Figuring Out a Reasonable Retirement Income

Michael Ingraham figured he would need $50,000 to $60,000 a year for him and his wife to live comfortably in retirement. Now that he's 67, that doesn't seem to be much of a problem.

Ingraham, who owned a New York medical advertising firm, saved money religiously. He invested wisely and downsized from a Freehold Township horse farm to a Sea Bright condominium, adding even more money to the couple's nest egg.

"We're not big spenders," Ingraham said. "I'm a Depression baby. We learned in those days."

Financial experts wish more people took Ingraham's tack. They say many people don't have a firm grasp of how much money they will need to maintain their standard of living during retirement. And that is causing concern given that workers are increasingly taking more of the financial responsibility for their retirement from their employers.

To some extent, knowing what retirees need 10, 20 or 30 years from now requires a crystal ball. After all, who would have guessed 10 years ago that gasoline would cost  $4 a gallon? For that reason, many retirees are falling short of their goals, experts said.

"The people I talk to say they've generally underestimated the cost of retirement," said Bob Carlson, editor of the Oxon Hill, Md.-based Retirement Watch newsletter. "For many people, expenses are going to be the same or even higher because they're going to have pent-up goals and desires -- like additional travel."How much do they need over the long-run? A 2004 study by insurance company Aon Corp. and Georgia State University's Center for Risk Management and Insurance Research found workers need 75 percent to 89 percent of their current income to maintain their standard of living in retirement.

The study assumes:

• Retirees will be in a lower tax bracket.
• They won't have to save as much.
• Their housing and transportation costs will decrease.
• Their health care costs will increase.

Longer life spans mean more money >