Are you unnecessarily frugal?

[Midpack]

As I get closer to retirement, I find myself living further below our means than ever, and having no regrets about it. And I suspect I will spend less than budgeted expenses in retirement too, but thought I'd ask some experts in the form of a poll.

 

[kumquat]

Where's the poll?

 

[freebird5825]

Um...no poll appeared.

 

[Midpack]

That's interesting, the thread posted before I submitted (the poll)? See above!!!

 

[ziggy29]

I won't respond since I'm not part of the target audience, but "unnecessarily" is a tough one to define here.

 

[ls99]

Yes!.

 

[WhoDaresWins]

I voted for the second option. I have to discipline myself to be careful with money to tell the truth.

 

[freebird5825]

We know what we are "allowed to" spend as dictated by the OUR budget, and we stick to that.
I save up and maintain a reserve of HER money for things like annual trips to FL. I spend very little on personal whims so I can plan and go on these "Escape from NY" adventures. Delayed gratification and all that jazz.
HIS money is heavily constrained by court orders, but dh2b still manages to buy himself some low to medium price techno-toys here and there.

 

[Goonie]

I voted for the 2nd option, "On average my expenses are as projected by my financial plan, I'm not going to risk depriving myself - but I don't want to go crazy.", but also leaned slightly toward the 3rd option of "I try to stick to my plan, but if I want something and go over so what.....", until I read the second part of that, ".....- I can always get a part time job or cut back expenses later."....homey ain't gettin' no part time job!!! NO way, NO how!!! Cut back a bit on expenses later maybe....but WORK? Huh-uh!

 

[W2R]

Yes, I am not part of the target audience either.

However the two categories including "as little as possible" and "not going to risk depriving myself" in their descriptions, are VERY far apart.

Seems like with these choices, one could turn to one's spouse and say, "See, dear? The majority on the forum are not going to risk depriving themselves, by any means. They're all out there buying boats and RV's (so can't I, please, huh, huh, huh?)"

While I didn't vote, I just have to say that I am spending less than my financial plan calls for me to spend, and I will continue to do so in the future. This doesn't mean that I spend, or plan to spend, as little as possible. I am doing my best to stimulate the local economy down here.

 

[Nords]

I'd choose the option of "I don't NEED to be quite so frugal, but I enjoy the challenge and I try not to get too hypercompetitive about it"...

 

[Moemg]

I have been fully retired for two years and I am usually cautious especially in the first few months of the year and then as I see my plan working I loosen up a bit and by November I am carefree . I have noticed that some people have slightly bizarre approaches to the 4% budget . They will be on budget for basic living expense but they make a huge purchase and somehow that does not count towards the 4% . I can understand doing that once but more than once and aren't you eroding your nest egg especially if your 4% is based on the original amount ?

 

[W2R]

I have been fully retired for two years and I am usually cautious especially in the first few months of the year and then as I see my plan working I loosen up a bit and by November I am carefree . I have noticed that some people have slightly bizarre approaches to the 4% budget . They will be on budget for basic living expense but they make a huge purchase and somehow that does not count towards the 4% . I can understand doing that once but more than once and aren't you eroding your nest egg especially if your 4% is based on the original amount ?

Well, if the huge purchase (like my Venza, for example, which was a huge purchase from my perspective) is something that they have been saving for for 10 years before they retired, and the money for it was set aside apart from the portfolio, then maybe that is how they manage to do it? I dunno. That is how some of us do that, anyway, sometimes.

I would suggest just computing the SWR based on your portfolio at the time of retirement MINUS the big thing, or things, that you planned to buy in the first few years. As I recall, you don't spend all of your 4% so after a few years of retirement, you would have set aside enough from your SWR money to buy more big things.

 

[audreyh1]

Midpack - I would have voted for:

"On average my expenses are well under that projected by my financial plan. I haven't tried to spend more to meet plan, but if ever I find something important to spend the excess on, I'll go right ahead."

Audrey

 

[Gone4Good]

Unnecessarily frugal? I'll let you know in 60 years, give or take.

 

[Coach]

I accuse my sister of being the cheapest rich person I know, but frankly, I'm almost as bad.

Coach

 

[Moemg]

Well, if the huge purchase (like my Venza, for example, which was a huge purchase from my perspective) is something that they have been saving for for 10 years before they retired, and the money for it was set aside apart from the portfolio, then maybe that is how they manage to do it? I dunno. That is how I bought my Venza, anyway.

I would suggest just computing the SWR based on your portfolio at the time of retirement MINUS the big thing, or things, that you planned to buy in the first few years. As I recall, you don't spend all of your 4% so after a few years of retirement, you would have set aside enough from your SWR money to buy more big things.

My post was just wondering . It was not directed at anyone . Sorry if it looked that way . It was a general post wondering whether they then subtract that amount and reset their 4% . Several posters have purchased Rv's , second homes and some really big items and I was wondering how they handle it .I don't really consider a car a big item unless it's a Lexus or a BMW .

 

[NW-Bound]

I cannot vote!

Plan? What plan? In the past 10 years, my annual expenses have ranged from more than $110K down to $40K, both numbers not including income taxes. Again, my 4%SWR is somewhere in between, and I still haven't figured out what it should and will be.

So, to play it safe, I am still w*rking, and for the last couple of months, it has been more like full-time than part-time.

 

[W2R]

My post was just wondering . It was not directed at anyone . Sorry if it looked that way . It was a general post wondering whether they then subtract that amount and reset their 4% . Several posters have purchased Rv's , second homes and some really big items and I was wondering how they handle it .I don't really consider a car a big item unless it's a Lexus or a BMW .

You've got a point. That is a lot of money to set aside! Maybe they have other sources of income like pensions or SS and they spend that on mortgage or loan payments. Maybe you are saying that they should include the mortgage payment in their housing expenses, or their RV loan payment in their expenses too, somehow. I just assumed that they did, I guess.

I guess it's possible that they subtract that amount and reset their 4% but that sounds pretty complicated, especially if they are giving themselves COLA's each year. I think that if I lost my mind and decided that I wanted to spend a couple of hundred thousand on something like that, I'd make myself a "loan". Then from my 4% I would subtract whatever those hundreds of thousands would have earned, and I would only withdraw that lower amount until I "paid back the loan" to myself. But it gets complicated because that money would miss out on being compounded during that time. I'd have to charge myself interest! Ugh!

 

[RE2Boys]

What Nord said: I don't NEED to be quite so frugal, but I enjoy the challenge and I try not to get too hypercompetitive about it"...

And part of the reason is that I've got a 5th & 6th grader at home. I work part-time and tell them my pension covers the basics, the part time stuff gives us a little extra for vacations, etc. Over the past 10 years, I 've maxed out at a withdrawal rate of about 2%, and that was when we were remodeling the interior of the house.

Guess old habits die hard, which are the habits that enabled me to retire at 50 with pre-schoolers. I don't much track things to closely anymore, my autopilot seems to keep expenses down.

RE2Boys

 

[REWahoo]

You've got a point. That is a lot of money to set aside! Maybe they have other sources of income like pensions or SS and they spend that on mortgage or loan payments. Maybe you are saying that they should include the mortgage payment in their housing expenses, or their RV loan payment in their expenses too, somehow. I just assumed that they did, I guess.

Or...you could have an unexpected windfall just before you retired - a sale of the company you worked for results in underwater stock options unexpectedly paying off to the tune of six figures 30 days before you walk out the door for good.

Then the first 2+ years of retirement sees your portfolio grow by 20% even though you are withdrawing from it to fund 100% of your expenses. You say, "Man, I've got it made!" and buy yourself a nice RV and a new car, paying cash...in July of 2007. Mr. Market promptly humbles you and reminds you who is boss.

Life is good - and very interesting.

 

[unclemick]

Yes. The dang mortality table I used has me croaking at precisely 84.6.

16 years of ER has me trying to reverse my 'cheap SOB gears' and enjoy spending more. I really really don't want to have the most customized hot rod wheelchair in the rest home.

(early SS + non-cola pension times 25) + portfolio market value on 12/31 = my sum from which I try to take 5% with optimisism.

However, I worry a lot and hear voices - like psst Wellesley so sometimes chickenheartedness impells me to take the SEC yield plus SS and pension.

heh heh heh - So I shall overcome my yes with a little sinful spending here and there - I hope.

 

[bbbamI]

I have been fully retired for two years and I am usually cautious especially in the first few months of the year and then as I see my plan working I loosen up a bit and by November I am carefree .

This will be our approach for this year. Last year we had some income and we were both retired for 10 months, so our spending was a bit more carefree.

I have noticed that some people have slightly bizarre approaches to the 4% budget . They will be on budget for basic living expense but they make a huge purchase and somehow that does not count towards the 4% . I can understand doing that once but more than once and aren't you eroding your nest egg especially if your 4% is based on the original amount ?

It's probably called 'selective accounting'.

It wasn't a huge purchase, but last year we spent a little more money than planned. This came from spending $10k for home improvements. We really didn't have to spend that much, but we decided to go with a more expensive type of flooring...sooo..I decided half of the cost would go to essential and the other half to discretionary.

Regardless of how we look at it, it was money spent in 2009.

I love being able to create my own spreadsheets!

 

[W2R]

Or...you could have an unexpected windfall just before you retired - a sale of the company you worked for results in underwater stock options unexpectedly paying off to the tune of six figures 30 days before you walk out the door for good.

Six figures? (faint!) That is wonderful! I am impressed that it took you until 2007 to buy the RV. And yes, life does tend to humble us like that now and then, doesn't it? It's almost like "somebody up there" is telling us that we will still have obstacles to surmount as the price for enjoying life.

 

[Bestwifeever]

We're still waiting for the unexpected windfall of a surprise inheritance or stock (either one would be nice). Since neither is going to happen, I created a very conservative (i.e., expensive) budget with super worse case scenarios for everything (including taxes).

The result is we are living quite a bit below the budget, even including our unbudgeted two big unusual expenses last year came to $30K plus the $6K I sent to IRS when we pulled the funds for those. (And you are so right Moe that at the end of the year I said to DH, look how well we did even with these two big expenses and totally ignored the fact that they weren't in the budget; and we can't do that every year).

So we're sort of faux frugal here.