Comparing Working Couple's Expenses to Retired Couple

[2B]

I have a series of potential budgets. I'm going into retirement with the hope of spending 100% of my ending salary. Since we've never spent that much before it ought to be a stretch even with a higher medical insurance cost. This is partly offset by the disappearance of work related expenses. My big goal was international travel and I'm already having problems getting DW to agree to a second trip. I have us scheduled for one 3 week trip but she's balking at doing another one. She's interested in more US travel but has no suggestions on what to see. We've seen the major sites that interest us but I'll start looking at some of the other options.

The basic living expenses keeping our nice house, eating out and generally living the comfortable (upper?) middle-class lifestyle will run about 35% of last years gross including medical and taxes. I'm convinced that we could live on half of this amount without subjecting ourselves to a life of poverty. Of course, I have/had a pretty good income.

I feel sorry for those trying to support children and others but what is the end-game for this? Eventually, your children will have to fend on their own even if you support them until you die. I hope I don't have to support any of my kids but right now they seem to be fully functioning economically.

 

[Gumby]

I have always been of the view that you should build your retirement budget from the ground up, and it will be what it will be, independent of your gross salary while working. The young wife and I have been tracking our expenses for over ten years. If I just back out our retirement savings and the mortgage P&I (it will be paid off before we retire) and leave everything else the same, our spending is only 40% of our current gross income from employment. Even grossing up the spending amount for taxes, it will require retirement income of no more than about 45% of current gross working income to have a standard of living exactly the same.

 

[Sandman62]

I always wonder when I see these discussions if early retirees who are living on half or less of their pre-retirement incomes have been retired long enough to have had to make some sporadic big purchases like new car(s), a new roof, and other things that maybe just haven't surfaced yet?

In my spreadsheet, with ER less than 3 years away, I've also started from our current salaries and backed out taxes, retirement savings, college tuition and other child expenses, and I come up with us needing only about 55%. But I also factor in that every 10-12 years we'll replace a car or two, and that we also need to set aside for another roof in 15-20 years, etc.

 

[2B]

I always wonder when I see these discussions if early retirees who are living on half or less of their pre-retirement incomes have been retired long enough to have had to make some sporadic big purchases like new car(s), a new roof, and other things that maybe just haven't surfaced yet?

At 63 I can't claim "early retiree" status but I do have a significant amount of maintenance in my normal budget. I haven't worried about the major maintenance expenses or car replacement because it would be equivalent to or less expensive than a major European trip. I'm still working on spending the "affluent" budget. If maintaining the house started to impact overall spending, it's time for the house to go. That isn't as much a problem for me as I expect it will be for DW.

 

[Gumby]

I always wonder when I see these discussions if early retirees who are living on half or less of their pre-retirement incomes have been retired long enough to have had to make some sporadic big purchases like new car(s), a new roof, and other things that maybe just haven't surfaced yet?

In my spreadsheet, with ER less than 3 years away, I've also started from our current salaries and backed out taxes, retirement savings, college tuition and other child expenses, and I come up with us needing only about 55%. But I also factor in that every 10-12 years we'll replace a car or two, and that we also need to set aside for another roof in 15-20 years, etc.

I do have a sinking fund for home repairs included in my budget, but nothing for cars. If I wanted to buy one $30,000 car every 6 years, I'd include an extra $4000 per year in the budget if my investments earn 8% on average (I don't actually need to draw the amount every year. Thus, I use my average return on investments rather than 4%). Since I have never in my life bought a $30,000 car, that would likely be more than enough, and it barely moves the needle.

 

[Teacher Terry]

We did have to replace our 2 really old cars (14yo each) this year. We replaced them with low mileage used cars about 4 years old. We will drive them a very long time. WE don't drive nearly as much because we just work p.t. mostly from home consulting & we walk many places now that we are semi-retired. WE did not go down to 1 because their are times that we need 2 & also I like the freedom of the car always available even though many days they just sit.

 

[daylatedollarshort]

I always wonder when I see these discussions if early retirees who are living on half or less of their pre-retirement incomes have been retired long enough to have had to make some sporadic big purchases like new car(s), a new roof, and other things that maybe just haven't surfaced yet?

We put reserves in our budget for major home repairs, car replacements and a buffer for all the "unknown unknowns". Yes, it is still under 50% of our former gross earned income. And it will go lower when our kids are off the payroll, and again lower after that if we decide to downsize.

We have cars with high resale value and we would probably buy used like we did for our last car purchase, now that we have more time to shop for a reliable used one, so selling a ten year old car and buying a two year old used car, the net cost out of pocket isn't that huge.

 

[Ozstache]

I always wonder when I see these discussions if early retirees who are living on half or less of their pre-retirement incomes have been retired long enough to have had to make some sporadic big purchases like new car(s), a new roof, and other things that maybe just haven't surfaced yet?

I have a major expense sub-budget that covers these type of expenses, such as:

• Car and motorbike replacement with near-new every 6 and 7 years respectively
• Furniture and appliance replacement
• Electronic equipment modernisation
• Major house maintenance / renovation
• Major vet surgery
• Elective surgery cue jumping funding
• Self education
• Major holidays (eg. around the world)
• Children's weddings
• Major birthday functions and presents
• Family assistance
• Funeral expenses

Works out for me to be around $10K per year average over a 10 year window.

 

[dd564]

Currently 37% of our after 401k savings expense is mortgages.
So if I get those paid off prior to retiring, that would mean my spend would be 63% if everything else is the same.


The other thing is we will possibly travel more which some would say will increase our expenses. But what I've found out is when we travel, my wife isn't shopping at Target daily so our cost is basially a wash.

 

[Cobra9777]

I always wonder when I see these discussions if early retirees who are living on half or less of their pre-retirement incomes have been retired long enough to have had to make some sporadic big purchases like new car(s), a new roof, and other things that maybe just haven't surfaced yet?

In my spreadsheet, with ER less than 3 years away, I've also started from our current salaries and backed out taxes, retirement savings, college tuition and other child expenses, and I come up with us needing only about 55%. But I also factor in that every 10-12 years we'll replace a car or two, and that we also need to set aside for another roof in 15-20 years, etc.

We're at 40% of prior gross, and this includes healthy allowances for car replacement, major repairs, home improvements, and travel. We eliminated taxes, retirement savings, college (for 2), other child-related expenses, and paid off the mortgage. When we downsize the house, we'll be closer to 30%.

 

[grasshopper]

Retired 9 years ago, we saved about 40% of after tax income, the years before ER. Now we find our yearly income is/could be the same as our after tax income and we are still only spending 60%. I am taking SS now, and that is reserved for travel. We had to replace a large truck $40K in 2008 that hurt.

 

[Teacher Terry]

We did do $15,000 in home improvements this year & that was not part of our 50% spending. We used some of the $ we made consulting to pay for that. Cars, roofs, etc need to be planned for of course because stuff happens.

 

[Theseus]

I am using 2010-2013 as a baseline, all expenses accounted for during that timeframe. With doubling property tax payments and a big renovation/update in 2010 our housing expenses were $40k that year, including that in the average will cover the "oh crap" benefit of home ownership.

Taxes are shrinking immensely from what they were during income producing years, but OTOH healthcare skyrocketing in comparison - I figure premiums + max OOP as the baseline for future years. 3% Inflation adder for most others, expecting to start out around $60k expenses without really skipping a beat in terms of lifestyle.

 

[Sandman62]

Thanks everyone for sharing your insights on budgeting for big- ticket items!