A physician turning sixty-seven this year who has paid in the maximum SS tax for the last thirty years will receive an inflation-adjusted income of over $30,000 a year from SS. If married to a similar professional, the spouse may get that much again but should at least be getting half of that.

Sure, some expenses will probably go up. Youll have more time to travel and want to spend more on hobbies, and who doesnt like to spoil the grandchildren? But the fact remains that your living expenses will be drastically reduced. Consider the example in Table 7: Item Working Income Portfolio Income SS Income Total Income Taxes Retirement Savings Mortgage College Savings Work Expenses Childrens Expenses Working Physician Retired Physician $300,000 $0 $0 $46,600 $0 $45,000 $300,000 $91,600 $75,000 $12,000 $60,000 $0 $30,000 $0 $15,000 $0 $2,000 $0 $15,000 $0 Life Insurance Disability Insurance Health Insurance and Health Care H.S.A. Charity Transportation Travel Other Expenses Total Expenses $15,000 $2,000 $3,000 $7,500 $6,400 $30,000 $5,000 $10,000 $39,100 $300,000

Table 7 $0 $0 $0 $10,000 $0 $12,500 $3,000 $15,000 $39,100 $91,600 This hypothetical physician, who is obviously a pretty good saver, is going to be able to live quite comfortably on less than one-third of his peak income. In fact, once you factor in Social Security, hell only need his portfolio to provide $46,600 a year, or about 16% of his peak income. Yet, hell enjoy the same standard of living in retirement as he had prior to retirement. Now everyone is going to be a little bit different. If you run the numbers yourself, you may find you need 25%, 35%, or even 50% of your previous peak income in order to maintain your standard of living. My own personal projections are right around 30%. But the number isnt going to be 80%, much less 100%, especially if you save a reasonable percentage of your income now.

Beware the pitfall of letting your standard of living rise after you pay off your mortgage and get the children through college. If you get used to spending the money freed up by decreased expenses, youll need a larger retirement portfolio and thus need to work longer to maintain your standard of living in retirement. Combining the Good News with the Bad News