Can you live happily in retirement on only 66% of your working income?

Roman Samborskyi /

Editor’s Note: This story originally appeared on NewRetirement.

Contrary to what many financial planners suggest, you can live on much less than 100% or even 80% of your pre-retirement income. In fact, a investigation by T. Rowe Price of new retirees who have 401(k) account balances or rolling IRAs have found that you can live comfortably on much less.

The report suggests that nearly three years into retirement, the majority of retirees are living on just 66% of their pre-retirement income (on average).

Is 66% of your work income really enough for your retirement income? Too?

retired senior man
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Only you can really know what you need. But, it is useful to understand what is really going on in households across the country.

Eighty-five percent of the 1,507 survey respondents say they don’t need to spend as much as they did before retirement to be satisfied. And 57% say they live as well or better than when they were working.

“This [the data] doesn’t surprise me,” says Cynthia Petzold, Certified Financial Planner at CommonWealth Financial Planning LLC in Roanoke, Virginia. “Everyone’s situation is different, but I think 66% is reasonable. [to cover] basic living expenses.

But the figure likely doesn’t include special or one-time expenses, such as travel, home repairs or car replacements, she adds.

Interested in living on less in retirement? Here are a few tips…

Don’t rely on rules of thumb: project what you really need

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The consensus among financial planners is that there is no magic income that everyone should strive for. The only real way to determine how much you and your household will need is to do detailed budget projections. Maybe you will need 50%, 66%, 100% or even 200% of your work income.

Get serious about budgeting for your next 20-30 years. It might sound crazy or unrealistic, but you can break your projections down into five-year chunks or think about milestones like kids graduating from college or your spouse retiring.

You can also think of phased retirement – an active phase when you first stop working and maybe spending even more than when you were working, a slowing phase when you start spending less, and a cooling phase. end of life where health care costs can be high.

The NewRetirement Planner allows you to do this kind of lifetime budgeting. Set as many different spend levels for as many different retirement phases as you want overall or in 75 different categories. Budgeting for your future helps you envision and make a plan for the life you want.

Create a reserve in your retirement savings

Elderly couple worried about social security and expenses
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Be sure to include these occasional expenses, which can significantly reduce your savings if not properly budgeted.

Home and car repairs, entertainment expenses, and rising health care costs are often overlooked in the planning stages, but they should be budgeted for.

“You don’t want to be in a position after retirement where something happens [that can] destroy your retirement plan,” says Jim Cantrell, certified financial planner at Financial Strategies Inc., based in Brookfield, Wis. “You want buffers in your retirement plan, and one way to do that is to estimate the high costs – in those occasional expenses. If not in the plan, these can be $10,000 to $50,000 that you weren’t expecting and can really hurt your retirement plan.

For example, most retirees tend to replace their car within five to 10 years of retirement, he says. So to plan for this cost in the future, retirees should consider how much it would cost to buy a new or used car and add it to their budget.

And don’t forget travel, the retirement activity most sought after by the greatest number of retirees.

Whether it’s travel or something else, be sure to budget for what you want to do in retirement.

Watch your budget and be flexible

senior friend shopping
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Flexibility is key to establishing and achieving your target retirement income level.

“Once you’re retired, annually review your projected expenses, your sources of income, and adjust your expenses based on your income,” Petzold suggests. “Be flexible when considering your retirement expenses. Sometimes I think people don’t understand that you don’t have to withdraw the same amount every month.

Ultimately, finding the right balance between your cash flow and spending habits, while accounting for occasional expenses, is key to living comfortably in retirement.

“People say financial planning is like a headache, but I don’t think that’s true,” Cantrell says. “It’s more like a Rubik’s Cube: all the pieces are linked together. Every time you say, “I’m going to change what I spend on one thing,” it changes what you spend on everything else.

Consider the average retirement income

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Not sure if 66% of your work income will really cover what you need and want in retirement? Perhaps consider the average household retirement income: $71,446 for 2022. (However, remember that averages, especially national averages, can be extremely misleading. Where you live, your age, and specifics of your lifestyle are more important than the averages.)

To prioritize

Senior woman holding house key
Roman Samborskyi /

Budgeting for 66% of your pre-retirement income may not mean you can buy everything you want, but you can make it work if you prioritize spending on what’s really important to you.

Try living on a tight budget before you retire

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It might not be completely realistic, but it might be a good idea to try living on a tight budget before you retire to get an idea.

Health care budget

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If you think Medicare is going to cover your healthcare costs, think again. There are things that Medicare does not cover.

Research from Fidelity Investments estimates that a 65-year-old couple retiring in 2022 can expect to spend $315,000 on health and medical costs throughout their retirement. And that doesn’t include the potential cost of long-term care.

Regardless of the level of spending, you will probably make it work and be very happy

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A Merrill Lynch study found that 92% of retirees say retirement gives them “greater freedom and flexibility to do what they want, no matter how much money they have.” The ideal point of freedom is between 61 and 75 years old. This is when the study says most people enjoy the “best balance of health, free time, pleasure, and emotional well-being.”

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