Budgeting for major expenses in retirement

[Mulligan]

+1 Like you, I toyed with the idea and discarded it as busywork.

I am slowly reaching that conclusion with my HSA money. Even though I long ago determined I would pay all expenses out of pocket until 65, I could not get myself to take the money out of the low interest bearing account because I couldn't stand the thought of losing money in my medical account. I am now mentally ready to just shift it all into mutual funds, but I need the market to drop at least 10% before I can make myself do it.

 

[NW-Bound]

I do not have a separate account for major expenses. My current cash of 26% should be plenty if I need a new car, heck even another home. And I have always had a lot of cash on hand.

Even as I cried "buy, buy, buy" in the past acting tough, my cash level has never been below about 15%, I don't think, and then not for very long. I am actually a scaredy cat despite my talking tough.

PS. The HSA account has been there for tax reasons when I still had earned income. It has lost its meaning, though it may be useful for other purposes.

 

[Major Tom]

Live and Learn - I have a feeling that if I needed to learn the use of spreadsheets for work, or for a specific non-work task, then I would become a near-instant convert.

I used to read this board and wonder if I was doing something wrong by not concerning myself more with the tax implications of what I did, and by not taking a more analytical approach until it dawned on me that with my low level of income (interest and dividends from my taxable accounts put me below the Federal poverty level) I had fewer tax implications than most others here. It is one of the reasons I attempt to share some of the details of my finances here - and to quote dollar amounts. It is not because of any type of inverse snobbery (as in, "Look at me - I'm so virtuous and frugal and low income!") but rather because as someone on the edges of the bell curve (i.e. not the average financial situation of members here), relating my experiences may be of use to others in a similar situation.

However, I'd be happy to have the need for the more thought-out approach that is usually necessary with a higher income

And yes - kitty heaven on wheels does sound good doesn't it? I'm looking forward to mornings spent drinking coffee and casually browsing the pages of E-R.org while looking out at beautiful vistas through the large windows of my Lazy Daze RV in the company of my kitties. It's pretty close to the life I have now, except with the ability to change the view through the windows at will!

 

[Major Tom]

I do not have a separate account for major expenses. My cash allocation of 26% should be plenty if I need a new car. And I have always have a lot of cash on hand.

Such a large cash allocation does indeed make planning for major expenses very easy (as in - not much planning required at all).

 

[NW-Bound]

That high cash level should hurt the total portfolio return, one would think. However, as I quite often employ a barbell strategy and go for more cyclical stocks, I was able to beat the S&P in the last 15 years.

 

[Mulligan]

I do not have a separate account for major expenses. My current cash of 26% should be plenty if I need a new car, heck even another home. And I have always had a lot of cash on hand. Even as I cried "buy, buy, buy" in the past acting tough, my cash level has never been below about 15%, I don't think, and then not for very long. I am actually a scaredy cat despite my talking tough. PS. The HSA account has been there for tax reasons when I still had earned income. It has lost its meaning, though it may be useful for other purposes.

The HSA has been a real positive for me as I continue getting the yearly tax deduction of 31% for me. Also it brings me under my 85k AGI needed to capture my $2100 pension state income tax credit.

 

[NW-Bound]

And yes - kitty heaven on wheels does sound good doesn't it? I'm looking forward to mornings spent drinking coffee and casually browsing the pages of E-R.org while looking out at beautiful vistas through the large windows of my Lazy Daze RV in the company of my kitties. It's pretty close to the life I have now, except with the ability to change the view through the windows at will!

If you want a used LazyDaze, you may have to watch the market and jump on one if the chance shows up. The problem with waiting to buy when you can use one is that it may not be available. I just looked and saw a few attractive deals. Finding a place to keep it may be problematic where you are though.

 

[Major Tom]

That high cash level should hurt the total portfolio return, one would think. However, as I quite often employ a barbell strategy and go for more cyclical stocks, I was able to beat the S&P in the last 15 years.

If you can keep such a large cash allocation and still beat the S&P500, you've got it made. Good going!

 

[NW-Bound]

The S&P was not doing that well since 2000. I have been wondering if I beat Wellesley or at least matched it while having very little bonds.

I have not been keeping good records of my part-time earned income and expenses until recently to know the net in/outflow to my portfolio. However, I knew that I spent a lot in some years.

 

[Major Tom]

If you want a used LazyDaze, you may have to watch the market and jump on one if the chance shows up. The problem with waiting to buy when you can use one is that it may not be available. I just looked and saw a few attractive deals. Finding a place to keep it may be problematic where you are though.

If the right deal came along, it would be worth renting a parking/storage space for a while.

There is a guy who previously worked for Lazy Daze who, for a few years, had a mobile business in California doing work on RV's. He would also perform inspections on LD's for prospective buyers. I can't think of a better person to advise me as to whether I found a good deal on a used Lazy Daze than someone who used to build them (he has a good reputation too). If you were looking for a used LD, you could let him know your requirements, and he'd contact you when he'd found something. He closed the business a couple of years ago and now works in sales at an RV dealer in the SF Bay Area but I imagine he's still a good source of information and help on used LD's.

When I'm ready for one, I'll be hunting him down to see if he can help. I figure that I should be able to find something not too far away within a year.

 

[NW-Bound]

There are a few good looking LazyDaze right now (to me), but not close to where you are. I have been curious and keep checking the market, but am happy with my generic class C which has not given me much trouble and not thinking of changing at all.

PS. Mine is the kind you can buy spanking new for a bit more than $60K (a 25-footer), quite a bit less than a LazyDaze.

 

[Major Tom]

I wouldn't be opposed to a long trip if a great deal came along, though I'd like to be able to use my ex-LD guy to do an initial inspection if at all possible.

 

[Raymond01]

Thanks everyone for your input this was very helpful.

 

[Ozstache]

I have about $5K fat per year in my budget to cover major capital expenses and repairs. That was going to go entirely on a backyard makeover, but since discovering this thread I found the ridge capping on my roof is in need of fairly urgent repairs, which will lop $1500 off the backyard budget (which I will make up for by doing as much DIY as I can). No point having a budget if I don't stick to it.

 

[Ed_The_Gypsy]

It is virtually impossible to properly budget an allowance for a large expense that comes every 7 years. What can you do, transfer money from your portfolio to a savings account each month? In truth, you don't have "buckets" -- what you have is one pot of money, your total net worth. An attempt to assign different parts of it into different buckets is just a mirage.

So....decide on your asset allocation. When you withdraw money, maintain your desired AA -- no matter if you take it out monthly or at 7 year intervals. Just make sure your average draw fits into the 4% rule....

I have come to the same conclusion. FI accounts just weigh down returns, but they do smooth them out. "Buckets" are a different way of looking at AA, is all, a visualization tool.