$90 per day -- really?

[malakito]

In that other thread I've noticed a little trend that I don't really get. In there I read the following:

"That includes everything but income tax"
"Does not include property taxes of $6K per year though"
"If I back out my car payments"
"If I back out my rent and car payment"
"Without mortgage, it drops to"
"If I remove my mortgage"

I guess I get the last two comments; in my case I plan to pay off my mortgage by the time I retire. But at the same time, I subtract my (projected) mortgage balance from my (projected) investments when calculating my potential withdrawal rate, so that seems fair.

In the other cases, I don't get it. Are people not planning on paying income taxes, property taxes, rent, or owning cars in retirement? These expenses are probably not inconsequential either, so ignoring them seems problematic, more so than, say, forgetting to account for bubble gum purchases in a retiree budget. In my particular case, these kinds of expenses are in my top 10 expenses.

Since turnabout is fair play, here's my retirement planning process in a nutshell:

1. Take current actual Quicken expenditures for the last six months. Multiply by two to get an annual figure.
2. Project that annual expenditure rate forward at the long term historical inflation rate.
3. Take current actual investment values and project them forward at the long term historical rate of return provided by their respective asset classes.
4. Project my monthly mortgage balance forward based on my payments and my (fixed) interest rate.
5. Plan to retire when (projected expenses) <= 4% of(projected investments - projected mortgage balance)

One of my key assumptions is that my spending in retirement is equal to or less than my spending now. I expect taxes and charitable giving to go down, as those will be based on my retiree draw instead of my salary. I expect health insurance to go up.

The reason I chose 6 months in step #1 is that I have some recurring expenses that only occur twice a year, so I need to capture those and average them in.

So feel free to criticize my approach.

malakito

(Feeling silly thinking that I was being frugal and finding out I spend nearly 3 times the average!)

[cute fuzzy bunny]

I put in EVERYTHING. Separate buckets for each category, and where I dont have absolute, real, repeating numbers and I'm guessing, I guess high and then add a 20-30% margin.

Eighty two dollars and nineteen cents a day.

[sgeeeee]

Quote:

In that other thread I've noticed a little trend that I don't really get. *In there I read the following: "That includes everything but income tax" "Does not include property taxes of $6K per year though" "If I back out my car payments" "If I back out my rent and car payment" "Without mortgage, it drops to" "If I remove my mortgage" . . .

I had the same thought, malakito. So I gave the overall number that might mean something to me, but then backed out the other numbers in case those other posters wanted to compare apples to apples.

Mrs. guru and I have fairly widely varying spending from year-to-year. I've been tracking our spending in detail for about 7 or 8 years and there is more than a factor of 2 difference between our lowest and highest year. And our spending is not trending upwards or downwards in any observable fashion. Some years we might spend a month in France or Egypt or Peru and other years we might knock around the desert chasing chasing diamondbacks and looking for prehistoric pit houses. Then there are the years when we had to replace a number of large ticket items vs those when everything worked smoothly all year long.

When I budgeted for retirment, I averaged the infrequently occuring items (like re-roofing, new car, replaced dishwasher . . .)over their expected lifetimes. And I used the highest amounts we had for travel and entertainment as the base point. So far, that seems to be plenty conservative.

[sgeeeee]

Quote:

. . . Eighty two dollars and nineteen cents a day.

Anything over $82.12 is just decadent.

[cute fuzzy bunny]

I like to splurge. Makes me feel dirty.

OK, $156.32 per day! Includes Fricken Taxes and everything

[charlie]

$89.00/day not including home equity loan with 4
years remaining on loan ($48.33/day).

Cheers,

Charlie

[Sheryl]

Quote:

In that other thread I've noticed a little trend that I don't really get. *In there I read the following: "That includes everything but income tax...

I didn't include income tax because I derived my ballpark figures based on how much flows out of my checking account every month. I was too lazy to bother digging out a pay stub or tax return and averaging it into the equation.

I think we're all getting different but helpful insight out of this discussion - for me it's just the whole idea of looking at things on a per dium basis. I know I'll have to factor in income tax on my investment earnings, but they will probably be lower than my current rate.

In general, I plan to spend more in retirement than I am now, because I dearly hope to get out from behind this desk and see more of the world... and my back yard.

Also I'll have to pay for my own health insurance. I will save some on gas and eating out, since I will have all that free time to cook (yeah, right), but overall I do my retirement planning based on the expetation that most other expensese will be similar.

[malakito]

TH,

Wow.

SG,

Thanks, that makes sense.

Sheryl,

OK, if that's the way it works for you. Personally taxes are my #1 budget item, so I can't do that. I'll assume that you're increasing that budget for taxes in retirement.

Maybe if I get the courage I'll post my actual budget numbers and let y'all critique and question them.

malakito.

[BigMoneyJim]

Quote:

"If I back out my car payments" "If I back out my rent and car payment"

Those two were mine. I've been paying car payments, but in the future I don't intend to. Sure I'll have to budget for replacement, but I doubt the savings for future cars will be as much as a car payment. I then backed out the rent and car payment thinking that's an extremely rough stab at if I had a paid off house and car right now.

For me it was a novel way of looking at the budget, especially since probably near $20 of my $90 a day is dining out.

The numbers don't translate well to retirement, though.

First, I'm paying income tax on more than the $90 per day because I've been reducing debt. I'll save most of the ex-debt-reduction money from here on out, but it won't all be tax deferred so I'll still be paying more income tax than I would if I were retired and drawing $90 a day from an IRA or 401(k). I also won't be paying Social Security or Medicare taxes out of IRA distributions. I will probably also have substantial after-tax accounts which may be taxed at capital gains rates.

Second, my health insurance is through work now, so that is not factored in my $90.

I could probably carefully budget my expenses and project what they would be in a retirement scenario, but the exercise is largely useless for me because I'm so far from retirement and and then there are the varialbes that my budget is in a transition period this month and the possibility of future wife and kids.

[Jane]

I said I spent $65 a day INCLUDING income tax but it turned out that I didn't include it. With income tax, add another $38, and I am up to $103.

Sorry, me bad...

Jane

[unclemick]

$65.73/day sans replacement depreciation resevre(117k in petty cash). Income $150/day not counting IRA's or my SS coming in one year.

CHEAP IS GOOD. Household - me, her, widowed mom, and heh heh not to cross forum BUT - step daughter in spare room plus one dog, one cat.

This will not last - my er aggressively frugal - is getting nickel and dimed to death - out voted -etc,etc, - "you're not going to take it with you" - aka "cheap B#*^ard". Cheap is suffering mission creap.

Hello unclemick! Your spending is in our range, and
I consider "cheap SOB!" high praise indeed. I don't
get a lot of pressure from the spouse to spend more,
thankfully. Previous spouse was too far out of control
to pulled back. My fault though. I trained her

John Galt

[Sheryl]

Quote:

TH, Sheryl, OK, if that's the way it works for you. *Personally taxes are my #1 budget item, so I can't do that. *I'll assume that you're increasing that budget for taxes in retirement.

Actually I was just putting out there what my current spending habits are, not what my retirment budget is/will be. That's a whole different animal.

After reading this thread I went back to my spreadsheets last night and found out I'm up around $126/day lately.

[dm]

Well this thread is interesting. I went through the last 18 months with the checkbook and my spending is at $200 a day, wife and two college age kids.

That includes some college costs for my son's and around $16000 for a used car. The college cost should end sometime but their is always something popping up.

There is no dought that this can be reduced. We have no budget at this time. We have no debt except the house payment which is $50 a day. I'm still working so medical is paid through work.

[dm]

I did make up a budget and if we paid off the house and the kids got out of college and moved out $90 a day is very doable for us. This is after tax.

This is what we would need figuring $1500 a month to cover medical and misc.

[cute fuzzy bunny]

Uh oh, I find myself needing to put in qualifiers now. But they arent "withholding" qualifiers.

I dont have any debt, be that mortgage, car payment or any other kind. But my daily figure quoted above does include funds set aside each year for car replacement and maintenance of home and car. I also dont pay any taxes except for property and the "car tax" here in CA. I would probably not have paid any for at least another 5-7 years except that I'm getting married and the wife works, however I'll be dragging down her tax load and none will need to come out of my pocket.

So if you have a mortgage and a car payment, that would definitely jack up the daily rate. And since you're needing to increase your withdrawal rate to pay for those, more taxable "income" so you are probably paying a lot more in taxes.

Yeah TH, maybe I should clarify also. My numbers
include no mortgage, no car payment, actually no debt of any kind. Also, -0- income tax for me and very
little for spouse. Alomost all house related expenses
are covered by my small holding company (it owns the
house - we rent from the corp.). Obviously rent is included in my expenses, but we have a friendly landlord, sooooooooooo

John Galt

[gayl]

lemme see: 2092/30 = 69.73 per day. Covers it all: bills, taxes, insurance, travel, savings, etc