How much does income affect your post-retirement lifestyle stability?

24 thoughts on “How much does income affect your post-retirement lifestyle stability?”

  1. I’m learning that spending doesn’t make me happy. That enables me to keep my expenses “low” from now through financial independence. Keeping low expenses also helps smooth out the ride of financial independence if any big stock market declines were to occur (where most of my nest egg will be). Being nimble is extremely important in FI.

    1. It’s great how easy this all gets once you learn that spending money on stuff isn’t the path towards true happiness. Everything falls into place after that point, enabling the foundation for some seriously aggressive saving. The less you spend, the happier you are?

      It’s an easy equation to solve, and even easier to LIVE! 🙂

  2. Great post Steve!

    I have been spending a lot of time thinking about what really matters most in this journey to financial freedom. Until recently I thought my “One Metric That Matters” was my Net Worth metric.

    However, after careful contemplation I am realizing after getting more granular in the details of my plan to reach a $10M Net Worth by the time I am 48, that my overall savings rate is actually more important than anything right now.

    I think a lot of people including myself (until recently) miss the importance of the savings rate. My model is heavily dependent on my ability to save 50% of my gross income. My contributions alone account for 40% of $4M in Net Worth in my 20 year plan.

    It is not until 10 years into my plan that compounding out paces my savings contributions.

    My households high income and assumptions for that to grow are what make the 20 year plan viable. But it’s the discipline to continue saving 50% of our gross income that makes the entire plan possible.


    1. A high income, coupled with a high level of savings, truly is the best of both worlds. I live in a two-income household and both my wife and I make darn good money, and saving over 70% of our combined income is, like in your situation, setting the chips up for an awesome looking retirement! 🙂

      Thanks for reading, Dominic.

  3. Great post, Steve. This is reminiscent of the Millionaire Next Door, and the idea that people who earn more feel compelled by their station in life to spend more (cars and clothes to match their job, a house in a “good” neighborhood, private schools, country clubs). While we’ve never felt the need to buy into the trappings of wealth, and so have avoided buying new cars, fancy clothes and exclusive memberships, we for sure lived large in the form of dinners out and travel. It was only when we realized that we needed to cut our spending, not just save a lot, in order to succeed at early retirement, that we truly made the switch to a lifestyle of frugality. When we moved from the city to our small town, we deliberately chose to buy in the least exclusive neighborhood, and bought less house than the banks said we could “afford.” We still drive our 11 year old car, though did add a second when we moved to the mountains. And we now eat out far less, and travel on the cheap. The best part is: we really don’t miss anything, or feel like we’re living a miserly existence. So we feel like we can succeed at early retirement, and can’t wait to find out!

    1. Thanks! Totally, when one switches to a lifestyle of frugality, spending almost automatically gets taken care of. Of course the switch can be difficult for people, but that’s quite frankly the toughest part. The rest comes easy.

      And you definitely did the real estate right. Our house happens to be the best house in the neighborhood with the best views, which means the value of everybody else’s essentially brings ours down. We won’t make this mistake again, for sure. 🙂

  4. Awesome post as always.

    I like that there are two facets to this equation. This is exactly what gives “middle class” families a chance at early retirement when some high income earners will never achieve it. I love that the end of the game is not decided right from the beginning, and that instead everyone actually has a chance. I feel this has been the most powerful lesson for me to understand that RE was a possibility.

    Also: I love the Maui picture, it almost looks like a drawing. HDR?

    1. Thanks Stockbeard! Actually, no HDR on that image – just regular Lightroom post-processing. I’m always amazed at how much detail photo editing software can extract from images, even if the exposure isn’t 100% right. 🙂

  5. When I obtained a full-time job this year, we could have very easily continued living the lifestyle we had (and then some). Dining out, traveling, spending too much on stuff that doesn’t matter–we lived what you noted as an unsustainable lifestyle. We took a hard look at what we were doing and are slowly making changes to be sustainable. Thanks for the great post!

    1. Hi Claudia,

      Good on you for making the lifestyle changes necessary to kick your savings and frugality into high gear. I know that your future self will definitely thank you for it. You are one of the few in this country who isn’t susceptible to lifestyle inflation! 🙂

      Thanks for reading.

  6. I’ve always focused on cutting spending in order to increase savings. But you do make a great point – and it is something I worry about. We both make a decent salary, which allows us to still spend a lot, while saving a bunch. I do worry that we will run into problems because right now we are used to having a huge buffer, so that money is not a source of stress for us. But when we are retired and don’t have that safety cushion… I think that is where we will have problems.

    1. Hi Mrs. SSC,

      Definitely take the buffer while you can – nothing wrong with a little wiggle room here and there. But yeah, it will probably be a change (for both you and me) once we finally slip into our retirement lifestyles and start living off of our investments rather than simply contributing towards them. Talk about one giant shift! 🙂

  7. We won’t be able to cut our costs in retirement (if I ever retire completely at all) by a lot. Other than the obvious mortgage issue. But then I’ll probably still have us doing a rental property or two.

    On the other hand, that’s revenue that will help us supplement our retirement accounts, which are currently woefully underfunded. (First, we’ll ramp up IRA savings next year — once we have the $25k we need for a medical expense — then we’ll worry about our mortgage, then a rental property.)

    But we do have several health conditions that will affect expenses even into retirement. So our costs will be similar even as we reach our golden years. Plus I’d like to find the money to travel more. So we’ll just have to focus on not letting our lifestyle costs inflate and cut where we can to spend on what matters. In other words, basic frugality.

  8. I just stumbled across your blog through Twitter and love your blog and this post. I can totally relate! I’ve been a lot more frugal in my spending over the last couple of years and noticed it not only increases my savings for early retirement significantly, but has enabled me to see that I could retire even earlier than I thought… I turn 40 next year and will have my mortgage paid off at the end of next year. Since I track my spending meticulously, I think I can retire anytime… but saving over 70% of my income and seeing my investments grow is so fun. Guess I’m just a finance nerd… Great post! I’m now a Twitter follower. 🙂

    1. Thanks Jen, and congrats on being so darn close to getting your mortgage paid off. That’ got to be a very, very good feeling. Thanks for the follow, and good luck in your drive towards financial independence and early retirement!

  9. Hey Steve! I have been kicking this one around in my head for a while. What exactly will my post-job/retirement look like? I have been taking steps to save in my 401k sure….but more importantly (and like you mentioned) I have been working on my current lifestyle choices NOW. I have drastically cut my monthly spending and moved to a cash only budget for all non-bills. I agree with you that yes a high-income or high savings rate helps, but it’s the choices we make NOW that will determine how our future looks.

    1. Thanks Jason, appreciate your thoughts! And good on you for taking the steps to better your financial life now, well before you plan to finally call it quits. It’ll make that process that much easier. 🙂

  10. Even though we’re both still working and it’s 2 years before we hit FIRE, we’re only allowing ourselves a monthly spending budget now that we know we’ll have in passive income when we retire. Our monthly spending budget has to cover everything, including fixed outgoings (insurance, taxes, utilities etc) food, work commuting costs, entertainment etc. The rest of our income is invested on the day we get paid.

    That way, when we retire, we’ll have been living on our ‘retirement’ budget (passive income) for two years already – the ‘flip-over’ should be seamless if we’ve got it right.

  11. So many people forget that what you spend in retirement matters a great deal. My current assumptions have me at equal spending to now, but allocated differently. Less in commuting and more in food.

    1. Thanks ZJ – yup, spending plays an incredibly important role in all of this. Yes, it’s nice to have a bunch of money. And yes, it’s also nice to earn a bunch of money. But, if you’re also *spending* a bunch of money, then all that income doesn’t matter too much!

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