Quote:
Originally Posted by CliffFletcher
Agreed. It would be odd hearing that some people only need $60k a year to be comfortable in their working years, but some need $240k or $300k to have a decent lifestyle. Like you say, beyond 2-3x median income people recognize we’re no longer talking about average or need.
But for some reason, retirement is presented as a stage in life where expectations and needs will vary even more than in the rest of life. Which seems dubious. It might be true of early retirement, when some people travel a lot, buy new cars, dine out all the time, take up boating, etc. But I’d wager that by their 70s, the monthly spending of average and wealthy seniors actually converges.
Stuff that people over 70 no longer spend money on:
Mortgage
RESPs/RRSPs/TFSAs
Stuff that they probably no longer spend money on:
Home renos (house hunt in older neighbourhoods of the city for evidence)
New furniture (see above)
New cars
Stuff they likely spend less on than when they were 55:
Clothes
Driving
Travel
Restaurants
So even if Canadians have dramatically different (4-5x) spending habits at age 55 or 60, that gap will narrow substantially over the next two decades. Fixed expenses like property tax, utilities, insurance, and groceries don’t vary that much between households. So it’s hard to see how the remainder of discretionary expenses can require massive differences in savings.
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No, you're totally right! The problem is two-fold though. First, you have people earning say $100k a year at age 60, and living their life. Those people aren't going to suddenly drop to a $40k/year lifestyle. they might in their 80's, but no way that is happening at 60. There are a lot of people who spending more in those initial years of retirement because they're doing whatever it is that they have waited to do. YOLO and all that.
Then in their 70's things start to wane. They spend less on travel and things like that than they were in their 60's, but not zero. In their late 70's early 80's the spending ratchets down further as there is less they can do and less they want to do.
They also might end up paying for care, paying rent in a facility that provides extra care or a combination of these things.