I have talked about the three stages of retirement and what that means for health and lifestyle. I have not talked about how these stages impact you financially. When retirement planning the rule of thumb is you should expect to live about 70% of your pre-retirement income. Between the ages of 60 to 70, you will spend more. Some people will spend up to as high as 110% of pre-retirement spending. They are travelling, collecting the newest toys or expanding the amount of aid they give to loved ones.
Between the ages of 75 to age 85, we spend less. For some of us, our costs may drop to 80% of pre-retirement income or less after the first spouse's death. Between the ages of 85 and 95, our costs may be lower or higher than 70% of our pre-retirement income. This depends on what we are spending on health care.
And then there is inflation which over time averages between 2 and 4%. This means that our spending power goes down by this amount every year unless we have investments that bring a greater return than this amount. All this means is that none of the old ways apply to retirement today.
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