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Expense Poll
Old 02-12-2013, 03:48 PM   #1
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Expense Poll

After many hours over the last six weeks doing my first deep dive into retirement planning, my 4 favorite tools (FireCalc, Fidelity RIP, my own excel spreadsheet and our Financial Planners tool) are all converging down to two questions. I'll deal with the most important of those here: "expenses" (big surprise):

I'm 52, DW is 50. Our combined income is 210k and we have been able to max out on all retirement savings options for many years. Our lifestyle is comfortable and we have not been constrained by a budget, but just our common sense of values. We have tracked spending closely and estimated our retirement budget based on that lifestyle (with adjustments for the kids leaving the nest). I believe this to be a very conservative approach and am wondering if we are really going to have the same mental approach to spending in retirement. In other words are we severely overstating expenses? I know that each situation is different, but here is my question.

Those of you that are in the same ballpark as us from an income perspective in your working years, but have retired recently: What is your annual budget amount? I'll go first:

$96,000 + $10,000 in taxes = $106,000

(Other income brackets please join as well, this could be a great help for many of us that are on the bubble)
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Old 02-12-2013, 03:53 PM   #2
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Our proposed budget is $95,000 (taxes included), dropping to $83,000 when the 529's are finished. (about 12 years from now).

That's an all -in... room for travel and perks budget for a family of 4. We have plenty of room to cut back...

It assumes mortgage is paid off... which should happen early next year. We're currently making huge extra principal payments (more than $2k/month extra) to reach this goal.
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Old 02-12-2013, 03:55 PM   #3
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About the same. Could spend a lot more but cannot travel as much as would like because of eldercare. Keeps WR around 2% or so (have pension as well, no SS yet).
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Old 02-12-2013, 03:55 PM   #4
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Quote:
Originally Posted by rodi View Post
Our proposed budget is $95,000 (taxes included), dropping to $83,000 when the 529's are finished. (about 12 years from now).

That's an all -in... room for travel and perks budget for a family of 4. We have plenty of room to cut back...

It assumes mortgage is paid off... which should happen early next year. We're currently making huge extra principal payments (more than $2k/month extra) to reach this goal.
Yes, ours is assuming mortgage paid off also. I take it you are still working?
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Old 02-12-2013, 04:03 PM   #5
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(deleted my original post because it didn't answer the question! Oops.)

Quote:
Originally Posted by cinman2000 View Post
We have tracked spending closely and estimated our retirement budget based on that lifestyle (with adjustments for the kids leaving the nest). I believe this to be a very conservative approach
That sounds like a good approach to me.

Retiring felt sort of like (what I imagine) jumping out of an airplane might feel like. You do all you can beforehand to figure these things out, but on retirement day as you walk away you just hope to heavens that your computations were good. My big surprise was a good one, fortunately; taxes as a retiree are surprisingly low.
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Old 02-12-2013, 04:04 PM   #6
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I do not think you will get much useful information. People's needs/wants are different.

Some people with a high income want to retire and will accept a low expense lifestyle - they like the comfort of a relatively large portfolio, and they don't need much to be happy. Others want to travel, or other things that can be expensive.

On the other side of things, some people may have a had a fairly low income, but have been saving like crazy so they can splurge a bit in retirement.

What do you want?

It might be better to outline your needs/wants with your proposed budget, and maybe people will pick out things that are missing(health care? home maint? car replacements?) or seem like outliers (like - hey, that much travel will cost more unless you really plan and scrounge and search out bargains).

-ERD50
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Old 02-12-2013, 04:08 PM   #7
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Before Tax Budget 72k
after tax essential budget is at 30k
after tax discretionary budget is 20k (mainly travel budget)
I include big ticket fund contributions in the mix also
My actuals #s so far have always been way under
another consideration - No mortgage
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Old 02-12-2013, 04:08 PM   #8
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You may have already searched and not found what you were looking for, but FWIW

Poll: How much do you actually spend each year?

Annual Expense Trends

IMO the only good way to figure out what you'll really spend in retirement is to cut back to that level of spending for a year or two before you retire. We did, gave us peace of mind to know for sure before pulling the plug.
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Old 02-12-2013, 04:25 PM   #9
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Quote:
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Yes, ours is assuming mortgage paid off also. I take it you are still working?
Yes - still working (until I get a severance package... or hit 55... or my BS bucket overflows.) Plan to retire anytime between now (in the middle of a corporate buyout - so severance possibilities are high) and 4 years from now.

We hit our target number - but I'd like some padding.

Hubby will retire next year when he turns 62, regardless.

My budget numbers were arrived at based on actual spending the last several years... then modified (changes in taxes w/ no SS/medicare taxes, increased health care, reduction in child care/summer camps).

The more I can pad the number, the more extensive our travel can be.
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Old 02-12-2013, 04:26 PM   #10
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We were in the ballpark with you income wise prior to retirement and our budget is about $65 without our mortgage, but like ERD suggests I'm not sure if that will be very helpful to you.
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Old 02-12-2013, 06:03 PM   #11
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As a single person who had never been been extravagant nor attracted by material things, I think I can live a simple and not uncomfortable life with what I will get from Social Security alone, and without cheating by not counting food stamps or other government benefits. I do have other retirement savings, but I can do a good many years on 0% withdrawal in times of bad market downturns.
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Old 02-12-2013, 06:19 PM   #12
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Quote:
Originally Posted by cinman2000 View Post
.....

$96,000 + $10,000 in taxes = $106,000
Almost exactly (within a few percent) the same as ours.
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Old 02-12-2013, 06:32 PM   #13
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Comparing budgets is like comparing apples and oranges. Circumstances differ. For me, there is no relationship between former earnings and retirement budget, because I have been paying myself sufficient to match personal expenses from my professional corporation in the years prior to retirement. That is the benchmark. I think you need to draw up your own budget now, before retirement. You might be surprised to find some economies you can make, too.
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Old 02-12-2013, 06:49 PM   #14
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Hey....We are a little bit younger than you, but will expect to have around the same budget as you proposed (well, adjusted for the 2030s). Hopefully less as the kids should be our of the house, mortgage paid off, no debt, etc....but we plan around 100k. ERD50 makes a good point that none of us are exactly the same and our needs are different, but you seem to lead a modest, contented life and LBYM. That budget should be great! Good luck with the retirement planning!
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Old 02-12-2013, 06:51 PM   #15
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We don't do a budget~ just fly by the seat of our pants (well my pants anyway.)

We spend less that our income streams bring to our checking account each month. Between pensions and SS, we generally have a couple of grand monthly left over that I stash into our savings vehicle, awaiting an opportunity to spend it.

Not sure how to spend what RMD will deliver to us in a few years but I'll figure that out eventually.
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Old 02-12-2013, 06:59 PM   #16
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My household income is about 60% of yours and my planned budget is about 60% of yours so proportionally we are the same. I don't know why but I found that to be interesting. I am not retired yet so I guess my budget doesn't mean much. It is difficult to compare 2 peoples spending amounts without seeing the actual budget items. For example I pay about $2000 in property tax you may pay the same or more. As others have said you may be comparing apples to oranges.
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Old 02-12-2013, 07:25 PM   #17
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Our gross income is more, our taxes are less, our expenses appear to be less, if we ignore: Our biggest expense now is college expenses, but that kid graduates next year. We live in a cheap location and have no mortgage.

We pay no income tax on
(a) 401(k) contributions
(b) HSA contributions
(c) health insurance premiums
and deduct the following
(d) property taxes
(e) sales taxes (no state income tax)
(f) charitable contributions
and get tax credits for
(g) foreign tax on mutual funds
(h) education credits

It turns out if we make another $100 in interest, we pay another $45 in federal income tax, so we are in the 45% marginal income tax bracket, but our federal taxes divided by gross income (not adjusted gross income) is about 9%.

I just don't see how one can pay $10,000 on $96,000 of income. Have you put your numbers into tax software? Or do you have zero qualified dividends and zero long-term cap gains and zero carryover losses which would mean that all your planned $96,000 will come from IRA or 401(k) withdrawals or pensions?
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Old 02-12-2013, 07:44 PM   #18
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cinman, we're in roughly the same age and income situation. But I am living overseas currently, where my expense structure is completely different from in the US where DW and I will retire in a few years. So I'm having an even more difficult time estimating retirement expenses than you are. A half dozen years ago in the US, with three kids still living at home, our expenses were in the low to mid $80k range, excluding taxes. I'm swag-ing $100k retirement expenses now (including taxes), so you and I are thinking along the same lines. Although I don't know these numbers very well, I'm figuring the top quarter of that budget is pretty flexible/discretionary, so withdrawals can be fairly flexible under bad market conditions. Like everyone else, I'm not sure how health insurance premiums will affect the budget in the years before Medicare.
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Old 02-12-2013, 07:53 PM   #19
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Gross income is higher. Expenses (ex-taxes) are just a tad higher than yours, but 60% of that goes to rent. I live in a high cost of living area.
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Old 02-12-2013, 11:06 PM   #20
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Tax rates can vary considerably due to itemized deductions. DH and I consciously decided not to reduce our charitable contributions after ER so they are now a very significant fraction of our (greatly reduced) income. Add to that property taxes and medical deductions and our taxable income is much lower than our spending.
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