Expenses

[Vincenzo]

There's a thread in the "Hi, I am...." forum where someone said that he would need approximately $110,000 (or was it $120k? I don't remember the exact amount) to cover expenses in retirement. Someone responded, suggesting that the OP might be overestimating his expenses. It got me wondering because I've estimated that we would need approximately $106k if we wanted to retire today.

Spouse and I have kept track of our expenses for an entire year and I'm wondering if some expenses should be left out of our future expense estimates.

Our annual expenses are broken down as follows:

Mortgage: $42,979 (we pay more than necessary so that we can be free and clear sooner
Maintenance: $5,526 (we live in high-rise condo)
Utilities: $1,765
Food & Wine: $5,801
Entertainment: $1,890
Clothes: $1,273
Gifts: $1,772
Transportation: $2,290
Doctors: $3,225
Lunch (we don't pack a lunch for work): $2,275
"Other" (e.g., haircuts, magazine subscriptions, postage, etc.): $5,214
"1-Times" (e.g., we bought furniture): $7,253
Vacation: $10,455
Other Getaways: $2,908

Total: $94,650

Without the mortgage payments, expenses would be $51,671. But when we retire we'll need to pay for health insurance. And then there are taxes. Spouse loves to travel so the vacation expense is pretty much non-negotiable. And I'm a big wino so cutting the expense for wine is a no-no (I usually buy cheap Chianti at approx. $8/bottle by the case).

Should we not be counting the expenses in the "1-Times" category? It's a category that has expenses that don't recur regularly, but aren't there always going to be "1-Time" expenses? Last year it was furniture, next year it may be something else, maybe not. I don't think my expense estimate is too way off. Would love to get different opinions.

 

[Mwsinron]

Do you think you will be using your furniture 30 years in retirement? You will need to budget some yearly money for housewares. How much thats up to you I guess. Why the more years of tracking your expenses you have the better to get an average.

 

[Vincenzo]

Do you think you will be using your furniture 30 years in retirement? You will need to budget some yearly money for housewares. How much thats up to you I guess. Why the more years of tracking your expenses you have the better to get an average.

Yes, you're right - we should budget something for housewares.

The big question is health insurance. I mentioned that our annual mortgage expense is about $42,978 and I estimate that we'll have the mortgage paid off in eight years. But I'm thinking that I shouldn't eliminate the $42,978 from my expense estimate because there'll be health insurance to pay for. It's only my DW and me, and budgeting $43k for health insurance may be too much, but I don't know.

I'm hoping that someone will give me a convincing argument that my estimated expenses are way overblown and that we can retire today - one can hope

 

[Mwsinron]

The way health care is going up who knows? You could go to ehealthinsurance and get an idea of what it would cost for you and your DW. I would say 43k budgeted for health insurance is waaay too much. A healthy couple its probably between 8 to 12k depending on your deductible.

 

[REWahoo]

It's only my DW and me, and budgeting $43k for health insurance may be too much, but I don't know.

You are budgeting a doomsday number.

If you want to be pessimistic, that's fine, but try to be realistic. I'd say $12-15K in today's dollars would be a conservative amount to allow for health insurance. As a benchmark, DW and I (age 60 & 59) are paying combined about $8K for $5,000 deductible, and DW is in the state (TX) high risk pool.

Not sure how typical our numbers are, but they are real world examples and would call into question how reasonable your $43K might be.

 

[TromboneAl]

Thanks for helping me understand how some people can have expenses around (or over) $100,000.

Put together just the mortgage, condo expenses, wine, eating out, transportation, and trips and you've got about $72,000. Retire, sell your condo, buy a small house in the country, go on more modest trips, eat home, and buy some thunderbird wine, and your expenses drop to under $30,000. Just by retiring (and moving), you'd save an awful lot.

Your net worth is about $969,100 right now, plus the condo. So you could retire today, but you'd have to want to enough to make the big lifestyle changes.

BCBS for DW and me costs $5,160/year.

 

[rmark]

Retiree health insurance through our state plan is about $400 for ex-employee, $550 for spouse (before medicare) per month. Each of these is about $150 less after medicare starts (mdicare supplemental).

Stick with the red wine, the antioxidants might help.

 

[haha]

To me his housing expenses are somewhat high--everything else is low to low-middle. A couple living in a high rise condo only spend $1200 for clothes and less than $6000 for food. Less than $2000 for entertainment. Not much urban lifestyle priced into any of these.

This person is house-poor.

Ha

 

[walkinwood]

Vincenzo,

Thanks for sharing your expense breakup.

Where do you live? That matters almost as much as lifestyle.

If you pay off your mortgage, you'll still have annual property taxes.

Regards,
c.

 

[Vincenzo]

Mwsinron,

Thanks for letting me know about ehealthinsurance. I'll check it out.

Mwsinron & REWahoo,

Yeah, I had a feeling my estimate for health insurance was too much. In general, my wife thinks my retirement plan is too rosy and so lately I've been ultra-conservative in some areas of my planning. I might bring that down a bit based on the feedback I've gotten here.

TromboneAl,

Thanks for the feedback. Just to clarify a thing or two - we hardly ever eat out (except for when we go on vacation, of course). I don't think buying a small house in the country is in our future as I'm not exactly Mr. Handy and a house, I'm sure, always requires maintenance. Plus, we don't want to be bothered with shoveling snow, raking leaves, cutting bushes, painting fences, etc. although in retirement I might feel otherwise. As for going on more modest trips? My wife is frugal and we both live simple lives but my wife feels (and I tend to agree) that there's just too much beauty out there to see. But we don't fly first-class, but coach. We don't stay at five-star hotels but at modest accomodations. Regarding the wine - yeah, I suppose I could find cheaper wine. A Trader Joe's opened up near us and I was hoping to find good, cheap wine there but, alas, this Trader Joe's didn't sell alcohol.

rmark,

Yes, I keep telling DW that the wine is for medicinal purposes - doctor's orders, I tell her

Ha,

Yeah, we live pretty simple lives. We do catch a show every now and then but off-Broadway stuff. We catch a concert every so often. But we don't do the "urban lifestyle" stuff all that much. Don't know that we're house-poor.

Walkinwood,

We live in Northern New Jersey. Property taxes - Doh! I knew I forgot something. And insurance too! Good grief! Time to hit another bottle of Chianti!

 

[Gone4Good]

We live in Northern New Jersey. Property taxes - Doh! I knew I forgot something. And insurance too! Good grief! Time to hit another bottle of Chianti!

e-healthinsurance.com will tell you that comprehensive medical coverage for the both of you will run about $10K in NJ. In NJ I don't think it really matters what kind of health you're in. Everyone's welcome, everyone pays. If you're in good health you can probably cut that bill 60% by moving to another state.

For that wine you might want to check out the Wine Library in northern NJ. You can pretty much take their suggestions and you'll find tons of great wine for <$10 / bottle.

Also don't forget sneaky expenses like income taxes and the cost of replacing durable goods, like your car.

 

[walkinwood]

Vincenzo,

As 3YTG says, $10K/yr for health insurance seems about right. And I also second his recommendation of the wine library - you can order online at winelibrary.com - great choice & usually the least expensive around here.

I see a lot of advice along the lines of "move". However, the greatest joy in my life comes from my friends (alas, I don't have family near by), so moving is not a very appealing thought. Though we've toyed with the idea of moving to PA - not too far away, but should result in a lower cost of living.

Besides, I like NJ! ... except for the taxes & cost of living!.

ww.