Expenses in Retirement

[RetireAge50]

Here are my expenses (today's dollars) that I expect/desire during retirement. Are these low, average, or high in your opinion?

Retirement Budget
Health Insurance $12,000
Car Insurance $1,200
House Insurance $720
Cell Phone $1,200
Health Club $528
High Speed Internet $600
Utilities $4,800
Gasoline $6,000
Misc $3,000
Food $8,000
Property Taxes $4,000
Tithes $9,000
Federal Taxes $9,000
Travel and Entertainment $25,000
Automobile Expenses $3,600
Home Maintenance $1,500
Total $90,148

 

[Fishingmn]

While the final total is similar to my planned expenses there are some differences:

- My gas budget is substantially lower but we have cars that get 33-40 mpg and don't expect to drive as much in retirement
- I am budgeting $10k for misc. This includes clothes, my wife's expensive hair appointments and anything else.
- I budget $6k for food/liquor. You are budgeting a lot for travel & entertainment (as we are) and any meals while dining out or traveling go into those buckets.
- We don't plan to give as much to charity after retirement since our income will be so much less
- I budget $2k for home improvement for things like landscaping, flowers & furniture
- I budget about $6k/year for major repairs which includes replacing all major appliances, roof & cars

The only other thing I'd recommend is running an estimate of income taxes. Mine came out less than expected - Income Tax Calculator - Tax-Rates.org

 

[Meadbh]

It's difficult to interpret information like this without context. Tongue in cheek responses are below in blue.

Here are my expenses (today's dollars) that I expect/desire during retirement. Are these low, average, or high in your opinion?

That depends on many factors. I see from your profile that you are married with two children. Child expenses vary with the life cycle.

Retirement Budget

Health Insurance $12,000

I don't live in the US, so I wouldn't be able to make a judgment on this one.

Car Insurance $1,200

That's a little less than I am paying for car insurance, but I don't know how many vehicles you have, their age, or your risk profile.

House Insurance $720

That's a reasonable figure, but we don't know whether you live in a shack or a McMansion.

Cell Phone $1,200

You might have an opportunity to reduce this if you give up a smartphone for a basic phone, if your kids leave home, and if you don't roam.

Health Club $528

Seems very reasonable. Only you can tell what the value is.

High Speed Internet $600

$50 per month seems a lot. Is there a way you can bundle this?

Utilities $4,800

Whoa! Do you have a grow up in the basement?

Gasoline $6,000

Either your family has multiple vehicles or you must be driving a lot. Are you currently commuting long distance, and will that change in retirement?

Misc $3,000

$3000 is a lot of "misc". This category needs to be, well, categorized. It could include a lot of waste.

Food $8,000

With four people in the household, $667/month still seems high. Perhaps it includes eating out? Does it take account of the fact that your children presumably will be leaving home at some point? Most of us find that in retirement, eating is cheaper, because we can buy and cook more healthy foods at home and better plan meals to avoid throwing out fuzzy food in the back of the fridge!

Property Taxes $4,000

OK, so it's not a shack. You could decrease this category by downsizing.

Tithes $9,000

Whoa! This is totally discretionary on your part. For me, this category is $0.

Federal Taxes $9,000

It is what it is. Depends on the structure and value of your income in retirement. Insufficient information to comment.

Travel and Entertainment $25,000

That's a lot of travel and entertainment. Again, this is discretionary.

Automobile Expenses $3,600

You've paid for the gas already. Is this insurance, maintenance, repairs, etc? Car loans? Again, only you can tell how much is discretionary here.

Home Maintenance $1,500

Seems low to me. One roof replacement could throw this category out the window (so to speak).

Total $90,148

 

[haha]

It all seems fairly low to me. Utilities seem high, but you likely have a big house that needs to be heated and cooled, so that's a given. Gasoline seems high unless you drive a lot. (US government gives a $.50 per mile car allowance when car is used in business. This is supposed to allow for all expenses, including depreciation, on an average car. I tend to think that since the IRS is not in the habit of leaving a lot on the table, this figure is likely pretty accurate except for an expert mechanic with a garage full of tools and parts, and who enjoys driving junkers) All the insurances seem fairly low to me, but who knows with Obama care? Travel and entertainment is a residual, so no way to reasonably comment. Seems like a careful but reasonably nice middle income budget. No real reserves obvious. Also, I was thinking this was a budget for a couple, until I saw Meadbh's post. Your kids are clearly very reasonable. To me, the food is low for 4 people- it's not easy for one person to eat doing almost all his cooking and eating at home for less than $350-$400.month. I assume eating out is part of T & E?

$9000 income tax seems low, but perhaps you are spending a lot of money that does not represent income so that is also hard to comment on. Cancel this with 2 kids, I missed that.

Some will likely will ask you how you could possibly be such spendthrifts.

Ha

 

[LOL!]

$9,000 in income taxes seems very very high to me.
Gasoline seems very very high to me. I spend about $10 in gas a week commuting back and forth to work along with local errands and trips to the airport. My SUV gets only 20 mpg. Spouse spends the same.

Here is how to pay ZERO income taxes with your demographic:
Bogleheads • View topic - How to pay ZERO taxes in retirement with 6-figure expenses

 

[Dawg52]

Mine is less than half that, but I'm a cheap old bastard. Plus living in the deep south helps with the budget.

 

[LOL!]

With prop taxes of $4,000 and tithe-ing of $9,000 you might be just above standard deduction range. Therefore, you will want to bunch deductions into every other year so itemized one year, standard deduction the next, itemize, standard, ....

See, e.g. Bogleheads • View topic - No Mortgage - How To Save Taxes

 

[aim-high]

Here are my expenses (today's dollars) that I expect/desire during retirement. Are these low, average, or high in your opinion?

Some are low, some are average, and some are high. If I posted my budget you would hold the same opinion of mine.

For example, my property tax is $7K a year for a McMansion. If necessary for ER we can downsize that and get to $5K if we stay in the area or even less if we move out of the area.

I plan on having $0 for ER taxes, but that's because most of my money will come from a ROTH.

We've got a $1200 budget for groceries and toiletries (things we buy at the supermarket) for a family of four. That will go down some when the kids move out, but we may keep it there because we'll probably entertain more in ER.


I've created two budgets and am in the process of discussing a third with my DW. You might find the same exercise helpful.

Budget one is the comfy lifestyle (spendthrift) budget. We like to enjoy life and live generously. This is the budget we feel will allow us to do so without too much concern for a "budget" or worrying about the kids being boomerangs for awhile. For us this is about 120K a year.

Budget two is the essentials budget. It's the one we are willing to shrink down to if necessary in order to stay fully ER'd in the face of a several year sequence of bad returns. For us this is about 60K a year. We could drop it even further if we moved out of the area or if social security is still available in 20 years.

The third one I'm calling "ER whenever I'm ready" budget. It will be somewhere between budget one and two. When I've got 35x that number, I'll feel I can call it a day if I choose. We're not quite there yet but are approaching it quickly.

 

[foxfirev5]

I am taking a rather simplistic approach with ER 542 days away. Last year I had x net pay direct deposited with start and finish checking balances equal. From this I subtract 12k in Roth contributions. The balance was my actual expenses, including deposits for car fund, personal HOA and fun fund.
For retirement planning I am adding increased healthcare costs ( that's the big ??) , increased car expenses ( no more company vehicle) and increased travel/recreation (no more expense acct, hotel points, airline miles etc)

To me this is a realistic approach that includes all those little things that slip through the cracks. I don't plan to spend less when I retire so hopefully this will work out.

 

[pb4uski]

In aggregate your budget is higher than ours but after adjusting for a few items of major difference yours is lower.

My income taxes are ~$2,000 - $0 federal and the rest is state. I would suggest that you take a copy of last year's tax return, take out your earnings and otherwise adjust as needed and see what the result is. Or use TaxCaster or some similar tool.

Our health insurance is currently ~$7,800, will increase to ~$9,000 next year but I expect to get ~$3,700 in ObamaCare subsidies so I expect our net cost to be ~$5,300. You may also want to provide for some co-pays and deductibles in addition to health insurance premiums.

Our cell phone is only ~$250 for two of us for a year (no smartphones).

Day-to-day spending money?

You are much more generous than we are and have a much bigger travel budget.

 

[Gill]

Home maintenance at $1,500 seems very low for even the smallest house.
Bruce

 

[W2R]

Here are my expenses (today's dollars) that I expect/desire during retirement. Are these low, average, or high in your opinion?

I think most of your categories are average. I would separate your categories into three groups:

GROUP ONE: Health care and taxes. These expenses are so individual, must be paid. Although one can and should work on tax management and health care shopping, ultimately these expenses are beyond our control for the most part. Other than GROUP ONE expenses, you are spending about $69K.

GROUP TWO: Travel and Entertainment, Gasoline, and Tithing expenses. These total $40K and each seems higher than many would be willing to pay but again this is an individual choice.

GROUP THREE: All other categories. GROUP THREE expenses total only $29K. I think your spending on these other categories is about average and very sensible.

Mine is less than half that, but I'm a cheap old bastard. Plus living in the deep south helps with the budget.

+1

 

[jebmke]

Health Insurance will vary all over the place. Does this category include all the uninsured items (deductibles, dental , eye exams and glasses .....)? These can add up. Also, you need to include amortization of large capital items (car, roof, central air replacement .....).

 

[Katsmeow]

Here are my expenses (today's dollars) that I expect/desire during retirement. Are these low, average, or high in your opinion?

Retirement Budget
Health Insurance $12,000
Car Insurance $1,200
House Insurance $720
Cell Phone $1,200
Health Club $528
High Speed Internet $600
Utilities $4,800
Gasoline $6,000
Misc $3,000
Food $8,000
Property Taxes $4,000
Tithes $9,000
Federal Taxes $9,000
Travel and Entertainment $25,000
Automobile Expenses $3,600
Home Maintenance $1,500
Total $90,148

I am assuming you plan to retire at 50 based upon your name. It is very hard to know how much is high or low without knowing (1) family size and (2) what part of the country you live in.

There is also an issue of lifestyle. In the same city you probably have people living on $20,000 a year and someone spending $1,000,000 and more a year. Part of this depends on what you think is important for your standard of living.

So - my assumptions on this will be that you are single with no one else in your household and I will base the amounts on living expenses where I am (Texas)

So:

Health Insurance $12,000 - For one person probably reasonable or high. Do you need to buy health insurance on the open market? If so, look at your state's exchange pricing if it has any.

Car Insurance $1,200 - For one car probably reasonable.

House Insurance $720 - Extremely low. For a 3000 SF house at about $300k we pay $1800 a year.

Cell Phone $1,200 - OK for a basic phone, low for a smart phone if using Verizon.

Health Club $528 - Seems a little high.

High Speed Internet $600 - OK if you don't really high speed. Depends on what speed you want.

Utilities $4,800 - How big is your house? Is this just electricity, gas, water, sewer and garbage? We spend more but we have 4 people in our house. If your house is small and just you then may be reasonable.

Gasoline $6,000 - That seems really high for one person who isn't commuting to work. DH is retired and I am semi-retired and we have one child driving daily to college (lives at home and commuting) and we spend way less than that.

Misc $3,000 - Miscellaneous category IMHO should be about $10 a week to cover cash that you forgot to record. Anything big enough to add up to $250 a month needs its own category. Need to know what you are putting here.

Food $8,000 - Does this include dining out or just eating at home? A lot of people include in food things like household supplied (paper towels, toilet paper, etc). If this doesn't include dining out it seems a little high. If it includes dining out seems reasonable.

Property Taxes $4,000 - Can't say. Depends on value of house and local tax rates. My impression is that $4000 is high for taxes if house insurance would be $720. Around here a house that was low enough in value to cost $720 in house insurance wouldn't have taxes that high.

Tithes $9,000 - No comment since I understand this varies with income.

Federal Taxes $9,000 - Depends on your deductions but might be high. Go run Tax Caster or something to estimate taxes.

Travel and Entertainment $25,000 - Wow! That seems astonishing high to me in relationship to everything else. I guess if you have $90,000 a year in income and can afford it, that this is fine, but if you want to cut somewhere there would seem to be plenty of room here to do so.

Automobile Expenses $3,600 - You already have gasoline and insurance elsewhere so this seems mostly repairs and maintenance. If you have one car, this seems high. If you are spending this month every year to repair/maintain your car then I would suggest you might want to replace it. On the other hand, maybe part of this is meant to be what you are saving for a replacement vehicle in which case it is OK.

Home Maintenance $1,500 - Depends on the house. For day to day maintenance/repairs it seems OK. But what about infrequent repairs such as painting, new carpet, new roof, etc.

Things you don't mention (maybe these are in miscellaneous or you don't have some of these expenses):

Household goods - replacing furniture or appliances, new sheets, or new utensils, etc.

Computer - Replacing computer, printer. New software. New peripherals. Computer subscriptions.

Office - Postage, paper, pens

Mortgage - assume you have none but still will mention

Umbrella insurance

Gifts

Pets

 

[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.

 

[NanoSour]

I just ER'd two months ago and I see some similarities to my budget. We have 3 children at home and live in a 350K home.

Health Insurance $12,000 - Way more than we budget being that we have retired military healthcare.

Car Insurance $1,200 - We pay $808 for an '05 Sedan and '06 Minivan. $1k Deductible.

House Insurance $720 - We pay $822 for $350K valued home.

Cell Phone $1,200 - Pay the same for 2 ATT iPhones.

Health Club $528 - Don't have a health club plan.

High Speed Internet $600 - We pay $540 for 25M service thru Comcast. No cable TV!

Utilities $4,800 - Our utilities are $260/month or $3120 annually.

Gasoline $6,000 - Seems way high from what I plan to spend. I'm planning 5-7K miles annually at 23 MPG for approximately $1200 total gas.

Food $8,000 - This seems about right to me.

Property Taxes $4,000 - Our property tax was $3150 for 2013/2014. Expect it to go up in 2015.

Federal Taxes $9,000 - Certainly seems high to me.

Travel and Entertainment $25,000 - At over 2K/month that's some pretty decent living.

Automobile Expenses $3,600 - Seems like a $300 dollar car payment to me.

Home Maintenance $1,500 - I suggest you need a higher budget for the bigger home items that come along every now and then, i.e. roof, hot water heater, flooring, appliances.

Overall, most items seems reasonable compared to what I've been paying.

 

[Loving Life]

I just ER'd a few years ago and I see some similarities to my budget, but not many.

Health Insurance $12,000 - our insurances (life, medical, dental and daily drugs run about $20K)

Car Insurance $1,200 - is the same for our 3 upscale autos

House Insurance $720 - We pay a bunch more $3k

Cell Phone $1,200 - about the same

Health Club $528 - about the same.

High Speed Internet $600 - Included in the Utilities

Utilities $4,800 - Our utilities are Double that $9,000.

Gasoline $6,000 - I am 1/2 of yours - $3k but that a very personal cost

Food $8,000 - We are about that - again a very personal cost.

Property Taxes $4,000 - Our property tax is about $12K

Federal Taxes $9,000 - Mind is a double that

Travel and Entertainment $25,000 - Our runs about $30K

Automobile Expenses $3,600 - I don't have this - pay cash every 4-5 years on a new auto.

Home Maintenance $1,500 - mine is double/Triple that since I do not do the work myself

My misc. items (Dry cleaning/tolls/Wife shopping/Sat/etc) runs about $12K

 

[Meadbh]

My misc. items (Dry cleaning/tolls/Wife shopping/Sat/etc) runs about $12K

Wife shopping? My imagination is running wild!

 

[Loving Life]

My wife is a shopping addict - shopping for a wife is way to expensive and I am way to old to switch in mid-steam.

 

[martyb]

My wife is a shopping addict - shopping for a wife is way to expensive and I am way to old to switch in mid-steam.

 

[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]

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]

...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.