The Economics of Retirement: Adding Up the Costs
Economists, media sources, and many other informed individuals hypothesize that, for planning purposes, households wishing to maintain their standard of living in retirement need to replace 70% to 90% of their pre-retirement income. The reality, unfortunately, is that Social Security is not designed to match these estimates, typically falling 10% to 30%–and often further–below these projections. This, of course, means that retirees must ensure supplemental sources of income to make up the difference. But the key question is how much supplemental support will be required? That’s one of the big unknowns folks looking ahead at retirement life need to face.
Nerdwallet’s Dayana Yochim examines this issue in a post on kcentv.com, approaching the question in the form of a budgeting exercise focusing on the realities of average costs (according to BLS information) in areas like housing, health care, transportation, etc. The message from Ms. Yochim, of course, is that being forewarned of what’s ahead will help you understand the variables you need to consider, and will help prepare you for the decisions you’ll need to make (like when to begin drawing Social Security benefits, for example.)
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