I often read that one should aim for replacing 70%, 80%, or even higher of their pre-retirement gross income. Does that apply to high earners also?
I track my spending meticulously. I'm 55 years old and divorced. Of my GROSS income, these things are spendings that will DISAPPEAR when I retire, with what percent of my gross income went to them in 2021:
- Retirement savings - (I won't need to save for retirement when I'm retired!) - 14% (does not count employer part, only what comes out of my paycheck)
- Mortgage (will be paid off on my 65th birthday) - 20%
- Alimony (also ends on my 65th birthday) - 5%
- Extra money I was able to sock away - 4%
That right there is 43% of my gross income. So at most, right now I'm living on 57% of my salary (and live pretty nicely with trips, meals, home furnishings, etc.)
Also, I spent 28% of my income on all income taxes (not property tax). Obviously, that will go down as a percentage when I retire and am in a lower bracket.
Looking at it another way, of my TAKEHOME, I spent 50% on mortgage, alimony, and extra savings put away - again 3 things that will disappear when I retire, leaving 50% for everything else.
Since I have such good data, can I aim to have gross retirement income that will generate, after taxes, what I'm spending annually now that isn't in the categories above?
