Expenses in Retirement

[RetireAge50]

Thank you everyone for great responses and suggestions. A couple clarifications:

Budget is for two people.

Gasoline is high as we expect to spend some time on the road in RV.

Taxes I budgeted as $9,000 as this is the total federal taxes to the top of the 15% bracket (about $90,000 income). If I need less income in some years will convert to Roth and pay tax to fill 15% bracket. Then in years I need more (new roof, car etc) will use Roth to avoid higher tax bracket.

$25,000 travel and entertainment is much more than I currently spend but figure if I am retiring early I want to have that option without going back to work.

Still need to think more about what lifestyle I would like as spending so much to maintain houses and cars seems crazy. Maybe would be better to own nothing and just roam free.

[teejayevans]

Quote:

Originally Posted by RetireAge50 Still need to think more about what lifestyle I would like as spending so much to maintain houses and cars seems crazy. Maybe would be better to own nothing and just roam free.

Since you mention it, buy a sailboat...
Boat Insurance $4000
Boat Maintenance $3000
Marinas $3000 (assume 50% time anchored out)
Fuel $500 (this goes up 10X or more with a power boat)
no real estate taxes, no utilities (solar panels, wind generator)
Rental cars, customs, other travel $2500 (when I was in Bahamas, I spend less than when back in the states)
1 cell phone and wireless hotspot for computer $1500
No car expenses, no real estate taxes, low fuel costs assuming you sail most of time, no health club (without a car, you'll be walking or ride a bike), low travel expenses (no hotels, no plane tix)...
TJ

[WestLake]

$25,000 is the travel budget I am planning but I'm single and plan an annual cruise, the TCM film festival, Mardi Gras, Oktoberfest and maybe another European trip and NYC to see shows with a miscellaneous variety trip or two.

I plan on cheap tickets and mostly value hotels with some splurges.

The last trip I took was to Carmel, SF and Sonoma. I stayed at less expensive places and with a friend who drove me everywhere - gave little thought (and planned it that way) to nice restaurants, paying for my friend and buying wine. Spent a lot more than I could imagine, it was surprising. So this "experiment" has me rethinking...

[Meadbh]

I am single and in my first year of RE. My planned travel budget is $8000 and so far this year I have spent ~$6500. That includes three trips, two of which have already taken place. The flight and accommodation for the third trip is already paid for so I expect to stay on budget. When my car loan is paid off in two years I plan to spend more on travel.

Couples can travel much more economically (per person) than singles.

[pb4uski]

Quote:

Originally Posted by RetireAge50 ...Taxes I budgeted as $9,000 as this is the total federal taxes to the top of the 15% bracket (about $90,000 income). If I need less income in some years will convert to Roth and pay tax to fill 15% bracket. Then in years I need more (new roof, car etc) will use Roth to avoid higher tax bracket. ....

The composition of the $90k of income is important. Long term capital gains and qualified dividends are taxed at 0% as long as you stay in the 15% bracket. So for example, if $20k of the $90k is LTCG your tax expenses will be a couple thousand lower. If higher proportions, even lower still.

Many of us who ER and are living off taxable investments whose income is mostly qualified dividends and LTCG are paying very little in federal income taxes.

[gauss]

For the two of us, our planned budget is $80,000 /year broken down as follows:

$55,000 - standard living costs (based on quicken historical data)
$10,000 - Fed/State income taxes
$ 5,000 - vacation
$ 5,000 - health care (assumes retiree group plan from Megacorp)
$ 5,000 - replacement cost accrual (car,home,furniture etc.)
--------
$80,000

Although your breakdown is different, the totals seem to be very similar (note that we did not have a tithing category).

Have you tracked actual expenses in quicken or some other tool? Having this historical data for us was very empowering.

-gauss

[daylatedollarshort]

Quote:

Originally Posted by RetireAge50 Thank you everyone for great responses and suggestions. A couple clarifications: Budget is for two people. Gasoline is high as we expect to spend some time on the road in RV. Taxes I budgeted as $9,000 as this is the total federal taxes to the top of the 15% bracket (about $90,000 income). If I need less income in some years will convert to Roth and pay tax to fill 15% bracket. Then in years I need more (new roof, car etc) will use Roth to avoid higher tax bracket. $25,000 travel and entertainment is much more than I currently spend but figure if I am retiring early I want to have that option without going back to work. Still need to think more about what lifestyle I would like as spending so much to maintain houses and cars seems crazy. Maybe would be better to own nothing and just roam free.

We would eventually like to do what they call on the MMM forum slow travel - stay in a furnished apartment various places for a month or more at a time. That way our travel and basic living expenses will somewhat merge. The tentative plan is to keep a smaller lock and go place where we live now as a home base for awhile.

[scrabbler1]

My budget, for a single person with no children, is as follows:

Housing expenses - $6,100 (This is my annual maintenance expenses for my co-op. They include property taxes net of state tax rebate, interest on the co-op's mortgage, and other common charges for the physical upkeep of the buildings and grounds.)

Health insurance and dental expenses - $2,500 (This will rise in 2014 once I can sign up for the ACA exchanges and buy a broader, subsidized HI policy than I have now.)

Auto and Home Insurance - $1,600 (Mostly auto because some of my co-op maintenance goes to the co-op's broad insurance policy covering the buildings and grounds.)

Utilities - $2,200 (My own electric, internet, phone, cable TV; natural gas for cooking and oil for home heating are part of my maintenance.)

Income Taxes - $3,400 (Federal and State; it rises and falls depending on some irregular cap gain distributions and what type they are, as pb4uski alluded to.)

Cash Expenses - $3,600 (This includes food, gasoline, square dance admission fees, and everything else; mostly food.)

Total - $19,400.

Income, excluding those irregular cap gain distributions - $30,000. Nice cushion.

[imoldernu]

Quote:

Originally Posted by daylatedollarshort You can compare your budget to the consumer expenditure survey numbers here - CE Expenditure Tables But if those amounts are what you need to make you happy then I am not sure other people's budgets would matter.

Thanks for this link. After taking time to understand the numbers, I found that we are close to the average on most of the categories.

Am not a fan of the BLS, but this analysis may change my mind.

Makes me happy...

[daylatedollarshort]

Quote:

Originally Posted by imoldernu Thanks for this link. After taking time to understand the numbers, I found that we are close to the average on most of the categories. Am not a fan of the BLS, but this analysis may change my mind. Makes me happy...

We had some crazy high expenses in a few categories before we did the comparison. I keep an ongoing list of annual expenses we cut. It is in the tens of thousands of dollars so far and we are far from done reducing expenses. Too bad we didn't do that years ago. It would have speeded up our semi-ER by many years.

We spend a lot less but have more free time and go out more now than we did before our budget enlightenment.

[W2R]

Fascinating link!

Looking at their latest numbers, I notice that the average spending for clothing in my age group of 65-74, was $1152. Granted, their consumer units averaged 1.9 people, but gosh, $1152? Really?

Clearly I am falling behind, and need to take corrective action, pronto!

[daylatedollarshort]

Quote:

Originally Posted by W2R Fascinating link! Looking at their latest numbers, I notice that the average spending for clothing in my age group of 65-74, was $1152. Granted, their consumer units averaged 1.9 people, but gosh, $1152? Really? Clearly I am falling behind, and need to take corrective action, pronto!

The average person in the U.S. buys 65 pounds of clothes in a year. Used clothing is one of our largest exports -

Mattias Wallander: A Second Life for Unwanted Clothing

[W2R]

Quote:

Originally Posted by daylatedollarshort The average person in the U.S. buys 65 pounds of clothes in a year. Used clothing is one of our largest exports - Mattias Wallander: A Second Life for Unwanted Clothing

Amazing! I had no idea.

[explanade]

Quote:

Originally Posted by WestLake $25,000 is the travel budget I am planning but I'm single and plan an annual cruise, the TCM film festival, Mardi Gras, Oktoberfest and maybe another European trip and NYC to see shows with a miscellaneous variety trip or two. I plan on cheap tickets and mostly value hotels with some splurges. The last trip I took was to Carmel, SF and Sonoma. I stayed at less expensive places and with a friend who drove me everywhere - gave little thought (and planned it that way) to nice restaurants, paying for my friend and buying wine. Spent a lot more than I could imagine, it was surprising. So this "experiment" has me rethinking...

How many days or weeks of travel is that?

How many hotel nights?

How many airline tickets?

I would like to spend that much on travel but a couple of business-class tickets to overseas destinations could eat up over half that budget.

Or you can buy 4 or 5 coach tickets for the same cost.

[kramer]

Quote:

Originally Posted by explanade How many days or weeks of travel is that? How many hotel nights? How many airline tickets? I would like to spend that much on travel but a couple of business-class tickets to overseas destinations could eat up over half that budget. Or you can buy 4 or 5 coach tickets for the same cost.

I have flown coach from the USA West Coast to various places in Southeast Asia each year of my retirement (so 7 times now). I have never paid over $1200 for the round trip. Plus, perhaps another $100 for all the getting-to-and-from airport expenses on both ends.

Accounting for inflation, I probably paid an average of $850 on 3 round trips to Colombia from the USA West Coast. My flights to Mexico were quite cheap.

Even in those 3 years where I was traveling to both South America and Asia, I was probably only spending $3000 per year in airplane tickets to foreign destinations, including regional flights.