Login

How Much Income Would You Need to Retire?

11 December 2017

One of the important questions pre-retirees face is how much they will actually spend when they eventually retire. Most financial advisers and planners would give a quote ranging from two-thirds of their pre-retirement expenses to 100%, depending on the lifetstyle they wish to maintain post-retirement.  This is an important figure, as it determines our retirement savings goal and how much we need to accumulate through savings and investments while we are still drawing a meaningful income or salary.

In this video, Dimensional Fund Advisors’ Dr Marlena Lee, VP Research, discusses her research on how the income replacement rate at retirement is a function of how much a person earned just prior to retirement. For many individuals out there, we aim to keep the same lifestyle we had enjoyed just prior to retirement. In their study, the replacement rate actually decreased – people tend to spend much less after retirement as some costs go down (less or no taxes to pay, mortgages fully paid, they eat less outside, have more free time to shop around for cheaper deals, etc). The replacement rate for households with higher income also went down significantly more than those with lower income, as there is always a form of minimum spending in the form of utilities, food and other daily necessities. In this video, note that the US 401K can be taken as a proxy of our local CPF payouts, whilst social security is a form of pension scheme.

The video broadly discusses, as a guide, what investors should think about when planning their goals in saving or investing for their retirement.

#

If you have found this article useful and would like to schedule a complimentary session with one of our advisers, you can click the button below or email us at customercare@gyc.com.sg.

Go back to homepage

IMPORTANT NOTES: All rights reserved. The above article or post is strictly for information purposes and should not be construed as an offer or solicitation to deal in any product offered by GYC Financial Advisory. The above information or any portion thereof should not be reproduced, published, or used in any manner without the prior written consent of GYC. You may forward or share the link to the article or post to other persons using the share buttons above. Any projections, simulations or other forward-looking statements regarding future events or performance of the financial markets are not necessarily indicative of, and may differ from, actual events or results. Neither is past performance necessarily indicative of future performance. All forms of trading and investments carry risks, including losing your investment capital. You may wish to seek advice from a financial adviser before making a commitment to invest in any investment product. In the event you choose not to seek advice from a financial adviser, you should consider whether the investment product is suitable for you. Accordingly, neither GYC nor any of our directors, employees or Representatives can accept any liability whatsoever for any loss, whether direct or indirect, or consequential loss, that may arise from the use of information or opinions provided.

GYC Perspectives

Markets are often irrational. Even among experts, forecasting does not consistently work. We instead believe in Evidence-Based Investing (EBI), which uses decades of empirical data and the greatest ideas in financial science to optimise investment outcomes. No market predictions, no forecasts, no emotions. All those things rely on gut-feel and intuition that cannot be consistently replicated.

Here, we share with you the evidence on why EBI works and why forecasting doesn't, as well as articles on topics such as behavioural finance to help you become better investors. New here? You can start with this introduction to EBI. Happy reading!

© 2017-20 GYC Financial Advisory Pte Ltd | Co Reg No 199806191K