Robert Powell’s Retirement Portfolio: Are you saving more than you need for retirement?

by | Aug 26, 2022 | Stock Market

How much will you spend in retirement?   Despite what you’ve been led to believe, your spending is going to decline on a real basis – after adjusting for inflation – about 1.8% per year over the course of your retirement, according to Explanation for the Decline in Spending at Older Ages, research published by several authors affiliated with the RAND Corporation. Watch Explanations for the Decline in Spending at Older Ages. 

Now, that might not sound like very much, said Michael Hurd, a senior principal researcher at the RAND Corporation and a co-author of the research. But if you begin retirement at age 65 and survive until age 95, you will have reduced spending by quite a bit. Think of it, he said, as the “reverse of compound interest.”  What that means, among other things, is that you might be saving more for retirement than you’ll need. “The so-called retirement crisis, it’s there for some people,” said Hurd.  “But it’s not a population-wide thing. In our metric, 80% of the people are adequately prepared for retirement.”  Calculating how much you’ll spend in retirement (and how much you need to save for retirement) is no easy task.  In the absence of creating a year-by-year budget, many are told to use a time-honored rule of thumb: Plan on spending about 70% to 80% of your preretirement income in retirement. But that rule of thumb is …

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