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How To Get Squared Away: In Retirement

How-To It's a 3-step process: 1) Define the retirement income you need. 2) Decide how to get it. 3) Get it done. 


Your Retirement Income Plan

How to Get What You Need

You need a monthly income to stay in your house, pay your taxes, keep your car on the road, and remain active in your community.  Not just now but for the rest of your life, and the life of a surviving spouse or partner.

The calculator below helps you develop a Retirement Income Plan, using standard rules-of-thumb to provide Quick Estimates of:

  • The monthly income you need. 
  • Your monthly income from Social Security, employer pensions, rents, etc., and what you might get from your savings.
  • How you might add to your income and cut your expenses, and thus the income you need, if you downsize or adopt a less expensive lifestyle.
  • NOTE: All items, except employer pensions, are assumed to rise in line with prices. 

The TOOLKIT below has tools to help you get better estimates of the income you need and what you might get from your savings, by downsizing or cutting your spending, or from a reverse mortgage or government benefits.

In ADVANCED you can

  • Enter those estimates, or other corrections, to update your Plan
  • See if your survivor will have the income he or she needs.

Set the Monthly Income You Need

The First Step in Your Retirement Plan

A rough rule-of-thumb says you need 75% of what you earned while working.

If you earned $50,000 a year, the rule-of-thumb says you need about $37,500 a year, or $3,130 a month (all figures rounded to the nearest $10) rising in line with prices. 

For an estimate of how much you need, replace the $50,000 in the white box with your pre-retirement income and that of your spouse or partner if you’re not single.  

You can then correct that rule-of-thumb estimate, if you like, by entering “YOUR FIGURE” for your Monthly Retirement Income Target.

header-small Your Monthly Income Target  
header-column Pre-Retirement Income You Spouse Total
input results-small Yearly Income
input results-small   Monthly Income  
header-column Retirement Income  Your Figure Target
input results-small Monthly Income Target
header-marker Add Up What You Have    
header-orange Your Current Monthly Income     
text In the white spaces, below, enter the monthly income you get from Social Security, employer pensions, and other monthly sources, such as rents, and how much you have in savings.  
text We'll then use rule-of-thumb estimates to see what you could get from savings, downsizing, and adopting a less costly lifestyle. 
text For better estimates, and estimates of what you could get from a reverse mortgage or means-tested benefits, use the tools in the TOOLKIT below.  Then enter these estimates in ADVANCED, below, to update your plan. 
header-small Monthly Income 
header-column Source You  Spouse Total
input results-small Social Security 
input results-small Employer Pensions
input results-small Rents, etc.  
input results-small Income from Savings:  
text If you have $100,000 in savings invested in stocks and bonds, a rule-of-thumb says you can draw out $330 a month ($4,000 each year) with little risk you'll run out of money.  So enter how much you have in savings to see what you might get.
input results-small Your Savings 
input results-small Your Income from Savings
input results-small MONTHLY INCOME TARGET
input results-small MONTHLY INCOME
input results-small
header-marker If You Have a Shortfall    
header-orange What Downsizing and a Less Costly Lifestyle Could Do
header-small What Downsizing Could Do
text if you downsize from a $250,000 to a $150,000 house, a rule-of-thumb says you could increase your savings, and thus your income from savings about $250 a month & reduce your housing expenses about $270 a month.  
text Replace the figures in the example to see what you might get. 
header-column   Current House Mortgage New House
input results-small
input results-small Increase in Income from Savings
input results-small Cut in Housing Expenses
header-small What a Less Costly Lifestyle Could Do
input results-small If You Cut Spending 
input results-small NEW MONTHLY EXPENSES
input results-small NEW MONTHLY INCOME
input results-small
header-marker If You Still Have a Shortfall
header-orange Consider a Reverse Mortgage or Government Benefits  
text-bullets A reverse mortgage is a new and somewhat complicated option that might eliminate your mortgage, if you have one, and increase your monthly income.  
text-bullets You might be entitled to government benefits if your income is low and you have limited savings.  
text The TOOLKIT, below, has information about these options and where you can get estimates of what they might provide.  You can then enter those estimates in ADVANCED to add these options to your Retirement Income Plan. 
header-marker Your Plan  
header-orange Monthly Income Target
input results-small Original Income Target
input results-small Less Cuts in Spending From 
input results-small   Downsizing
input results-small   Adopting a Less Expensive Lifestyle
input results-small   Reverse Mortgage (eliminate current mortgage)
input results-small   Government Benefits 
header-orange Your Monthly Income    
input results-small Monthly Income from Social Security, Pensions, Rents, etc.
input results-small Income from Savings
input results-small Plus Income From
input results-small   Savings Added From Downsizing
input results-small   Reverse Mortgage 
input results-small   Government Benefits
header-marker Advanced    
header-orange Enter Better Estimates     
text Use the tools in TOOLKIT & enter the better estimates to update Your Plan. 
header-column  Income Cut Expenses
input results-small Income from Savings  
input results-small Downsizing 
input results-small Less Costly Lifestyle  
input results-small Reverse Mortgage  
input results-small Government Benefits   
header-orange Will Your Survivor Have Enough?    
header-small Survivors Generally Need Less Income, But Also Have Less 
text-bullets One person needs less income than two.  We assume your survivor will need 70% of what you need as a couple.  As survivors need less, we also assume they get 70% of any government benefits you get as a couple.  
text-bullets Survivors get one Social Security benefit, not two.  But if you're married, the survivor can get the higher of your two Social Security benefits. 
input results-small So tell us your marital status
text-bullets If married, your survivor generally gets half the deceased spouse's employer pension.  That's what we assume.
text-bullets Most employer pensions, however, are not increased in line with prices.   So we assume they will buy only 60% of what they do today when the first spouse (or partner) dies.  We assume the same for income from a reverse mortgage. 
text-bullets Caring for the final illness typically reduces the couple's savings.  We assume the final illness will reduce your savings, including savings from downsizing, 20%. 
header-small Will Your Survivor Have Enough?    
text    (All figures in today's dollars)
header-column Who Survives:  You
input results-small MONTHLY INCOME
input results-small   Social Security
input results-small   Employer Pensions
input results-small   Rents, etc.
input results-small   Savings
input results-small   Downsizing
input results-small   Reverse Mortgage
input results-small   Gov't Benefits 
input results-small MONTHLY INCOME
input results-small MONTHLY EXPENSES
input results-small  
input results-small

What About Reserves?

You Need Reserves

You need reserves for emergencies, either savings or home equity you could tap should you need a new roof or furnace or an expensive medical procedure.

But you might not need larger reserves to pay for rising expenses down the road

Expect to spend more on health care, perhaps twice what you’re spending per month today. But spending on transportation, entertainment, and other items often declines with age. Would such cuts in YOUR spending offset the rise in health care expenses?

  • If so, you don’t need savings or home equity in reserve to pay your rising bills.  
  • If not, you do need savings or home equity in reserve to pay those rising bills. 

The big risk is long-term care.  But unless you have a lot of assets – more than enough to provide the income you need – it rarely makes sense to hold reserves to pay the cost.

  • Most people rely on state Medicaid programs for those with “limited means.”  You don’t need large reserves if you’ll to exhaust your “means” should you need to enter a nursing home, usually at the end of life.  Many states also allow your spouse to keep the house + about $100,000. 
  • You can also buy long-term care insurance.  It costs about $200 a month per person and premiums could rise in the future.  Such insurance, however, can significantly cut or eliminate your need to hold reserves for long-term care. 


Tools You Could Use to Refine Your Plan

To Use Your Savings for Income.  A rule of thumb says you can draw out 4% of what you currently have each year, rising with inflation, with little risk of running out of money.  You’d get more if you buy an annuity, less if you live on the interest.  To consider your options, use Figure Out How to Get Income from Retirement Savings.

To Downsize. Your house is often your largest asset and largest expense.  To see the income you could get and the expenses you could cut if you downsize, use Figure Out How Moving Changes Your Finances. 

To Adopt a More Sustainable Lifestyle. To see where your money goes and where you might cut back, use Figure Out How to Make a Budget in 3 Minutes.  To identify specific ways to save money, use Figure Out Where to Cut Spending.

To Take a Reverse Mortgage. You can get cash, a line of credit, or an income for life, and can stay in your home for the rest of your life.  But there are things you need to know.  So use Learn About Reverse Mortgages.  To see what you might get, use the Government Approved Calculator, from the National Reverse Mortgage Lenders Association.

To Get Government Benefits.  Many retirees are eligible for benefits to help pay for medicine, medical care, food, utilities, and other expenses, but don’t apply.  To see if you are eligible, use the National Council on Aging’s Benefits CheckUp.

To Work.  Many retirees work these days.  You can’t work forever.  But while you do, you add to your income and preserve your savings for when you no longer work. To consider some issues in returning to work, use Learn About Strategies for Older Workers.

To Learn About Expenses Down the Road. Use Learn About Medical Expenses in Retirement and Learn About Long-Term Care.


The Greatest Challenge Isn’t the Math. It’s the way we’re wired.  So Learn About Behavior That Can Ruin Your Retirement.

Then Get It Done. Put reminders in your calendar. Schedule what’s urgent first. Then what’s big or done quickly. Then what’s not so big or takes time.  And in no time you’ll be DONE.

Our Assumptions & Disclaimer

Rules-of-Thumb We Use

Income from Savings

  • The 4% Rule:  In your mid-60s, you can draw out 4% of what you have in savings each year (1/3% each month), rising to keep pace with inflation, with “little” chance of running out of money.  As you can get a higher % when older, or a higher % if you use your savings to delay claiming Social Security, we see 4% as reasonably conservative.  

Income from Downsizing

  • It costs 10% of the value of your current house to downsize: to 1) fix-up your house, 2) sell your house, 3) move your belongings, and 4) fix up & furnish the new house.  After paying these costs, the difference between the price of your current and new house is added to your savings. 

Cut in Housing Expenses from Downsizing

  • Housing expenses – taxes, insurance, utilities, and upkeep – are 3.25% of the value of the house.

Cut in Expenses by Adopting a Less Costly Lifestyle

  • If you downsize, the reduction in your spending after you downsize. 

DISCLAIMER: The information provided on the SquaredAway website is for educational purposes only.  It is not intended to provide personal financial advice.



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