Yes, I did mean to say that I was addressing your point about expenses increasing in retirement. And that, I think, is where we disagree. I think that most expenses will decrease in retirement.

I know several people that are currently retired, who have comfortable incomes (typically around 50-70% of what they earned while working). None of them seems to have any meeting their needs. What I do find interesting, though, is that many of their ‘wants’ are fairly easily satisfied.

In your working life, a lot of your disposable income goes toward ‘wants’. Such things might include traveling, buying a big-screen TV and other gizmos, and so on. Obviously the types of wants will vary by individual. By the time somebody has retired, they usually have acquired all of the “stuff” that they would want. Accordingly, most retired people (in my limited experience, at least), spend a lot less money on purchasing things beyond day-to-day necessities.

Even then, though, the expenses typically go down - most retired people I’ve met have extremely small appetites. There’s a reason that “seniors menus” usually have smaller portions - it’s because most seniors have no desire (or ability, in many cases) to eat a huge portion of food. Thus, food expenses go down in retirement.

Some other categories of expenses often go down in retirement as well. Housing, for example. Many retired people find large houses to be too much for them, so they downsize. This reduces property taxes, utility expenses, and so on. It can also eliminate a mortgage if one is still owing on their larger “family home”.

The one category that is likely to get more money in retirement is travel, but even then I don’t think the effect is as significant as you might think. With no time limitations, retired people are free to travel last-minute, or during the “low” season. In either case, it’s much easier to travel for far less than a standard working stiff, which partially offsets the fact that the individual might be traveling more often.

I’m sure there are individual differences, but I think my point is clear: on the whole, expenses will go down in retirement. While I think saving for retirement is definitely an important thing to do, it shouldn’t be done “at all costs”, meaning significantly sacrificing your standard of living while you’re young, healthy, and able.

In your first sentence did you mean to say “your comment about expenses INCREASING in retirement”? Because I think I’ve been talking about expenses increasing (or rather, not significantly decreasing).

I think we are arguing about the wrong thing here. I don’t think we can really answer the question “will my/your/one’s expenses decrease in retirement.” I think people spend based on what they earn. That is probably especially true in retirement when you are closer to the end of your life (less long-term planning required). The right questions are “how much income do I need in retirement” and “how much do I want.” Those questions have also been asked and answered in this discussion but I think the question “will my/your/one’s expenses decrease in retirement” just doesn’t make sense. Unless you want to talk about “necessary expenses.” And there’s no doubt those will decrease. But you were referring to total expenses dropping in retirement (including “fun things” as you said). Everybody is different I guess, but if you won the lottery in retirement you would spend it (unless you became mentally ill). Same thing if your income somehow increased post-retirement. You’d find a way to spend it. I (or rather a grandparent of mine who re-married post-retirement) can speak from personal experience on that one.

Great points though…I also save as much as I can to have the flexibility to retire late with more or retire early with less.

What a great discussion this has been! I’ve learned a lot here.

If you’ve eliminated all of your debts when you retire, and your children are grown and on their own, your post-retirement expenses are likely to drop greatly from their pre-retirement peaks, even factoring for traveling more and doing other “fun” things.

I take your point, however, and I’m in the same camp regarding retirement savings - I save as much as I possibly can for retirement, not because I fear being forced to eat dog food when I retire, but because I want the flexibility to choose to retire early. Having a good pension combined with a large RRSP account will give me that flexibility.

Trahair’s point is that you don’t NEED to save every possible penny, because your expenses in retirement are likely to be lower than you think they’ll be.

“I have to agree in general term that there is no fixed % of your current income that works for everyone. It has to do with what you want.”

Well said.

But is this due to the fact their expenses went down independent of their income decreasing? I’d like to see such a study. The following is also true: “research on spending patterns does show that most people tend to spend less not more when they have less money.” And so is the following: “research on income patterns does show that most people tend to earn less not more when they retire.”

I didn’t say needs are irrelevant. I said (in brackets in my original post) that they are irrelevant if “you can easily satisfy your needs.” I probably explained this wrong (as usual), but what I meant was that for me needs in retirement are irrelevant because I don’t want to just satisfy my needs in retirement but I want to satisfy some needs and wants. Needs are the 30% that Trahair talks about. Double or triple that up to 60-90% of pre-retirement income and you’ve got your needs (diapers and food) covered and some money for wants. So I look at how much total do I want in retirement, not how much do I need to scrape by. That’s sort of why I think Trahair’s myth #1 is a bit of a moot point since who wants to just up the minimum?

I might get back to some other comments later this week but not sure because I’m rather busy this week. I’m thinking of starting an “on notice” and a “dead to me” list (a la Colbert). To add some humour to my habit of bashing various people, so people won’t take me too seriously when I am “too harsh” on person X.

I also disagree that your needs are irrelevant. Our needs are finite and can be planned for. Our wants are not. If you keep planning for everything you could ever want thirty years down the line, you’d never retire. BTW, what makes you think that a modest, frugal person is going to live lavishly in retirement? As we get older we tend to become set in our ways and most people are going to live in pretty much the same lifestyle they were accustomed to in their working years.

I realize that this may not apply to everyone but it does apply to most people. For people who are 55 or older, who can count on OAS and CPP to fund part of their retirement, it is easy to agree with DT that you don’t need all that much in your RRSP.

I have to agree in general term that there is no fixed % of your current income that works for everyone. It has to do with what you want.

For example, I like the way I live right now and it isn’t costly. If I assume I’ve paid off my mortgage in retirement I could live off of $22,000 after taxes, so if I add in $3000/year in travel. I can retire off of $25,000/year. So people might assume I’m nuts for that amount, but its how you live your life.

CD

There seems to be a lot of tech geeks in the PF world.