One rule of thumb holds that households should plan to spend about 70-80 percent of their pre-retirement incomes after retirement begins.
In fact, many advisors build this assumption into their retirement needs analysis models.
However, the world keeps changing, and for some clients you may want to point out new realities that can increase retirement budgeting flexibility:
-
In the United States, retirement keeps getting more expensive as the costs faced by retirees rise at a faster rate than the Consumer Price Index. To review recent proof, see "Show clients why retirement inflation is not dead":
-
The U.S. dollar is on a roll against almost all foreign currencies. In 2015 alone, through the end of October, the dollar increased 10% against the euro, 12% against the Mexican peso, and 14.5% against the Australian dollar.
These trends have created a growing gap in the retirement cost-of-living in the U.S. relative to attractive options overseas. If your clients are interested in spending all or part of retirement years abroad, you may want to help them by doing the following:
-
estimating potential cost savings
-
comparing quality-of-life considerations in the U.S. vs. abroad
-
factoring lower living costs abroad into long-term planning assumptions. The free cost-of-living comparison calculators at Numbeo.com are useful tools for this purpose.
For example, Valencia is the third largest city in Spain, near the Mediterranean, with an attractive year-round climate. Using Numbeo calculator, let's compare costs-of-living there to those in Chicago, the third largest city in the U.S.
Continue Reading for Free
Register and gain access to:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
