# Retirement Costs How Much?

-edited

Deconstructing the "average" cost of retirement.

On the heels of yesterday's post that people's retirement savings situation might not be as bad as they think (the key point is people with something, not people with nothing saved yet) this article by Mitch Tuchman for Marketwatch popped up that says the average cost of retirement is \$738,400. Mitch reasonably notes "a veritable truckload of caveats." In doing some math Mitch says the average Social Security benefit is \$16,000 and with a \$750,000 portfolio you can generate \$30,000 assuming a 4% withdrawal rate. He cites BLS data that the average cost of living is \$20,000 per person so \$46,000 per couple is math that can work.

He did not define whether \$16,000 in Social Security is per person or per couple, it seems low for a couple. According to a simple Google search the average benefit in 2017 was \$1360 per person per month which is close to \$16,000. Giving the other partner a spousal benefit instead of a full benefit to be conservative would put the total Social Security income at \$24,000 so instead of needing \$750,000 in Mitch's scenario you'd only need \$650,000. Where Mitch and I may have done the same search for Social Security benefits I would note that was the average payout. My mother used to get a spousal benefit, then when my father passed away she was able to move up to what had been his dollar amount. He started taking SS in the 80's and when he died his benefit, despite all those years of COLA was only \$1200. Many clients and the few family members taking SS in the last ten or 15 years get in the \$2000 range (then add the spousal benefit) which all in could bring down the original \$750,000 number even more. A \$30,000 combined SS benefit would only require a portfolio of \$400,000 in Mitch's example.

I talk about this all the time but figuring how to monetize a hobby can either relieve the burden on the portfolio some or depending on the income can delay portfolio withdrawal entirely giving the portfolio the opportunity to get to the number needed. I've had countless posts that downsizing into a tiny (or just small) house can be the answer for some people. In those posts I lay out a scenario of netting \$100,000 to add to the portfolio. I've also written many times about moving to a foreign country as a young retiree, renting out a paid for house here, living off the rental income while allowing Social Security and the portfolio to grow and then coming back to the US as a middle aged retiree.

The ideas are endless. The point is not to copy one of my ideas or anyone else's ideas but to learn about these alternative approaches and to explore whether something that is "different" could work for you and as I noted yesterday and I believe demonstrated again today; your retirement situation is not as bad as you might think if you have started to accumulate some savings.

One of the comments on Mitch's article said to "live for today, the future takes care of itself, it always does." I would encourage a little more balance than that, I wouldn't completely sacrifice today or my future. But in a similar vein, if you think you need \$750,000 and you come up a little short, something may have to give but it isn't the end of the world. Even at a goal of \$750,000, if you end up at \$400,000 you might be disappointed but you will figure it out because you will have to, in that scenario, \$400,000 becomes the reality that you will live with. Maybe the thing that gives is you work longer, maybe you figure out how to spend less or you'll find something else that has to give but you will figure it out without living in your car eating pet food.

Repeated for emphasis there are countless ways to solve your individual retirement situation. Find out your numbers from the SS website, assess your lifestyle needs and wants, devise a plan and start early so you can adapt that plan to any life changes be they good changes in life or not so good.