On Friday an outlet called “MoneyTalksNews” offered a video clip once again delving into how much of a person’s current income they can expect to spend when they actually hang up the spikes and retire. I am frightened to type the inquiry into my browser for fear that my central processor will explode trying to process the countless number of articles on this topic. Distilled to its essence the debate varies between 60% and 80% of pre-retirement income. The other, more interesting discussion, is how much you can afford to draw down on that retirement nest egg.

Dear readers: Skip the agonizing debate and sit down with a pencil and paper for an hour. Let’s assume you currently make $100,000 a year as a household and you both want to retire at age 66+ when you become eligible for normal social security. Let’s also assume that combined your social security income will sum to $5,000 a month. A piece of that won’t reach you because you will need to get Medicare Parts A + B and that is going to be a few hundred bucks a month. Let’s say you are left with $4,500 after that contribution.

If you qualify for anyone’s pension, don’t forget you will be able to tap that money and add it to the income list. Now, it’s time to get the bills out. Mortgage? How much is it and when will it be paid off? Real estate taxes and homeowner’s insurance? Not going away. You need the insurance in case you leave the stove on. Utilities? Yes, electricity, gas and fuel oil are comforts you have become used to. But when your income is fixed you may need to re-think whether the AllSports24/7 and Netflix Premium Plans are really worth all they cost. These subscription amenities are a creeping budget buster. Car expense is next on the list. I’m reading that the average new car purchase now exceeds $50,000 and your auto insurance premiums reflect the fact that if you smack the pole at the dry cleaners and the airbag deploys, someone is paying $1-2,000 for the fix. Do you need that kind of rig now that you aren’t commuting 90 minutes a day?

Here’s a form. Print it out and think it through. E.g., no lawn care in winter. Christmas presents come but once a year and you are retired now. Pennsylvania Code, Chapter 1910, Rule 1910.27 – Form of Complaint. Order. Income Statements and Expense Statements. Health Insurance Coverage Information Form. Form of Support Order. Form Petition for Modification. Petition for Recovery of Support Overpaymet | Pennsylvania Code | Justia

Once you do that work realizing that perhaps you can polish your own nails or even mow your own lawn (for now). You will have a personalized expense sheet and you can stop reading about 60-80% of pre-retirement income.

Next, take a look at what you own and owe. Let’s assume you and your mate have $400,000 in retirement and $150,000 of cash/bonds/salable securities. That’s $550,000 before we look at home equity, your silver dollar collection and the jet ski in the garage.

There is a debate about how much of this you can draw annually. The conservatives say 4%. The prodigals edge closer to 5%. Four percent is $22,000 a year. Five percent is about $27,500. So, $2,000 a month will come on top of social security and any other pension money.

I’m at about $6,500 a month. How does that look in relation to the messy budget document I asked you to fill out? That’s not Suze Orman or Dave Ramsey talking. That’s your financial picture. You could sell the house and harvest the equity, but you can’t live in a shoe and today starter homes are $300-$500,000 in Pennsylvania. You could sell the jet ski if it worked. And the silver should have been sold in January. Meanwhile, you might consider when you will be liberated from your mortgage lender or inquire about what a reverse mortgage might do to enhance the cash flow.

Personal finance is personal. And if you look at these models and decide you are comfortable, take an extra moment to acknowledge that the hot market in modern divorce is the “Baby boomers.” Then, ask yourself, what your financial future looks like with “half”

A useful article: Why retirees should follow the $1,000 dollar retirement rule