A recently released study by J.P. Morgan Asset Management suggests that retirees will need over 90% of what they used to live on once they stop working. For years, the rule of thumb was that once we started going to the pickleball court instead of the office, we only needed to replace 75% to 80% of our income to maintain the standard of living we were used to. This new realization will not come as a surprise to most of us who gave up our day jobs for the plushy new lifestyle we’re now leading. Why is it a surprise to anyone else?

So my first response to this breaking news is, “Duh?” You mean you just figured this out? But I’m not trying to criticize the analysts. Far from it. I want to applaud them for acknowledging what we all know. And now they have to data to support it.

Tooting my own horn, in my book AAR

P Roadmap for the Rest of Your Life
, written way back in 2013, I acknowledged that the generally accepted rule was that retirees would probably need about 80% of their current budget. But I also wrote, “For many, that figure can be low.” Wow, was that an understatement. I then wrote, “I personally recommend using the same budget you have now, unless you can demonstrate that your costs will decrease.”

I will go one step further now. I think retirees would be wise to assume they will spend even more than what they’re used to living on, at least for the first five years or so. What’s driving this higher cost of living? Well clearly inflation is robbing us blind these days. And have you looked at the price of cars lately? Used cars are even worse than new ones. A year ago I sold a 2009 Toyota Rav 4 that had over 100,000 miles on it for over $8,000. I only paid $25k 13 years ago and now I got back almost a third of what I paid.

But I think the real reasons we’re spending more are the huge rise in the stock market, pent up demand, and having the freedom to live the life we want.


In the past budgets dropped for retirees for a number of reasons. A major one was that people paid off their mortgages so housing costs dropped. Clearly that is no longer the case. In fact, according the the Federal Reserve Study of Consumer Finances, in 2019 almost 40% of households headed by people age 65 to 74 had a mortgage on their primary homes. And almost a third of 75 year olds and older still had a mortgage. Furthermore, this doesn’t include mortgages on second homes. Remember snowbirds? Many retirees head south to escape from the harsh winters. And many sunbelt residents head north to escape the brutally hot and stormy summers in the south. Bottom line is that close to half of older homeowners are still making mortgage payments on their primary residence and many more have mortgages on their second homes. Coupled with increasing property taxes and insurance, housing costs for these retirees have certainly not dropped.

Another reason for the lower budget in the past is the notion that you don’t need to put money away for retirement but rather, you spend what you already put away. But that’s just not true. That goes against the current trend where many retirees continue to work at least part time. We continue to put away money for a rainy day even when it’s raining. When we’re 72 we have to take Required Minimum Distributions (RMDs). For many of us, we spend a lot more than just the RMDs and Social Security (operative word in RMD is “minimum”). Life expectancy of a 65 year old is about 20 more years, so we continue to put money away hoping that we’ll still have some resources when we’re in our 80s and 90s. And maybe we’ll even have enough to give the kids an inheritance.

So I’m thrilled that the study acknowledged what I’ve long felt was the truth. Most of the older folks I know spent the first few years after retiring doing all the things they wanted to do but couldn’t because they were working or had family obligations. Unburdened by working and family life, we travel a lot (until Covid came along, although we’re starting to travel again now), we eat a lot of meals out, we go to movies and shows, and we join gyms and country clubs. Fortunately we are all enrolled in Medicare so our health insurance costs haven’t skyrocketed. But auto and home insurance have increased. In short, we spend as much or even more than when we were working, maybe not on work clothes and commuting, but on sweat pants, golf clubs, and pickleball paddles. Admittedly, some of us started having health issues that reduced our activity. And many more of us will cut back as we age. It’s not that age is a cause, it’s just that as time passes, more of us will pass. So yes, at some point our budgets will drop. But in the meantime, I’m going to stick with my original plan and assume I’ll be spending the same amount as I am now. When I get the next J.P. Morgan Asset Management questionnaire, that’s what I’ll say.


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