You know that retirement ad with white-haired people sitting in Adirondack chairs looking blissfully out at the horizon? That’s not real. It’s as if we are all going to be very rich when we retire, even though we are not now.  Except for that obnoxious guy who saves his money to sail around the world when he retires. Even he, after the first four months, comes home and lives out his life in his old house, sailboat in the driveway.

We’ve seen that image of retirement so often that, if that’s not likely what’s in store for us, we already believe we have failed. What’s the point if we can’t see how to get into those Adirondack chairs?

Turns out, most people’s (voluntary) retirement looks a lot like the life they had been living just before they stopped working.

A compilation of two major sources of retirement spending data for U.S. retirees, the annual U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey and the biennial Health and Retirement Study survey conducted by the Survey Research Center at the University of Michigan, finds:.

  • Spending drops modestly (14%) immediately after retirement, partly due to the cessation of work-related expenses (e.g. special clothing and transportation) and changes in food expenditures.
  • Inflation-adjusted spending continues dropping slowly afterwards as retirees age into their late 70’s.
  • Housing + Related is by far the largest spending category for all age groups.
  • Health Care expenses rise with age, but remain substantially lower than housing expenses.

I emphasize the word voluntary because, according to this same research, as many as a quarter of the population enters retirement involuntarily due primarily to major health difficulties or extended unemployment. For them, their retirement standard of living represents a much bigger drop than for the average retiree.

SUM180 assumes that, in most cases, your lifestyle in retirement on average costs/will cost about 80% of what it did just before you retired/will retire.

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Look at the retired people you know, and I think you’ll find this rule of thumb rings true. Here are some of the examples in my life:.

  • My 79-year-old father has so far stayed in his house, kept his one horse in the barn in the back yard, rents out the back pasture to a few more horses to cover costs, still goes to his gym, shops at Meijer’s, and uses his allowance to pay the yard guy. That’s his retirement. Not an Adirondack chair in sight.
  • My best friend’s parents are also 79 and her father still works part-time at the local Kroger after having sold his grocery business now almost 20 years ago, her mother just retired from her part-time dentistry practice, they live in the same house, walk in the local park for exercise and travel with their kids and grandkids for fun. No Adirondack chairs.
  • My former office manager’s 75-year-old mother finally stopped selling real estate 2 years ago, she still lives in the condo she has been in since her husband died of cancer 20 years ago, is a kidney-transplant survivor for over 15 years, and enjoys time with her 5 children and myriad grandchildren on the weekends and holidays.
  • My 58-year old friend left her job to be with her significant other, a semi-retired professor, having just sold their place in town and moved out to his second home in upstate New York. They might have Adirondack chairs — but they live in a log cabin in the Adirondack Mountains so that doesn’t count!

Judged by the standard of their lives before retirement, each of these “retirements” represents a resounding success.

So, with the information that your retirement will look a lot like your life just before retirement in mind, many of us will be better able to envision and plan for our likely retirement needs. Using the simple rule of thumb of needing to cover about 80% of pre-retirement living expenses, we can focus on the different types of income sources we can pull together to cover these costs, building off of what we have and what we know today.

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