Spending in retirement poll

[goodandbadjapan]

As a companion to the net worth poll, I wondered what most people anticipate their rough spend per year to be (for your household) in retirement. It's hard to know in advance, of course, but I'm guessing at somewhere around ¥3,500,000 - ¥4,000,000 in a typical year without huge splurges. That's probably actually more than we spend now, but now we have almost no travelling, eating out etc. at the moment.

Edited to add: in today's money terms, I mean, as opposed to guessing inflation adjusted values etc.

[RetireJapan]

I think we could live a perfectly happy life on around 2-2.5m, but expect to spend 2-3 times that assuming no catastrophes.

I calculate our pensions alone (2x nenkin, 1x UK) will come to around 3m a year!

[goodandbadjapan]

I think we could live a perfectly happy life on around 2-2.5m, but expect to spend 2-3 times that assuming no catastrophes.

I calculate our pensions alone (2x nenkin, 1x UK) will come to around 3m a year!

Yes, I think I'd be comfortable on 3-4 million but planning a nest egg to allow for more so that I at least have more choices.

[TJKansai]

Just a guess, but could be we spend 5-6 in early retirement if we are travelling overseas a lot, but then as we slow down perhaps 3-4 (assuming no huge healthcare costs).

[captainspoke]

Just a guess, but could be we spend 5-6 in early retirement if we are travelling overseas a lot, but then as we slow down perhaps 3-4 (assuming no huge healthcare costs).

Probably. My older sis relayed the phases of retirement as, "the go-go years, the slo-go years, and the no-go years."

[Tkydon]

I was just reading a book mentioned in this webpage

https://www.cnbc.com/2022/01/05/harvard ... -home.html

"Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life" by Laurence J. Kotlikoff, economics professor.

It is written for the US audience, but he suggests in chapter 2 that if you can delay taking your Social Security Benefits / National Pension to age 70, the pension amount is much larger (this is so in Japan as well. See below.) and so a higher withdrawal rate of other funds in early retirement has the benefit of increasing the delayed Pension income in later retirement, leading to an overall increase in the standard of living and reduction of taxes.

https://www.nenkin.go.jp/international/ ... nsion.html
Option of “Early Payment” or “Delayed Payment”
The pensionable age for the Old-age Basic Pension is 65 in principle. However, you may opt to receive pension at whatever age after 60. The pension amount is adjusted depending on the age you start to receive your pension. You may opt to receive lower amount of pension before age 65, or you may opt to receive higher amount after age 65. Specifically, your early pension amount receivable at the age of 60 is 70 % of that for age 65 and your delayed pension amount receivable from the age of 70 or older is 142 %.


He also says,

It’s easy to fall into the trap of thinking that you’ll die on schedule, exactly at your life expectancy. Don’t be fooled. Virtually no one dies on time.
Your life expectancy is a statistical average. You’re not an average. Plan to live to the maximum age. The longer you last, the longer you’ll need to clothe, feed, house, entertain, and maintain yourself.

[TokyoWart]

Just a guess, but could be we spend 5-6 in early retirement if we are travelling overseas a lot, but then as we slow down perhaps 3-4 (assuming no huge healthcare costs).

Probably. My older sis relayed the phases of retirement as, "the go-go years, the slo-go years, and the no-go years."

I think that expression originates from a book by Michael Stein and it has been confirmed in some of the research supporting the "smile" shape of retirement spending.
https://www.kitces.com/blog/estimating- ... ing-smile/

[RetireJapan]

https://www.nenkin.go.jp/international/ ... nsion.html
Option of “Early Payment” or “Delayed Payment”
The pensionable age for the Old-age Basic Pension is 65 in principle. However, you may opt to receive pension at whatever age after 60. The pension amount is adjusted depending on the age you start to receive your pension. You may opt to receive lower amount of pension before age 65, or you may opt to receive higher amount after age 65. Specifically, your early pension amount receivable at the age of 60 is 70 % of that for age 65 and your delayed pension amount receivable from the age of 70 or older is 142 %.

Makes a lot of sense. I usually urge people to consider deferring if they can (a regular payment from the government when you are less competent has to be better than juggling mutual funds in a broker account).

I think it's going up to 75, so you can get 184% of your base pension if you wait 10 years.

[captainspoke]

Just a guess, but could be we spend 5-6 in early retirement if we are travelling overseas a lot, but then as we slow down perhaps 3-4 (assuming no huge healthcare costs).

Probably. My older sis relayed the phases of retirement as, "the go-go years, the slo-go years, and the no-go years."

I think that expression originates from a book by Michael Stein and it has been confirmed in some of the research supporting the "smile" shape of retirement spending.
https://www.kitces.com/blog/estimating- ... ing-smile/

Lots of detail for what I assumed was some kind of cliché or common wisdom. Thanks!

[captainspoke]

https://www.nenkin.go.jp/international/ ... nsion.html
Option of “Early Payment” or “Delayed Payment”
The pensionable age for the Old-age Basic Pension is 65 in principle. However, you may opt to receive pension at whatever age after 60. The pension amount is adjusted depending on the age you start to receive your pension. You may opt to receive lower amount of pension before age 65, or you may opt to receive higher amount after age 65. Specifically, your early pension amount receivable at the age of 60 is 70 % of that for age 65 and your delayed pension amount receivable from the age of 70 or older is 142 %.

Makes a lot of sense. I usually urge people to consider deferring if they can (a regular payment from the government when you are less competent has to be better than juggling mutual funds in a broker account).

I think it's going up to 75, so you can get 184% of your base pension if you wait 10 years.

While managing investments later could be a challenge, and I of course see the point, something else that might factor in is 'legacy'. If you spend down early on with more reliance on pension later, there'll likely be less to leave behind.

And the quality/level of elder care in some countries--that you may have to buy into--may be a factor, too. Given my mother-in-law's situation, assets don't seem to matter here, but income (pension) does. Tho I don't have any plan to leave japan, in the US having significant assets would get you in (possibly to someplace very plush, along with medical services), whereas a solid pension may not.