Determining Living Expenses for Retirement

Short on Details

I'm 10+ years from retirement, so I've begun reviewing materials to help me plan for those years. When a title says, "Determining Living Expenses," I suppose I expect a bit of meat on the subject. Instead, I got bare bones. The book says to plan for increased living expenses -- things like health care and long-term care. It rehashed ballpark numbers (such as Fidelity's estimation of $200k per person for retiree medical expenses and $5k-$10k per month for long-term care insurance)...but what about regular expenses? Do they change upon retirement (food, utilities, etc.)? It covered the biggies related to healthcare, which is why I don't pan the e-book, but it really did not provide any detailed guidance on planning for the post-retirement living expenses.

The book does advise something on which I still mentally munch: A recommendation to expect 100%-125% of expenses in the elder years:

First, does this include the aforementioned "biggies," or is that living expenses only? I bring this up because, if one IS saving for those later years, then living expenses WILL go down once you cease saving for those years. My net pay is largely AFTER my long-term savings because of that 15% (+ or -) that comes off the top. Thus, if my pay NOW is 500 a week, and if I put 20% in retirement savings, then I need plan for 400 a week. (Note that my numbers are ONLY for ease of calculation...). It makes sense to me that I'd plan on that 400 a week PLUS the medical expenses/LTC insurance. If there's anything over that, I'd consider it to be a bonus.

Second, does this 100-125% include an inflation factor? The 100-125% recommendation makes more sense if that is the case. Planning on 125% of one's income in the early stages implies a bit of excess (particularly given the first point above); but as inflation whittles away at buying power, that 125% will -- in the later years -- purchase what 100% once purchased (and then 90%, etc.). Thus, if you're disciplined enough to save today, AND if you put aside any of the early-retirement excess, then the retiree should have enough once inflation smacks down one's purchasing power.

I pay attention to this a bit earlier than many my age because I've witnessed parents who saved what was then considered a boatload of cash (around $350,000); but unfortunately, inflation, an abysmal interest rate environment, and an elevated life expectancy resulted in insufficient assets to meet their retirement needs. Throw in the anchor of an unusual health crisis, and they're frightened about their future. They never lived recklessly; they did all that was expected back in their more youthful days. They just could not anticipate all the events that led to this pass.

I therefore seek how to plan for that era of my life, and I'd rather plan for more than I need than to plan for just enough to meet my needs. If I leave assets when I die, so be it...at least I won't be approaching my 80's having outlived my assets, and I won't have to rely on children or a governmental agency to make lifestyle decisions for me. It's in that spirit that I sought "meat" as to what to plan for. I wanted something like, "plan for 7.5% increases in energy costs," or "it's sufficient to budget about 60% of current expenditures on clothing." In other words, where SHOULD I begin, and I can customize the advice to suit my unique lifestyle. With such details, I can do the math and see if my expected assets will be sufficient.

Instead, this book is a rushed version of the same stuff plopped down on the Sunday newspaper magazines. That's not to say the book is utterly useless; it's just far too short on details to provide any long-term value.