declining spending in retirement

Discussion in 'Financial Planning' started by beliavsky, Sep 25, 2005.

  1. beliavsky

    beliavsky Guest

    A New York Times article

    New Advice to Retirees: Spend More at First, Cut Back Later
    By ILANA POLYAK
    Published: September 25, 2005

    at http://www.nytimes.com/2005/09/25/business/yourmoney/25save.html
    discusses the view of some financial planners that since most retirees
    desire less consumption as they age, it is rational for them to spend
    at higher rates early in retirement. A paper

    Reality Retirement Planning: A New Paradigm for an Old Science
    by Ty Bernicke, CFP

    cited by the article is at
    http://www.fpanet.org/journal/articles/2005_Issues/jfp0605-art7.cfm .
     
    beliavsky, Sep 25, 2005
    #1
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  2. beliavsky

    dapperdobbs Guest

    Beliav... -

    The article references medical expenses for retirees aged 75+ at some
    $3,600 a year. That must be one heck of an insurance policy! I'd
    factor in more like $3,600 a month in bills, for a total of $43,200 a
    year - for medical / living expenses alone. And that's conservative.
    Check out the middle to high-end of tri-level care retirement
    communities lately? Skilled nursing ballparks around $70,000 a year.
     
    dapperdobbs, Sep 25, 2005
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  3. beliavsky

    Avrum Lapin Guest

    The articles provide an interesting perspective on spending in
    retirement. However I am leery when one talks about averages without
    showing a standard deviation. To place the word average in perspective
    remember that the average person has one ball and one teat.

    While it might be tempting to adopt the ³spend more at first, cut
    back later² I am more worried about ending up eating canned tuna every
    day.

    My feeling is that in the first year of retirement the average
    retiree will spend about 90% of what he spent the last full year of
    work. The 10% delta is the pre tax equivalent of FICA etc deductions.
    Obviously a person with high commute expenses or other high work related
    expenses will spend less but the avid golfer may spend a lot more just
    in greens fees.

    I look at the ³big trip² or the kitchen remodel as being one time
    expenses.

    Nursing homes remain the big uncertainty but remember that only
    half of us will end up there and half of those will be out within 3
    years (in a box). There is always Medicaid to bail you out.
     
    Avrum Lapin, Sep 25, 2005
    #3
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