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Old 08-08-2009, 11:35 AM   #21
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In my budget I have essential, discretionary and sin categories.

Essential is my bare bones. I'm sure the figures in each category will change over time. I can only work with what I know now...which isn't very much.
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Old 08-08-2009, 11:48 AM   #22
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You know, I never looked at my nest egg this way. I looked at the total number I needed to have when I started retirement, and if I had more than that, there was a cushion.

Firecalc and ORP provided me with the numbers. So whether I was taking 4% or 3%, wasn't the issue.

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Old 08-08-2009, 11:49 AM   #23
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Audrey, I could never get my head around what bare-bones actually is, at least for me. As a result, I've always had a problem with that theory.

How do you define "bare-bones"? Take housing for example. Does bare-bones mean staying in your current house (or motor home) and maintaining upkeep and repairs? Staying in your house and postponing all maintenance until some future date? Downsizing? If so, by how much?

Using actual expenses for the three years prior to retiring, I choose to go with a 95% success rating on FIREcalc plus add in a smidgen for a fudge factor. I suppose that's the same as saying "bare-bones" is whatever I have left to spend if things really go sour for me financially.
Well, you can't postpone maintenance and upkeep until some future date for too long, so that ultimately has to be included, even if it can be put off for a couple of years now and then. So, basically it has to be included.

Staying in current house - that completely depends whether downsizing is part of your current retirement plans and therefore included in your projected retirement expenses. But all costs associated with where you plan to live in retirement has to be included in "bare-bones". You have to have a place to live.

You have to have a place to live, you have to eat, you probably have at least one vehicle to maintain, you have pay for certain types of insurance, you have to maintain the essentials. That, IMO, is bare bones. Everything else - travel, eating out, hobbies, subscriptions and club dues, more "stuff", more toys, nicer food, etc. - those are the non-essentials.

This was just an attempt by Cut-throat to get people to look hard at these expenses and projected budgets and not under-finance their retirement NOR overdo it on the "padding.

It's just one way of looking at things.

And, IMO, you have to be very careful about basing retirement expenses to pre-retirement expenses. Comb through you current expenses carefully to see what really would apply after retirement. A lot of actual expenses go down. Some go up - but those are usually the "non-essential" expenses (with the exception of health insurance which can be a big added essential expense for some folks).

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Old 08-08-2009, 11:55 AM   #24
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I think Cut-throat intended for the "bare-bones" to be perhaps even giving up chicken breasts for the dark meat! LOL!

He didn't intend that someone get to that point! That was the whole point - to have enough padding that even under very tough market conditions where you had to pull way back on your spending, with luck you would still be above that almost punitive "bare-bones" scenario. And that would perhaps give some folks confidence about the sufficiency of their retirement nest egg.

It would also alert those folks trying to cut it too close that maybe they are cutting it too close!

Just another test. Caveat emptor - you have to decide what applies to you.

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Old 08-08-2009, 12:14 PM   #25
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And, IMO, you have to be very careful about basing retirement expenses to pre-retirement expenses. Comb through you current expenses carefully to see what really would apply after retirement. A lot of actual expenses go down. Some go up - but those are usually the "non-essential" expenses (with the exception of health insurance which can be a big added essential expense for some folks).
Good point.

I failed to mention in my case we essentially lived on our retirement budget for the three years prior to retirement. DW retired at the beginning of those three years and since we planned a RIP (retirement in place - no relocation) and we looked very closely at what would change when I retired. For us, the health insurance nut was the one major difference we had to include in our retirement expense plan.

While doing something like this might not be feasible for many, our situation allowed us to have a very high confidence level regarding our expenses once I stepped off the treadmill.
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Old 08-08-2009, 12:15 PM   #26
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For me there are two bare bones. One we stay in our dream house, the other we move. Now our retirement is based on staying here, obviously. However, we could:

Lower/raise the thermostat
git rid of cell phones
basic cable (no cable no tv and no tv not an option)
back to dial up
No eating out
no travel (for us that is not much of a sacrifice)
reduce special occasion spending birthdays/Christmas
some other minor stuff

Now we could move to a one bedroom apartment and greatly reduce our expenses, and that would really be bare bones, however, I can't even come up with the situation that would bring up to that.I guess if you get right down to it, bare bones is a room at the Y or under a bridge and supper at the soup kitchen.
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Old 08-08-2009, 01:20 PM   #27
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Upon re-reading, this sounds preachy even to me, but I am not a good enough writer to get the tone right. I just wanted to get my two cents in about bare-bones: it doesn't have to be penurious.

We are in bare-bones mode now, partly intentional, and partly serendipity. When the crisis struck, we had been vagabonding for more than two years. We were renting a furnished house while the owner was out of the country and had to be out by mid January. The first decision was to quit traveling and settle down. It was driven by concerns about the economy and market, but it wasn't hard because we had been cruising before vagabonding, and were going on 5 years of an unsettled existence. It was time.

The serendipity part came in when a friend's garage apartment became available at the same time. Tiny, but in a great part of town and renting from friends is infinitely more agreeable than dealing with giant apartment corporations. We figured we could hang out for a while and wait for the Austin real-estate market to come back to earth.

I am not bragging and I am not saying that our experience would translate. Many folks would probably be miserable in a 600 sq. ft. apartment, but hey, we used to live on a boat. But in any case, last February, we woke up and realized that our expenses were 40%30% beneath our budget, with no sweat and quite content. We just sort of stumbled into it, sort of unplanned.

As the economy and markets improve, we have the option of moving to larger digs or keeping this Lilliputian apartment and using the extra bucks to do some serious traveling. In the meantime, I sleep very well at night.

I think middle class Americans have more options than they realize, and financially independent folks have even more.
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Old 08-08-2009, 03:39 PM   #28
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In some of my earlier projected retirement budgets, I had some inflated catch-all categories that I hoped would cover things I didn't think of. Over time, I'm trying to get more specific about expenses, both specific monthly expenses and major expenses that may come every year. I've just taken another pass at it this afternoon.

How this related to the topic is, how much extra you need depends on how well you've budgeted everything in the first place.

I'm resuming the monthly expense tracking I started doing last year, but had quit because with 2 homes and moving, it didn't seem helpful for the future. Now I'm pretty settled into my routine for the foreseeable future. I know some people say that post-retirement expenses are different, but other than medical insurance, they won't be so different for me. I already wear jeans or shorts and t-shirts and stuff like that, so no clothing reduction. And I telecommute, so gas will be the same, or maybe a bit more since I won't be tethered to my desk as much. The good news is that I had plenty of padding, so the more realistic numbers look better.

In the major expenses, I've realized I have to have a large budget item for home maintenance as my house gets older. I hope it's enough, as I watch the siding being torn off my neighbor's house to expose major water damage due to a poor flashing job. I've also settled on a budget for car repairs, vacation, and a capital fund for whenever I need a new car or another major expense I consider outside of home maintenance. I can certainly cut back on the vacation and capital fund if need be, especially since those amounts are high.

Another thing I had to get straight is income tax. I thought I had taxes figured out because when I total up my investments, I subtract what I'll pay in taxes as I liquidate them, including fully reducing my 401K and IRA as they get taxed. But I didn't consider that the dividends and cap gains I'll take in cash from my investments for most of my cash flow will be taxed as well. That one hurt.

Bottom line for me is that I'm close but today's work put me a bit farther away. And the question I have to ask myself is whether there's anything else I've failed to budget for.
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Old 08-08-2009, 04:46 PM   #29
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Bottom line for me is that I'm close but today's work put me a bit farther away. And the question I have to ask myself is whether there's anything else I've failed to budget for.
Ah yes, the unexpected. Earlier this year I thought I was smart to refinance and reduce my mortgage payment by $200. By next month I will have re-couped my refinance expenses but, guess what? Health insurance premium went up $80/mo! Also, property tax went up $20/mo. So there goes half the savings!

I don't know how to take into account these increases except to make sure that I have a very large cushion in my budget.
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Old 08-08-2009, 05:48 PM   #30
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Uh, so long as I'm still working, I don't really track this. I pay all the bills and consider what's left in the work-a-day checking as my "walking around money"(my dear Dad's terminology). I just don't dip into the long-term investments and (God-forbid) the retirement accounts. I keep my head down and pay the mandatory pension, the 457(b), the SS, the Medicare, the taxes, the utilities, the insurances, the union dues, the credit cards, the health club, the gardener, etc, etc. This all comes out of the residue from my decidedly modest earned income. So long as I can do this, I'm in good shape! It is only myself that I have to be concerned about these days.
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Old 08-08-2009, 06:20 PM   #31
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I just went through a year plus of "pseudo bare-bones" spending.
I trimmed almost every frivolous cost (eating out, new clothes, hobby related purchases like garden gadgets and techno-toys, I grew my plants from seed, etc) I could, in order to save up for a dream trip. It was an extremely valuable exercise, but I'm glad it's over.
I'm still putting the same amount away, but the target savings amount for the trip (to be achieved by a certain date) is no longer looming. In plain English, I can have some daily/weekly fun again.
Wooooooooo....
I did not stop investing, though, and I never will unless it gets really ugly. Other things would go away first.
For me, bare bones would be no trips, no investing, nothing new unless house related and necessary (like replacing a freezer), just the basics.
Rock bottom would be having to move out of my house involuntarily because I couldn't afford to live there anymore. May that day never arrive...
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Old 08-08-2009, 08:31 PM   #32
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I am using the "bare bone x 2" methodology myself, although "bare bone" for me is really more like "basic living expenses": food, car and home insurances, utilities, pets, car repairs, home repairs, property taxes = $20K a year. I am adding another $10K for health insurance and co-pays. Basic expenses can be trimmed further if needed, especially food and utilities.
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Old 08-08-2009, 08:54 PM   #33
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Clothes. Now there is an interesting category. I have not spent a dime on clothes in the three years of retirement. DW has spent some, but only about 10% of what we have in the budget. We have sent nothing to the cleaners. This is one category on which we are definitely spending less money.
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Old 08-09-2009, 06:16 PM   #34
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How do you define "bare-bones"? Take housing for example. Does bare-bones mean staying in your current house (or motor home) and maintaining upkeep and repairs? Staying in your house and postponing all maintenance until some future date? Downsizing? If so, by how much?

.
I struggled with this question too. It's easy to think of "bare bones" as simply giving up dining out, fancy vacations, etc. It's more challenging to think of, for example, moving away from cherished grandkids and other extended family to live in a part of the country where we'd live cheaply but strictly "in another world."

CutThroat used to mention moving to a trailer down by the river........ And I'm well aware that we could sell our suburban Chicago home and move south to a retirement community of double-wides and put enough in our pockets to fund expenses for several years. But do we want to consider that as the "bare bones" standard? Tough question.

In the end, we drew the line at the expense level of staying here in our long time home regardless of expenses and that's built into our "bare bones" budget. Everyone has to make their own decision.
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Old 08-10-2009, 02:14 PM   #35
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Wow, a lot happens when you don't check the boards for a couple of days...

The whole thing of "bare-bones" is kind of mute in my situation...that's the whole point in DH's mind...he in no way, shape, or form wants to live bare bones or even anywhere close to it. I think that is why he is concerned. But if our expenses are tallied up and we even padded them a bit and we still have $27,000 in INCOME left over then I don't know why he would be worried. We won't be touching any retirement savings...we would be living off of his retirement income. My retirement income would kick in when I turn 60.

And for whoever asked about DH's health (sorry, can't remember who)...he is fine right now...that is why I want to retire now...so we can do things together and do some traveling together and have some sort of retirement together because it is probable that he won't still be here when I'm 60...unless they come up with a cure in the meantime. Let's face it, there's no guarantee for any of us...but I want some time with him just in case the worst happens.
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Old 08-10-2009, 03:59 PM   #36
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If I crunched the numbers and we had $27,000 a year more than we needed even with a somewhat conservative withdrawal rate, I'd be gone so fast heads would spin...

As for how I calculated what I "needed" in terms of income, I wouldn't set it to "bare bones" but rather the minimum I think we could spend while providing what we consider a minimally acceptable quality of life. That will include a few "wants" as well as all of our "needs."
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Old 08-10-2009, 04:08 PM   #37
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Yes, no one is recommending anyone live "bare bones"! Rather - 2X bare bones needs gives you a nice comfortable margin.

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Old 08-10-2009, 04:24 PM   #38
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To me bare bones is survival rate. I would have never retired if I thought I would be at bare bones someday. I would say there is Retirement Rate, how I want to live the rest of my life, and something like Emergency Retirement, a point I am willing to live with for a period of time say a couple of years, but not for the rest of my life, and the bare bones, a place I never want to live.

I looked at the Retirement rate and insured I had it plus some. I looked at everything I could think of that would force me into an Emergency Rate. I then examined that scenario to see if there would be a recovery, short of dying. Personal spreadsheets, with FireCalc gave me enough confidence that I don't believe I will ever see the Emergency Rate.
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Old 08-10-2009, 04:39 PM   #39
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Wow, a lot happens when you don't check the boards for a couple of days...

The whole thing of "bare-bones" is kind of mute in my situation...that's the whole point in DH's mind...he in no way, shape, or form wants to live bare bones or even anywhere close to it. I think that is why he is concerned. But if our expenses are tallied up and we even padded them a bit and we still have $27,000 in INCOME left over then I don't know why he would be worried. We won't be touching any retirement savings...we would be living off of his retirement income. My retirement income would kick in when I turn 60.

And for whoever asked about DH's health (sorry, can't remember who)...he is fine right now...that is why I want to retire now...so we can do things together and do some traveling together and have some sort of retirement together because it is probable that he won't still be here when I'm 60...unless they come up with a cure in the meantime. Let's face it, there's no guarantee for any of us...but I want some time with him just in case the worst happens.
Since you think it's probable that DH won't make it until you turn 60, why don't you analyze whether you alone will have enough at 60 to live comfortably without him and his retirement income which will expire when he does? That seems to be the real issue. Do you alone have enough income to RE given the fact that you are not entitled to any of his retirement income once he passes. I know you mentioned you'll have your own retirement income at 60, but will that be significant years from now when you start collecting it?

I understand why your DH is worried. He doesn't like the idea that if he dies sooner rather than later, you might struggle financially. He no doubt also understands that if he lives a good long time, then your continued working was not required and precious RE time and time that could have been spent together was wasted accumulating funds not required. But since no one knows the future, the answers to these dilemmas as not obvious.

Your frustration is that you are more willing to assume the risk of his early death and your possible financial hardship than he is. Try to make him understand that, for you, the risk of spending time needslessly working and not with him is greater than the risk of financial hardship should his retirement checks stop sooner rather than later.

In your DH's place, I'd feel exactly as he does. He's not worried about you two surviving financially as a couple. He's worried about you surviving alone should his cancer take him (and his retirement checks) out of your life. Do the math with the unpleasant assumption that DH survives only a short time and, hopefully, show him that even in that gloomy scenario, you'd be fine financially. That's what he needs to see IMO. At least that's what I'd need to see.

I hope he lives to be 114.
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Old 08-10-2009, 06:21 PM   #40
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How this related to the topic is, how much extra you need depends on how well you've budgeted everything in the first place.
Ding, Ding, Ding. Folks we have a winner. If you know how much you need, then extra isn't necessary
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