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View Poll Results: Retirees Accuracy of Estimated Spending
Overestimated by >= 100% 0 0%
Overestimated by about 75% 0 0%
Overestimated by about 50% 2 4.76%
Overestimated by about 25% 2 4.76%
Overestimated by about 10% 1 2.38%
On target +/- 5% 22 52.38%
Underestimated by about 10% 9 21.43%
Underestimated by about 25% 6 14.29%
Underestimated by about 50% 0 0%
Underestimated by about 75% 0 0%
Underestimated by >= 100% 0 0%
Voters: 42. You may not vote on this poll

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Old 06-23-2007, 04:09 AM   #21
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I've been retired for eleven years.

I voted "on target". I'm not sure this answers the OP's question precisely. Our budget was based on our expenses before retirement and our financial resources. We targeted a level of expenditure (with inflation increases) that gave us an acceptably high probability of our money lasting longer than we do. We have kept pretty closely to our original budget, hence my "on target" vote.

Some changes in spending after we retired: House maintenance and medical care (deductibles and co-pays) expenses have increased. We spend more on travel. We buy better quality food, but eat out less often. Taxes have varied greatly from year to year.

How much we spend is a variable under our control, so we adjust our spending all the time to match the budget. There are optional things which we now spend more money on; longer trips, better wine, more fresh and organic food, etc. There are things we may spend more money on, such as trips to more expensive countries. And there and things that would be fun that we will probably never be able to afford. A vacation house on beach front acreage with pleasantly warm weather year round and a live-in caretaker comes to mind.

In my opinion, "income needed" is what is required to provide food, plus clothing and shelter as necessitated by the local climate. Medical care is a peculiar category which may be a true need of unpredictable and almost unlimited size. The medical care need can be met via insurance, several spare millions of dollars, or good fortune.

Of course, income needed is not the same thing as income desired. I try to keep the difference clearly in mind. We are spending many times what we need, but I don't ever expect to have more money than I know what to do with. I can live with that.
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Old 06-23-2007, 04:27 AM   #22
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What all those other posters said--practiced living on ER budget before ER, same spending now but on different activities, having time to shop better saves money, etc. Living a relaxed life with all the time I need is priceless. The financial part seems so unimportant compared to the joys of ER.

I agree that it makes sense to test the retirement budget. Currently we LBYM. We do not deprive ourselves, but we are fairly conservative and do not waste money on a continuous purchases of (stuff). We do have big expensitures from time to time, but they are for cars, furniture, etc... By far our largest discretionary expense is entertainment and travel. In our case our expense budget will actually increase due to travel allocation. We could live with our current expenses and not have a problem. When we ER, our Income will be just about my current pre-tax salary. We will lose DW's salary. We are currently living on the amount DW makes and we save just about the amount of my salary (Post tax). Of course, our tax bracket will drop when we ER. Plus we will not be paying into SS and Medicare (tax). We are going to down-size the house. That will cut our property tax by about 1/3. We will have some increased expenses in a couple of areas (under $5k/yr). All in all, our allocated expenses is about 30% more than our current expenses.

I suspect that we are overestimating our expenses due to our expectation of traveling (several months a year). That pool of money is just a big slush fund.

If our run rate on expenses is less, I will probably find something (discretionary expense) to spend it on that we have not identified so far. For example: We are planning on buying modest cars going forward. But heck, if we have the money and it is not being spent... perhaps we will buy fancier vehicles. We are going to enjoy it in some way. After seeing my parents spend most of their money on the nursing home... why not. But I think we have the NH covered (hope we don't need it), we have LTC policies.
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Old 06-23-2007, 07:10 PM   #23
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Tough to answer this one. I added plenty of pads and extras, along with a pretty detailed "other" category and I also calculated how much extra I needed to make every year to pay for the capital items like cars, home upgrades and the like. I ended up busting it down to decade level amounts and fractionalized the cost when an item had a multiple decade lifespan.

Then I made sure I could make enough money to cover all of it, no surprises.

So up until this year i was way short on spending towards my budget, but thats a "good and intentional failure" as far as i'm concerned.

I sort of made up for the shortfall in the last year or so...but thats what happens when you realize that you're making a lot more money than you thought and you elect to strike a different balance between quality of life and financial independence.
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Old 06-23-2007, 07:54 PM   #24
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I voted on target. I too followed expenses prior to retirement and figured I would spend just about the same amount retired as working. I also planned for a new car every 8 years. Like REWahoo I budget for contingencies and roll up the savings. As this money is not spent yet, I could be underbudget, however, if the expenses come in early, I would be over.
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Old 06-23-2007, 11:40 PM   #25
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This one depends a lot on just how stable things are for you. In our case our withdrawal rates have been: 6.4%, 3.7%, 4.5%. Had some part time work income which helped (unexpected). Also didn't expect such a nice stock market since April 2003. Some unexpected expenses were: needed new car when we gave old one to son, new 30yr roof, redid house duct work. Also another unexpected ongoing expense incurred when son decided that the trades were not for him and maybe he should really get serious about college -- of course, since he's an adult now he has to work hard to convince us to keep helping him , no free lunch.

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Old 06-24-2007, 09:28 AM   #26
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of course, since he's an adult now he has to work hard to convince us to keep helping him , no free lunch.

Les
Les,
Best plan I heard on this was from an A.F. Chaplan. He told his kids, "You go to school on student loans" when you graduate I'll pay off the loans. If you don't the dept is yours. One son went to college dropped out. When the dept came due, he ask his dad if the deal was still good. He now has a degree and is doing well.
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Old 06-24-2007, 09:58 AM   #27
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Rustic, sounds like a nice idea. I'll talk it over with the DW . Thanks!

Les
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Old 06-24-2007, 02:19 PM   #28
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good poll. Interesting to see that almost all were either on target or underestimated, but virtually no one overestimated.
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Old 06-25-2007, 02:00 PM   #29
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Just curious as to how you factor in major non-emergency lump sum expenses (car, air conditioner, driveway, etc.)?

Seems like a $30,000 car would be treated as something other than an expense, at least for this poll. Do you keep a "major expense" fund, slice it directly from the nest egg as needed, or diligently set aside from monthly "allowance" for when the time comes (in which case maybe it is a traditional expense).
I'm not FIREd yet...but I would budget for these expenses the same way I budget for them now:
--Estimate lifespan of item (or frequency of purchase)
--Divide total expenditure cost by above # of years
--Enter the annualized fractional share into your annual budget.

That way, over time, you'll encounter a few major items sooner than estimated, you'll encounter a few items later than estimated, but it should all average out to be approximately on-time, and you'll have the funds saved up for them and won't have to worry about taking out too large of a percent of your stash one time to pay for them.
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Old 06-26-2007, 02:31 PM   #30
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I'm not FIREd yet...but I would budget for these expenses the same way I budget for them now:
--Estimate lifespan of item (or frequency of purchase)
--Divide total expenditure cost by above # of years
--Enter the annualized fractional share into your annual budget.

That way, over time, you'll encounter a few major items sooner than estimated, you'll encounter a few items later than estimated, but it should all average out to be approximately on-time, and you'll have the funds saved up for them and won't have to worry about taking out too large of a percent of your stash one time to pay for them.
This approach makes sense while you are working. But when you are living off your savings there is no rational place to put an annualized fractional share. Better to just plan for it when it comes and liquidate appropriate assets at the time. It might even make sense to lease for a while if the market is hot at the time.
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Old 06-27-2007, 02:30 PM   #31
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I've been retired 10 yrs but single now for 3 yrs. My expenses are less than SS so i'm not yet depleating savings. I just began RMD so will soon add equities to taxable savings, but being a retired facility maintenance engr. I still enjoy finding ways to save energy and extend the useful life of car, home, etc. Passive investing helps too.
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