Boomer Budget Breakdown: The Hidden Difference Between Living on $60K vs. $80K a Year
When it comes to planning finances, even a small difference can make a big impact. For instance, life on a budget of $60,000 a year can be significantly different than when you have an $80,000 annual budget, particularly if you’re a boomer.
“Simply put, the difference in amounts does not mean a shift from normal living to luxury living,” said Brandon Gregg, certified financial planner (CFP) and advisor with BBK Wealth Management. “However, this difference could make an impact in many ways. This extra cash flow could mean the difference between better healthcare options, more opportunities to generously give to family or other charitable needs or the ability to travel and do more than expected.”
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Read on for a deeper look at this boomer budget breakdown and what it means for everyday life.
The Hidden Difference for Boomers
The hidden difference between living on $60,000 versus $80,000 will depend on where you live, said Melanie Musson, finance expert with Quote.com.
“There are some areas of the country where you could live comfortably on $60,000 and others where $80,000 would feel like living in poverty,” she added. “Overall, here’s the hidden difference: $60,000 means survival while $80,000 means careful comfort.”
Financial Stress or Peace
“The gap between $60,000 and $80,000 in retirement isn't about having $20,000 more to spend,” said Andrew Lokenauth, founder of the blog Fluent in Finance. “That $20,000 gap is the difference between financial stress and financial peace. At $60,000 a year, a typical retiree covers the basics with little cushion left for healthcare surprises. And healthcare is the wildcard most retirees underestimate. A single hospitalization or long-term care need can derail a $60,000 budget within months.”
At $80,000 a year, everything shifts, Lokenauth added.
“You can afford Medicare supplemental coverage, travel a couple times a year, keep a small emergency fund and give to family or charity without anxiety,” he said. “In my years in finance, I noticed that the most secure retirees weren't the ones with the biggest portfolios. They were the ones with $15,000 to $20,000 in annual buffer above their fixed expenses. That buffer is the difference between retiring with confidence and checking your bank account every week.”
The Ability To Save and Invest
As a part of his job, Cody Schuiteboer, president and CEO of Best Interest Financial, sifts through known income and expense records to assess the viability of mortgage applicants.
“The budgetary disadvantage of making $60,000 versus making $80,000 is the worst gap on a budget I have come across,” he added. “The $20,000 gap closes very quickly, but the impact on day-to-day life is far more significant than the number itself.”
According to Schuiteboer, after-tax income of $60,000 versus $80,000 is not a $20,000 gap, but a $14,000 gap. He added that $14,000 will go toward paying necessary bills and, for the most part, will not go to large discretionary purchases.
“That is the gap in saving and investment potential,” he added. “The $60,000 family covers basic needs and ends the month with a zero balance, while the $80,000 family does the same and also builds an investment and an emergency fund.”
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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