I can't figure out how I'll spend $40,000/year in retirement

[AboutThere]

I don't think you numbers are too far different than the Consumer Expenditure Survey, if you factor lower expenses such as a mortgage free home, live in a low cost of living area and do not have medical significant out of pocket medical expenses:

http://www.bls.gov/cex/22015/midyear/age.pdf

I actually do not have any problem spending over $40K a year in the Bay Area. But even in a higher COL area the CES was a good wake up call for us that we had been over-paying for many goods and services and could live well for a lot less than we had been spending.

One expense some of us have to plan for and include in our budgets is income tax on RMDs.

That's absolutely fascinating. I'm over on car insurance and property taxes and way, way under (like $9,000/year under) on medical-related costs, among other findings.

 

[braumeister]

And I left out toys like airplanes and larger boats. There's probably no upper limit on what one can spend on those. They're great for those who have the income to support them but it's simply not in most people's budget.

Don't be too sure. I included a future line item in my budget for a Gulfstream G650, and I'm actively saving up for it now.

Looks like I could take delivery in the year 8516, unless they raise the price before then.

 

[Sojourner]

You all are making me feel a lot better - all those years of reading about the "need" to have 80% of your income replaced had me depressed.

Yeah, that 80% guideline is complete nonsense for most of us ER types. It seems to apply more to people who spend every last dollar of their income, and thus who can't retire early because they never learned or practiced LBYM. I'm comfortably living on about 30% of what I made in my last year of full-time employment, and that's because even when I was drawing that salary I was living on only about 35-40% of it. So, not a hard transition.

 

[Done]

The 80% income rule of thumb can safely be thrown out the window once you have a solid estimate of your retirement expenses (including lumpy expenses, insurance and taxes). As for spending less than average, congratulations! It will make it that much easier to ER. In a high COL location, we don't live lavishly but still pay $15k/yr in property taxes alone. But it's our choice to remain here so I suppose I can't complain.


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[Cobra9777]

Excluding income tax, DW and I spend $85-90K/year in a fairly low COL area in Texas. However, that figure includes $10K for travel and $15K allowance for large, non-recurring expenses like home improvements and new cars. We rarely spend that much. We also have a very large house on several acres that will be downsized at some point. No mortgage; but the property tax, insurance, maintenance, and utilities are $25K per year. We will easily cut that in half after downsizing.

With the possible exception of the house, I really don't consider our lifestyle to be out of the ordinary at all, and certainly not luxurious. We are seasoned scrimpers on recurring expenses like cars, phones, cable, utilities, groceries, services, etc. But in addition to travel, we do enjoy concerts, plays, sporting events, a decent bottle of wine now and then, and eating out with friends and family at nice places. DW also enjoys gift shopping for the kids and grandkids, and it brings her great joy to do so. I also have several somewhat expensive hobbies, including woodworking and collecting/restoring vintage audio gear and musical instruments. Anyway... subtract all that, and the result is not really what I had in mind for retirement. YMMV.

 

[Walt34]

Don't be too sure. I included a future line item in my budget for a Gulfstream G650, and I'm actively saving up for it now.

Looks like I could take delivery in the year 8516, unless they raise the price before then.

That's about the time I'll get my boat!

 

[stepford]

It all depends on hobbies. In the first couple of months of retirement I did little but relax and ride my bike. Since my mortgage is paid off and I have subsidized retiree medical insurance, unsurprisingly my expenses during this period were quite low - something around $1K/month.

Then I got a bit bored, started traveling, bought a 4WD truck and some toys to put in it... and suddenly I was right at the ~$5K/mo retirement budget I had projected. Now I shouldn't be buying any more vehicles anytime soon, but summer vacation season and its attendant expenses is almost upon us, so I wouldn't be surprised if I remain at the higher level for a few more months.

In short, it costs me almost nothing to live, but the budget is there so I can LIVE.

 

[NW-Bound]

Once you have a paid-for home, do not care to exchange for new cars every couple of years, have no expensive toys to maintain, no dependents to support, nor expensive medical bills, it really does not take much. How much does one need for food, electricity, water, phone and internet? Even travel does not add that much, if you do it frugally. If you travel luxuriously, the sky is the limit.

I spend a lot more than $40K, but that includes a lot of fluff, and also charity and gifts. I can give up a lot of those, and my quality of life barely changes.

The above said, I just remember that one year my medical expenses ran $20K+. I was seriously sick, and incurred the $10K deductible on top of the insurance.

The OP has his healthcare covered, so he can do $40K a lot easier than I can.

 

[jcretire77]

I have a bunch in discretionary, vacations, tennis club, golf club, gifts, entertainment, miscellaneous all of which can go out the door if things really went south or I would funnel the money to meet health care costs if there was a bad year. We moved to a new house and that is now an eye watering property tax increase. So OMY

 

[DrRoy]

I am planning on a budget of $84K/yr. The house is paid for, but I include $15K for travel, $10K for medical, and $15K for various taxes. Just those 3 are $40K already. I do think the $84 is high for most years, but I want to have it available for comfort. It also includes $10K/yr for surprise repairs to the house, etc.

 

[FUEGO]

We struggle to spend that much, too. After spending $33k and $24k the past 2 years, I intentionally upped the budget to $40,000 because I don't want to make my kids too wealthy when we kick the bucket. We travel about as much as we can given the kids' school schedule and our desire to have some down time at home.

Right now I'm catching up on some home repairs that I could probably DIY but don't really want to. That's still not going to push the needle much (under $1000 for a bunch of plumbing work on our 44 year old house). We also bought a new used minivan (only $8200). We aren't in a low COL area but it's pretty reasonable here. All houses in our neighborhood are under $200k (though one on the corner just listed at $205k!!).

We have $10k budgeted for travel. Only $1750 budgeted for taxes (basically zero fed tax because 3 kids, $1500 state tax). Health care is nearly free ($0 deductible plan for $125/mo after $909 ACA subsidy).

Edit: got curious and it turns out our neighborhood is in a bit of a bubble. A few houses in our hood just sold for over $200k but over the past few years $100-135k was more typical.

 

[bingybear]

when I did my budgets, I think largest expenses were medical insurance, medical max out of pocket (don't expect to reach this one often), property taxes, and misc insurance (house, car, motor cycle, etc.)

Travel is another wild card. If you want to hike NZ, the airfare along may be $5k for 2 from a non-hub airport and depending upon where you want to land.

So if you have really good medical care that is covered, that could easily knock a fair bit off the RE tab.

 

[audreyh1]

Don't be too sure. I included a future line item in my budget for a Gulfstream G650, and I'm actively saving up for it now.

Looks like I could take delivery in the year 8516, unless they raise the price before then.

Your heirs will appreciate your savings!!!

 

[dixonge]

That's about the time I'll get my boat!

You guys - c'mon, this baby's less than $4M!

Gulfstream Aerospace - Pre-Owned Aircraft - G200 S/N 79

 

[dixonge]

When I see monthly ER budgets here they all seem to be 70,000/year and up, and folks make a point to say they're frugal and don't take vacations, etc.

Keep in mind there are some HNW people here, from either inheritance, high salaries, frugality or a combination of the above. For some, $70K might represent 50% of their pre-retirement budget.

 

[Walt34]

You guys - c'mon, this baby's less than $4M!

Gulfstream Aerospace - Pre-Owned Aircraft - G200 S/N 79

That old thing? Nah, I'm holding out for the luxury private 747.

 

[Music Lover]

After you develop hobbies, you'll be well over $40k spending a year

It depends on the hobby. I have about $5000 invested in music gear (guitars, basses, and amps). The ongoing annual cost for strings, maintenance, etc. is less than $100.

 

[Souschef]

When I retired, I started flying for Angel Flight and Pilots & Paws. I rent, since I do not fly enough to justify owning. Last year I flew over 50 hours, at $130/hour. That is $6500, which would take a chunk out of that 40 K.

 

[Teacher Terry]

It's great that you fly for those groups. Our health insurance premiums cost 10k year, we spend between 10k-15k on travel and we like to eat out, etc. Our yearly spend is between 65-70K. Obviously we could cut out the fun stuff if we ever needed to.

 

[Rustic23]

You said you have car, house and other stuff paid off. Do you have a fund to replace those items? Your car is good for 10 yrs, A/C 15, roof 15-30 depending where you live, major appliances 7-15 yrs, house paint 15 yrs, and so on. If you are not putting aside for those expenses, you will know how you can spend $40,000 a year and more is some years.

 

[RetireAge50]

$40,000 is about right for taxes, health, food, insurance, utilities, cars, etc.

Then any of the ings take a bit more, for example: skiing, golfing, traveling, playing, rving, diving, snowmobiling, motorcycling, flying, whatevering.

Maybe when people get old these type of things are no longer fun or wanted I don't know.

 

[Winemaker]

Alas, I love good wine but cannot drink much of it - migraine trigger.

I've worked an additional 2,400 into the annual food budget as I am a bit of a foodie. Frankly, one of the fun things I'm looking forward to in retirement is to have the time to really make some strides in my cooking. I simply don't have much energy to make complex meals during the work week.

Try taking a mild antihistamine prior to imbibing, a lot of migraines are associated with the abundant amount of histamines found in red wine.

 

[jabbahop]

We are still a family of five and our budget is much higher. Some of our bigger items ...
- medical insurance + out of pocket - $21K
- car/home/umbrella - $4K
- Sinking fund for cars - $10K
- Home maintenance/projects - $10K
- HSA - $6K

Now hopefully we are over budgeting on the out of pocket medical, car fund and home maint projects but you never know.


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[MasterBlaster]

I struggle to spend $250 per month let alone $2500.

A sack of beans, a sack of rice and you're all set.

Who wants to work for The Man forever. Stop workin' and start livin' the dream.

But first thing is to get those expenses way down. Housing and transportation are crucial.


ER Now !

 

[Major Tom]

A sack of beans, a sack of rice and you're all set.

Who wants to work for The Man forever. Stop workin' and start livin' the dream.


ER Now !

That place is a palace. Far too extravagant. Here you go