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By Dave Braze (TMF Pixy)

Welcome back!

In Lesson 1 you gave some thought to when you want to retire and (ahem!) when you think you'll expire. Subtract one from the other, and you've got the total length of time you'll be in that blissful middle ground of retirement.

So what's that gonna cost? That's what we're going to take a stab at figuring out today.

Popular financial wisdom maintains that, in order to live in retirement as we do today, we'll need 60% to 80% of the gross household income we now earn. This guideline assumes:

• In retirement, our job-related expenses for clothing, commuting costs, and lunches will probably disappear.
  
  
• We're no longer saving for retirement (because we're already there), so that "expense" disappears.
  
  
• Paid-up mortgages, or living in smaller homes, may cause housing costs to decline.
  
  
• FICA taxes disappear because we're no longer working.
  
  
• Income taxes often decline because much of our retirement income is composed of untaxed Social Security benefits.

Logic tells us that we can probably cope quite nicely with a smaller gross income than we have today. But we still have to decide what income we will need in retirement to live the way we want. There's no "right answer" here other than the one you pick.

« Lesson 1 Homework Assignment

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