Retirement Blog

The Consumption Assumption

Millions of Americans who could otherwise be retired, continue to work, due to a mis-leading «consumption assumption» method of calculating retirements. According to retirement expert and author Ramsay Mameesh - «The retirement industry uses the assumption, that you will consume, between 70% - 80% of your current earnings annually in retirement, to calculate how much savings you will need for retirement. There are several things wrong with this method, first of all, it is a guess. Second, you get penalized for doing well. Third, it keeps you working longer than necessary.»

Citing a Congressional Budget Office review of the «The Retirement Prospects of the Baby Boomers», in which it states «there is no widely accepted standard of what constitutes an adequate or appropriate level of retirement income or consumption.», Mr. Mameesh argues that the «Consumption Assumption» method, of calculating retirements, is preventing millions of Americans from retiring. «Americans think that they need more money, than they actually do, in order to retire successfully.»

Using April 2007 U.S. Census Bureau data, on the net worth of American Households, Mr. Mameesh estimates that 15 million American Households, had a net worth that would enable them to retire. «Unfortunately, that Census Bureau report, came out right before the housing collapse and stock market decline. The new report will most probably show, that less Americans have a net worth, that will allow them to retire. It is why I have written, that if your retirement window falls within the next five years, you may not want to wait – you may be better off retiring now.»

«Taking two couples, and using the consumption assumption method of planning, one earning $80,000 would need $1.6 million to retire, the other couple earning $120,000 would need $2.4 million to retire. That’s an $800,000 difference! You mean to say, that the $120,000 couple, couldn’t live the $80,000 couple lifestyle and retire earlier or with much less savings?» Mr. Mameesh believes that conservation, or a «Green Retirement», is the future of retirement planning. And that using, retirement spending rather than retirement savings, is a more accurate method of calculating retirement.

To demonstrate this new approach to retirement planning, Mr. Mameesh is using his retirement blog to document, how it is possible to retire in San Francisco with less than a million dollars. «I’m living in one of the nicest neighborhoods in the country, in the second most expensive city in the nation, and I’m showing how it can be done with less than a million dollars.»

An environmentalist, Mr. Mameesh believes that the «Consumption Assumption» method of planning retirement, is neither economically nor environmentally sustainable. «The problem facing the environment, and people’s ability to retire is the same – over consumption. People are literally consuming their retirement. Switching from a consumption lifestyle to a conservation lifestyle, both before and during retirement, could save people hundreds of thousands of dollars, allow them to retire years earlier, and help the environment.»

More information, on this unique approach to retirement planning, can be found by visiting Mr. Mameesh’s website http://www.iplanretirement.com

contact: Ramsay Mameesh ramsaym@iplanretirement.com 650-455-0072