What the Surveys Don't Say About Your Retirement Income Needs

NEW YORK (TheStreet) -- What will it take for a satisfying retirement?

Not as much as you think, perhaps.

Financial experts have kicked this question around for decades. The oft-quoted rule of thumb says the average retiree needs 70% of pre-retirement income to maintain the same standard of living after quitting work. That assumes there will be no further need to save and that the mortgage is paid off and expenses such as commuting are a thing of the past.

But some have said that rule is obsolete. Because people are living longer, retirees must reserve some of the annual income for the future, meaning the income must be larger. And because yields on safe holdings such as bonds and savings accounts are so low, it takes a bigger nest egg to produce the same income. Some experts caution retirees against relying on the old rule about withdrawing 4% of assets per year, suggesting 3%, or even 2%, is more prudent. That can be pretty discouraging.

But occasionally there's some upbeat news, such as a study by T. Rowe Price, the mutual fund firm. "Retirees are living on less," the report says. "Nearly three years into retirement, retirees report living on 66% of their pre-retirement income on average. But that has not translated to dissatisfaction with their lifestyle: 57% report they live as well or better than when they were working."

Of those surveyed, 89% were between somewhat and very satisfied with their retirement so far, and 85% found they could be satisfied spending less then they did before retiring.

The survey did not reflect all retirees' views, since it polled only those with rollover IRAs or balances in their 401(k)s. That suggests these folks had planned ahead and earned enough to save, while many Americans have done neither.

Still, the results offer a valuable insight into what it takes to be satisfied in retirement. The financial services industry tends to portray retirement as a kind of 24/7 spending spree focused on travel, lavishing money on the grandkids and moving to a dream location

But if people are happy living on substantially less in retirement than they spent before, it doesn't seem likely they are doing all this. Among those polled, 65% said they found a new freedom in not trying to keep up with the Joneses.

Being free of the rat race is, by itself, many say, one of the most satisfying aspects of retirement -- coming and going as you please, not having to answer to The Man, spending time with people you care about, focusing on sports, hobbies or volunteering, barbecuing instead of eating out ... All that, though not addressed in the survey, may be more valuable than going on an expensive cruise or driving a flashy car.

There's no question that many working-age Americans should be living more frugally to put more aside for later years, and that many will have to trim their spending quite severely to make it through a long retirement. Strategies such as delaying the start of Social Security and working longer make sense for many, if not most.

But those who are doing their best to prepare for retirement can take some solace in knowing that others find they don't have to be rich to be happy.

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