of two single people in the same zip code--one is 30 and one is 63--and the both have the same income of $11,880 (which is 100% FPL for both since they are single). That means for the 2nd-lowest-cost silver plan they would only be out of pocket $19.80/mo no matter what the plans cost. If you are 30 let's say the premium for the 2nd-lowest-cost silver plan is $100/mo, and if you are 63 it is $300 (to make up some numbers), then the 63 year old is getting a much larger tax credit than the 30 year old ($280/mo vs $80/mo).

[Cassie]

WE don't use the ACA but use our former employer's because it is better insurance without such high deductibles.  I would be really mad if I was paying a fortune for insurance and then paying a fortune in deductibles like some people are. 

[boarder42]

yes the rates vary if you remove subsidies but we're on a forum where you should be receiving them and so to accurately calculate your cost you should likely include your income level.  I assumed that could be inferred from the numbers and wording of my above post.

Subsidies vary with income.
Rates vary with age.

These are unrelated other than "older folks might earn more."

subsidies also vary with age as can be seen by the numbers i presented.

you're missing a key piece

No.  ACA subsidies are based on the FPL.  I really don't know where you're getting the age bit.  Family size matters (because that affects FPL).  Age does not.  Here is a good explanation of the subsidy formula:  http://www.valuepenguin.com/understanding-aca-subsidies

My original disagreement was with the blanket statement "i'm pretty sure its against the law to use age now to adjust your rates." 

It is not against US federal law and not against the laws in my state.  Maybe you have state laws that differ.  But that statement is not universally true in the US.

Actually, the subsidies do effectively vary by age. For people at a certain %FPL, the ACA says you only have to pay X % of your income in premiums for the 2nd-lowest-cost silver plan and you get a tax credit for the rest. So in a non-expansion state if you are at 100% FPL, you only have to pay 2% of your income in premiums for the 2nd-lowest-cost silver plan and the rest is paid for with a tax credit. Let's take the example of two single people in the same zip code--one is 30 and one is 63--and the both have the same income of $11,880 (which is 100% FPL for both since they are single). That means for the 2nd-lowest-cost silver plan they would only be out of pocket $19.80/mo no matter what the plans cost. If you are 30 let's say the premium for the 2nd-lowest-cost silver plan is $100/mo, and if you are 63 it is $300 (to make up some numbers), then the 63 year old is getting a much larger tax credit than the 30 year old ($280/mo vs $80/mo).

boom thanks. for the detailed explanation of what i was seeing.

[Capsu78]

WE don't use the ACA but use our former employer's because it is better insurance without such high deductibles.  I would be really mad if I was paying a fortune for insurance and then paying a fortune in deductibles like some people are.

That is the crux of the debacle known as the Affordable Care Act...while we may have more people "enrolled" than prior to it, the focus is on the premiums- Deductibles are where the cost explosions are.  If you couldn't afford insurance before, how will you self pay $10,000 just to actually get to use your insurance now? 

[Spork]

WE don't use the ACA but use our former employer's because it is better insurance without such high deductibles.  I would be really mad if I was paying a fortune for insurance and then paying a fortune in deductibles like some people are.

That is the crux of the debacle known as the Affordable Care Act...while we may have more people "enrolled" than prior to it, the focus is on the premiums- Deductibles are where the cost explosions are.  If you couldn't afford insurance before, how will you self pay $10,000 just to actually get to use your insurance now?

It depends on how much health care you actually use.  Unspent deductibles cost $0.

The theory is: I can afford to go to the doctor for checkups and little stuff.  But if I get cancer or get hit by a bus, I can easily dig up $6000 for the deductible and they'll cover the next $100,000 or so.  Now: ACA has run the cost of monthly insurance up.  But that's another issue entirely.

[Cassie]

People that need various medications or expensive ones could find themselves unable to afford them year in and out with the ACA. I was really disappointed with how the whole health care thing turned out.

[Beridian]

The linked article asks prospective retirees to detail what budget cuts they will make to achieve a 30% reduction.  That's easy.  I currently save 24% of my income into retirement accounts and another 10% into regular savings.  I will no longer make these deposits once retired.  When my income drops I also expect a sizable reduction in taxes.  There, that was easy.

I also think that projecting 70% of current income in retirement is ridiculous unless your current income is pretty low.  I expect to spend about 25% of my current salary once retired.

[forummm]

WE don't use the ACA but use our former employer's because it is better insurance without such high deductibles.  I would be really mad if I was paying a fortune for insurance and then paying a fortune in deductibles like some people are.

That is the crux of the debacle known as the Affordable Care Act...while we may have more people "enrolled" than prior to it, the focus is on the premiums- Deductibles are where the cost explosions are.  If you couldn't afford insurance before, how will you self pay $10,000 just to actually get to use your insurance now? 

If you have high deductibles it's either because 1) your income is high enough that you can "afford" them, or 2) you do have a lower income but didn't realize that picking a silver plan dramatically reduces your out-of-pocket costs. For people between 100-250% FPL, silver plans have cost-sharing reductions that can take your ~$6700 deductible down to $0-1000 depending on the plan.  And OOP max can be similarly low. But this only works for silver plans. Getting a bronze or gold plan can be a much worse deal for those in the 100-250% FPL.

Anecdote: Before he got a job with insurance my brother's plan for a family of 6 had $3 copays for office visits or medications, a $300 deductible, and $1000 OOP max for the year because he was in that income range.

[Monkey Uncle]

WE don't use the ACA but use our former employer's because it is better insurance without such high deductibles.  I would be really mad if I was paying a fortune for insurance and then paying a fortune in deductibles like some people are.

That is the crux of the debacle known as the Affordable Care Act...while we may have more people "enrolled" than prior to it, the focus is on the premiums- Deductibles are where the cost explosions are.  If you couldn't afford insurance before, how will you self pay $10,000 just to actually get to use your insurance now? 

If you have high deductibles it's either because 1) your income is high enough that you can "afford" them, or 2) you do have a lower income but didn't realize that picking a silver plan dramatically reduces your out-of-pocket costs. For people between 100-250% FPL, silver plans have cost-sharing reductions that can take your ~$6700 deductible down to $0-1000 depending on the plan.  And OOP max can be similarly low. But this only works for silver plans. Getting a bronze or gold plan can be a much worse deal for those in the 100-250% FPL.

Anecdote: Before he got a job with insurance my brother's plan for a family of 6 had $3 copays for office visits or medications, a $300 deductible, and $1000 OOP max for the year because he was in that income range.

Yeah, I recently priced an ACA silver policy with similar deductibles, co-pays, and out of pocket limits as my current employer-provided insurance using a conservative estimate of my expected income in FIRE.  With the premium subsidy applied, I would be paying less than half what I'm currently paying for just my employee's share of the premium on my employer-provided insurance.

[BigoteGato]

Imagine the author had said 70% of SPENDING. Then read the article. That change addresses a lot of the objections above. If the 70% rule of thumb seems useless to you because you keep a careful budget, remember "you" are not retiring in say 10 years; it's the "you+10" that is retiring. Two different people; think back how you and you-20 would answers lifestyle questions. So, while I have a detailed budget, I find it useful to listen to others further along to use/disregard their experiences. I read the author to be saying that if you think your expenses will drop by X%, try to imagine what exactly will you be cutting. Maybe after retiring you won't be able to have 10% of your expenses as gifts - are you OK with that? Anyhow, this was not a totally useless article to me.