Hardly a week goes by without our having several discussions about the financial aspects of retirement.  This week we address some issues from the last several days.

How much house can I afford?  The traditional rule of thumb—i.e., not more than 28% of your monthly income going for a mortgage payment—is not particularly helpful.  There is no magic number. The Consumer Expenditures Survey, however, provides good budgeting guidelines for all housing costs. The mid-year update was released last week.  One of its several charts segments expenditures by ten income groups, breaking apart spending into its component parts.  All housing costs range from 30% to 42% of household income, depending on the income group. This data series provides reasonable guidelines to think about retirement budgeting.  If you carry a mortgage, we recommend that mortgage, taxes, principal and insurance not exceed 25% of after-tax income

The general release is found here:

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The chart that segments spending in ten segments is found here:

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While Waiting for Social Security, Whither Retirement Income?  A traditional response of taking money from taxable accounts first may not be the best retirement withdrawal strategy.  The “average person” probably should take from their tax-deferred account first.  By doing so, higher taxes will be paid, but it makes sense, because when you start taking Social Security and have minimum distributions, you will be pushed into a higher bracket.  If these are coordinated, a retiree can smooth out taxes and find more years of security because of lifetime tax reduction.

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Morningstar Sounds the Inflation Alarm.  At a time when economists are oscillating between hope for robust growth and fear of the threat of deflation, Morningstar is warning that the seeds of inflation are already sown.  The “seeds” from which inflation might suddenly and powerfully emerge are:  labor scarcity born of long-term demographic changes; a narrowing “output gap”—the difference between the economy’s actual and potential performance; commodity prices having reached a floor from which they are more likely to now head upward; and shrinking corporate profit margins.

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We hope you enjoy reading these articles along with us and that you find them informative.  Please forward this to your friends and family.


J. Mark Nickell & Co.

Disclosure – The articles mentioned in This Week with J. Mark Nickell & Co. are for information and educational purposes only. They represent a sample of the numerous articles that the firm reads each week to stay current on financial and economic topics. The articles are linked to websites separate from the J. Mark Nickell & Co. website. The opinions expressed in these articles are the opinions of the author and not J. Mark Nickell & Co. This is not an offer to buy or sell any security.  J. Mark Nickell & Co. is under no obligation to update any of the information in these articles. We cannot attest to the accuracy of the data in the articles.