En español | Financial experts seem to speculate endlessly about boomers' projected lifestyle in retirement based on their savings and spending patterns. Now a new survey that polled recent retirees about their standard of living has found that, for some, you don't need a lot of money each year to retire comfortably and live happily.
According to the survey by Baltimore-based investment firm T. Rowe Price, recent retirees report living on 66 percent of their pre-retirement income on average - $58,000 annually - and say they're very satisfied.
Half of the 1,507 people surveyed say they're living as well or better than when they were working. Most say they're better off financially than their parents were at that age.
"The key finding is that retirees are making their retirements work," says Anne Coveney, a senior manager at T. Rowe Price. "What's impressive is that they've adjusted their spending and their satisfaction is quite high."
The retirees surveyed had a 401(k) or IRA and a median household savings, including any home equity, of $473,000.
Retirees typically have fewer expenses than people in other age groups. They no longer pay for work-related costs, for example. And by the time they're retired, their children - and the expenses that go along with them - are gone.
According to a J.P. Morgan Asset Management study in March, consumer spending peaks at age 45 and then declines in all areas except health care. The study also found that retirees don't seem to need as much income to be content. After spending hit $40,000 annually, their satisfaction in retirement increased only incrementally.
So can boomers retire with less than financial experts recommend? Generally, advisers say retirees need at least 75 percent of their annual pre-retirement income to maintain their standard of living and reduce the risk of outliving their savings. In other words, if you earned $100,000 a year, you'd need about $2.25 million to last 30 years.
Dave Richmond, president of Richmond Brothers, a wealth management company in Jackson, Mich., says it's easier than you may think to live on a smaller percentage of replacement income.
"If you're still living with a mortgage and you have [consumer] debt, you're going to need a higher percentage of your pre-retirement income," he said. "But if you made $100,000, you no longer need to save the maximum $23,000 in a 401(k). That's a 23 percent savings. And now you're in a lower tax bracket from 25 percent to 15 percent. That's another 10 percent savings. So now you're saving 33 percent [of pre-retirement income] right there. Now you're down to 66-67 percent."
Living on less is not what Sacha Millstone, a senior vice president of investments at Raymond James & Associates in Boulder, Colo., says her newly retired clients want. They plan to spend about as much as they did when they were working.
"I have been practicing for 30 years and I do a lot of work preparing people for retirement and managing their accounts after they retire," she said. "I can tell you my clients are spending much more than 66 percent of their pre-retirement income and much more than $58,000 annually. They want to do things they couldn't do when they were working. The first years of retirement they tend to make more trips ... and they spend more."
The survey also reaffirmed how important Social Security is to a retiree's lifestyle. The government benefit was by far the most important source of income for retirees, accounting for 43 percent of what they brought in, the survey found. Pensions made up 19 percent. Funds from retirement plans, personal savings and investments accounted for 18 percent of their income.
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