There are at least two schools of thought with regard to the basic principles involved in planning for retirement spending. The first, and most common, approach poses the problem as a seemingly simple determination of the retirement income needs of a retiree relative to pre retirement income. This is typically expressed as a “replacement rate,” in which a retiree targets a given fraction of his or her pre retirement income level as an amount adequate to sustain a desired lifestyle without working. Often, a particular level of income is given as a rule of thumb (e.g., 80% of pre retirement income). (more…)

For clues to how much it will cost you to live after retirement let us turn to a study made by our government in 1959. To make this study goods and services which represented a modest standard of living for a retired couple were priced in 20 American cities. The following table shows the annual cost of living for a retired couple in the city of Detroit: (more…)

One way to find out how much money you spend each month and what you spend it for is to keep a record of all expenditures during the next month. For this purpose some people find a small five cent notebook handy because they can carry it with them. What¬ever system you use, be sure and write down everything and es¬pecially what you spend for the “little” things such as magazines, a pack of cigarettes, toothpaste and hairpins. (more…)