[Christy]

Could someone explain the whole having 70 – 80% of your pre-retirement income for a comfortable retirement?

Our household bring in between $400-425k but we’re in an expensive stage of life with 2 in daycare and 1 on the way.

We do come ahead each year fairly well financially with our investments and savings.

But the idea of having $297,500/year saved for retirement doesn’t seem attainable for 25-30 years given our current expenses.

[Frank]

There is no basis for such an assumption, so don’t use it. The reason it exists is MARKETING.

The financial services industry knows that most people have no idea what they actually spend, so comes up with metrics based on income to start a conversation that hopefully ends in a sale.

Here is what you need to know: You should never accept any rules of thumb from the financial services industry unless and until you have researched and know where they came from.

A large percentage of them are unadulterated bullsh** designed to attract attention and sell products.

You need 25x expenses to be over-saved. After that, its all about proper management. The end.

[Melissa]

I think most in the FI community think of it more in terms of a multiple (25x) of expected retirement expenses instead of a % of income.

I’m guessing they say 80% of income assuming that you won’t have to save a % of income anymore in retirement, and that your income needs will decrease compared to your working years.

[Sean]

Well if you’re saving 20% you need roughly 80% to have the same spend. If you’re saving more than 20%, then maybe you’ll need less.

If you can’t save 20% on 425k you probably need to look at where you can cut your expenses.

But there is something to be said for different phases of life, and the fact that with kids out of the house you probably won’t spend as much.

You don’t mention when you want to retire, but obviously the later it is, the longer you’ll have to save up, and the fewer years you’ll have to cover.

[Dawn]

We’re tracking our actual spending for retirement and planning off of that.

I think the 80% is a lazy income- tax estimate

[Kim]

You are blessed and many families subsist on much less . Do what you can but don’t for a minute give up time with your babies to work extra hours /days.

Time is too precious at that age

[Jacqui]

Agree with what everyone else has said, but want to echo that that’s essentially $25K/month, which is steep for this community in most ways.

With $400K+ coming in you can most definitely get to a 20% savings rate, even if you start small (unless there are extenuating circumstances).

A lot of what FI involves is making cuts to help realize what’s actually necessary for your life, then by living in a very structured way, you in turn get freedom.

[Aaron]

The way I think about retirment is I project out what my expenses will
Be and try to figure out what combination of assets will
Meet that in retirment .

If you project to spend 297,500 a year that’s gonna require quite a large collection of assets to support

[John]

This is well explained throughout these responses. If you are spending 300k a year and want to maintain that in retirement then you are also going to have to generate more than that to account for taxes.

I want to spend about 57% of my current salary as a base and add even more on for extra travel, new cars, etc.

I need to generate even more savings and am planning to account for taxes as well as I will have a lot of 403b and pension income that will be subject to taxes. Start with tracking your spending.

Child care years are expensive, but it is easy to then just transfer that into the next new expense (private school, a bigger house payment, a new car)?

Eventually you have to save enough to maintain that lifestyle in retirement or likely downgrade in some manner.

[Sarah]

That rule is goofy and always has been. I calculate my expenses for current expenses and expected future expenses based on inflation and life stages.

My fi number is significantly lower than what it would be if I followed that silly rule.

I’m not going to be paying 2k a month in daycare during retirement.

[Dan]

That’s really not applicable to you as it’s only a very generic rule of thumb and you should focus your future income need based on spending rather than your income.

It’s not what you make, it’s what you save and invest and spend. You may very well benefit tremendously from working with a financial planner.

You’re making such a high income that seemingly small mistakes or things you’re unaware of can greatly compound against you.

I would encourage you to consider that. Good luck to you!!

[Sandra]

That a traditional guideline. Better is to determine your expected expenses instead of using some random guideline.

[Author]

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