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

[RunningBum]

I agree with you and I don't at the same time. Expenses determine needed nest-egg I agree.

But what you have (perhaps) not considered is that lifestyle, and it's associated expenses are highly correlated with income.

Therefore the 62% of income Canadian data point is indeed worthy of discussion.

The fact of math dictates that there has to be some number that is retirement expenses divided by working income. It doesn't say that number has to be useful or indicative. One way to see would be the standard deviation of that 62%. The higher it is, the less likely the number is to have any real value. Taken to extreme, if 5 people spend 100% of what their income was, and 5 spend 24%, the average is 62%, but nobody actually spent anywhere close to 62%.

Many people here on e-r.org probably aren't getting into the lifestyle associated with their income. See this current thread http://www.early-retirement.org/forums/f28/hiding-your-wealth-not-a-poll-81873.html for example. Others may, but I don't think it's to be recommended. I'll give you that there is some correlation. If you were a CxO in working life you are likely to be a country club type in retirement, and a middle class worker probably isn't going to be splurging on first class vacations, but the extent of the expenses will vary too widely, for reasons I already mentioned, to be of value for individual planning. This is why, when newbies come here and ask "Can I retire now?", the comeback question is "What is your retirement budget?", and never, that I've seen, "How much are you making now?"

But feel free to discuss. I'll stay out of it.

 

[MasterBlaster]

But feel free to discuss. I'll stay out of it.

We got your point the first time, You are repeating yourself.

But feel free to discuss it, again.

 

[Corporateburnout]

Yep, one would have to develop expensive hobbies or some high cost living to spend $70K a year. Outside of my mortgage (which I am on track to pay off before retirement). I spend around $20K on living and this includes yearly expenses like taxes and insurance. (My employer health insurance is cheap and does continue into retirement...) Maybe an expensive vacation year would be another $5000 - $6000 for 2 big trips and some weekend splurges.

As people have said before it's a lifestyle choice. We live in a high cost of living area where our real estate taxes and condo fees are over 10K/year. our travel and entertainment budget is over 20K.

Never been to a yard sale/flee market and don't plan on going anytime soon. It's not our cup of tea. If we find a discount on a play or a concert we'll take it but that won't stop us from paying full price.

 

[RunningBum]

We got your point the first time, You are repeating yourself.

But feel free to discuss it, again.

Actually I responded to the point you said I (probably) didn't consider, and only repeated my conclusion.

edit: At least I thought I did, but I know I have a tendency to repeat myself, so I apologize if I did.

 

[UpAnchor]

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.

It depends, of course. In the 70's/80's I owned a couple of planes which cost me 2,500 & 7,500 respectively. I have no idea what it costs these days to get into something older but airworthy as I no longer follow such things. But I can say that our small 22' cruising boat passed that by a factor of four.

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



Get a boat

Bingo. And once owned, it's often more about the cost of storage and slip rental than about maintenance and depreciation.

As for the 80% rule, no it's never made sense to me to use something like that outright. I do estimate roughly 70% for the years leading up to SS@70 and about 50% thereafter. And, even there, I hope to discover I'm wrong (in the good direction). But those are based on our actual anticipated costs. Incidentally, those percentages include going into retirement with a fairly new sub-4% mortgage. Should we pay that off early, I'd expect we might get down to 50k yearly but would be surprised to get it any lower without moving to a lower cost area. That's not likely. So I don't see 40k or less for us but I know quite a few who have or are retired on such amounts.

 

[rodi]

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.


Sent from my iPad using Tapatalk

I have similar numbers... as follows:

- medical insurance + out of pocket max: $17k (already adjusted for ACA tax credit)
- car/home/umbrella: $4K
- Sinking fund for cars: $10K
- Home maintenance/projects: $5K
- HSA - $7750 (DH qualifies for catchup.)

I'm expecting some of this to drop when the kids are launched... especially medical insurance... but that's a ways off.

 

[Andre1969]

I'm doing a workup of my monthly expenses for retirement (shooting for 6-7 years).
I'm trying to ER when our house is paid-off, major upkeep items (roof, etc) done, and cars paid-off.

I wouldn't say that I'm frugal but I ran my current numbers and we're spending about 2,500/month in monthly expense.

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.
Under my numbers (and I don't consider myself particularly frugal) I'm finding it hard to spend over $40,000/year in retirement - is there anyone else here who is making it on that amount?

Couple items: I do live in a low-cost area (200,000 house is "expensive" here) and our health care costs are fully covered (indeed, double-covered) under vested, independent university plans.

I think having your health insurance covered, as well as shooting for a paid-off house by the time you retire, are the key ingredients here. At one time, my goal was $40K per year, with no mortgage. But, I'll most likely have a mortgage when I retire, and health costs are an unknown, so I'm shooting a bit higher.

 

[Walt34]

It depends, of course. In the 70's/80's I owned a couple of planes which cost me 2,500 & 7,500 respectively. I have no idea what it costs these days to get into something older but airworthy as I no longer follow such things. But I can say that our small 22' cruising boat passed that by a factor of four.

I don't doubt it. I bought a Tri Pacer in 1975 and paid $3,900 for it, according to one inflation calculator that's a bit over $17k now. While I could afford the routine stuff I really couldn't afford heavy maintenance like an engine overhaul so two years later it was gone. Had a ball with for that time though, including a 1976 trip to Oshkosh. Still have the T-shirt!

 

[Taxman59]

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

It looks like our sons' rooms when they were young! They would run to their room and lock the door. Then the older brother would kick the door to try to get the younger brother to let him in (I look back and feel for the youngest, he had 2 brothers chasing him!). Add friends coming over and normal roughhousing, and the walls had cracks and holes, the doors were trashed!

Just got 12 new interior doors installed, and my youngest (20 years old mind you) was mad at something, and slammed his fist into the new door. Luckily I hadn't started painting, so I put a bunch of spackle in the hole and with luck, that will be the only hole to deal with!

 

[W2R]

It looks like our sons' rooms when they were young! They would run to their room and lock the door. Then the older brother would kick the door to try to get the younger brother to let him in (I look back and feel for the youngest, he had 2 brothers chasing him!). Add friends coming over and normal roughhousing, and the walls had cracks and holes, the doors were trashed!

Just got 12 new interior doors installed, and my youngest (20 years old mind you) was mad at something, and slammed his fist into the new door. Luckily I hadn't started painting, so I put a bunch of spackle in the hole and with luck, that will be the only hole to deal with!

Whoa! If either one of my brothers had tried something like that at 20 years old, not only would he have been the one repairing it, but also he would STILL be grounded (and both are in their 70's by now).


Edited to add second thought: Well, maybe 20 is too old to be grounded, true.

 

[Palmtree]

After years of research and preparing for retirement I thought I had our annual expenses down. The first week of retirement I had a major health occurrence and a major scare. That was $$$$$ in medical bills and a major letdown going into retirement. I get the OK from the doc about two months later and then our HVAC/air conditioner went out. That was a few more thousand dollars. Then after some heavy weather I had to spend $11,000 to prevent further major erosion on our property. Needless to say in the first year of our retirement we have went way beyond our estimated budget.

 

[braumeister]

But a couple really does not spend 2x. Many of the costs are shared and not doubled, such as housing and operating expenses.

I think the usual rule of thumb is that two can live as cheaply as 1.6.

 

[NW-Bound]

I think the usual rule of thumb is that two can live as cheaply as 1.6.

... for just as long, right?

I do not know the right ratio, nor have computed it. We have been married forever.

 

[brainsqueeze]

It would be helpful if the OP posted his actual budget. Then we can all poke holes in it.

 

[Major Tom]

It looks like our sons' rooms when they were young! They would run to their room and lock the door. Then the older brother would kick the door to try to get the younger brother to let him in (I look back and feel for the youngest, he had 2 brothers chasing him!). Add friends coming over and normal roughhousing, and the walls had cracks and holes, the doors were trashed!

Just got 12 new interior doors installed, and my youngest (20 years old mind you) was mad at something, and slammed his fist into the new door. Luckily I hadn't started painting, so I put a bunch of spackle in the hole and with luck, that will be the only hole to deal with!

Reminds me of some of the fights at home between 2 of my older brothers, who were born a little over a year apart. I won't go into details but a few of them were similar to what you described.

I was by far the youngest of 4 and spent most of my time growing up almost like an only child. After the middle 2 brothers, I think my parents were relieved that I was quiet and spent a lot of time in my room

 

[eta2020]

I am expecting 2k a month on various taxes and 2k a month on health.

There goes 48k Maybe I am too cautious but I do not want to be in situation where I will extract my tooth because gold crown costs 2000 bucks and then I will chew my food on front teeth only

 

[tbirdluvr]

I am single with no children and am still working. No debts; house and cars all paid for. I track my expenses in Quicken. Last year expenses: $28,400. This is expense from my net, after deductions for taxes, pension and health insurance. That includes a couple of mortgage payments and final payoff last year and painting the exterior of my house. I am trying to muster the courage to pull the ER plug next month.

I have LBYM, paying into a pension and saving 50% of my net. I will likely increase my expenses for travel and hobbies after retirement. But my point is that I can live well below $40k/year. YMMV, depending upon your circumstances.

 

[gayl]

Under my numbers (and I don't consider myself particularly frugal) I'm finding it hard to spend over $40,000/year in retirement - is there anyone else here who is making it on that amount?

$2300 monthly net after taxes / health insurance in SF Bay Area. But mortgage is paid off so it's relatively easy

 

[RobbieB]

I can live lower than 40k/yr too but I don't have to so why bother?

I don't want to live small for the rest of my life, I want to live LARGE!

And that is a challenge I can tell you.

 

[daylatedollarshort]

I can live lower than 40k/yr too but I don't have to so why bother?

I don't want to live small for the rest of my life, I want to live LARGE!

And that is a challenge I can tell you.

I want to live large on a small budget. I just like being frugal. Worst case we have money to leave to the kids and charity.

 

[RobbieB]

Tell me about it. I dunno, I'm really not worried my "frugal genes" always win out in the end.

I was thinking about the first thing I wanted to buy after I retired. I know, a boat. But I had lots of boats and you always need to put them away and clean the fish at home. A house boat, yeah, catch and clean and toss the offal into the river. But they are slow. A house on the river with a boat dock in the backyard. That would be great, but all the ones I've seen while I've been out there fishing do not have fences and the dog likes to go out the dog door at home and poop in the fenced backyard.

A co-worker asked me what kind of car I was gonna buy. Hadn't thought of that and started thinking. We all had Co. cars. I thought a Maserati Quatro Porto would be nice and I could afford one but the neighbors would not look at me the same if I had it parked in the driveway and that a new house would be prohibitive.

I'm still living in my paid off house with the dog and her dog door with my old 2003 Taurus parked in the driveway.

The "frugal gene" will protect me from "irrational exuberance" I'm sure.

Have Fun!

 

[papadad111]

I solved the problem by having a couple more kid's who are experts on finding way's to spend more money.

Yep. This is an early retirement board.

Early retirees typically have kids still on the payroll.

So food and auto insurance and tuition are big ticket kid related items

Then there is health insurance - getting out early also often implies exiting long before getting vested retiree type health insurance.

Early retirees , especially those who have paid off the mortgage, Will likely list kid costs and medical insurance as the top 2 buckets.

Then as others have said, hobbies will kick in and you'll find used for that money. (Or u can direct deposit your surplus to my account)!

 

[2017ish]

I think the usual rule of thumb is that two can live as cheaply as 1.6.

When you combine me with DW, we live on 3X what I could comfortably live on; but the 1.6X is about the ratio she gets by adding me.

(I keed, I keed!)

 

[athena53]

After years of research and preparing for retirement I thought I had our annual expenses down. The first week of retirement I had a major health occurrence and a major scare. That was $$$$$ in medical bills and a major letdown going into retirement. I get the OK from the doc about two months later and then our HVAC/air conditioner went out. That was a few more thousand dollars. Then after some heavy weather I had to spend $11,000 to prevent further major erosion on our property. Needless to say in the first year of our retirement we have went way beyond our estimated budget.

Yeah, that stuff happens. We downsized but spent $50K enclosing the back deck and replacing windows and a few other things on the house we bought. THEN the furnace needed to be replaced. THEN the A/C died. (Both 20 years old, original equipment.) Roof has a 50-year guarantee and the cars are in decent shape so I hope we're done for awhile.

I'd still be working for a living if I tried to replace 80% of my pre-retirement income. DH and I saved a huge % of what I made (he's retired since 2003 and gets SS). So, with "saving for retirement" no longer a budget item, we need less to live on.

I continue to be a bit horrified at the dollar amount of our expenses (withdrawal rate is under 4% so we're not going broke, and I'm not collecting SS yet). For this reason, I do track our expenses to see if it makes sense. Biggest budget items are travel and charitable; both ran about $18K last year and could be cut back if needed. Other major players are mortgage and property taxes (about $1,000/month) and various health insurance premiums (also about $1K- DH gets Medicare but I'm not eligible yet).

But definitely have some padding for surprises. If my last remaining dental bridge fails, I'm in for about $5K for an implant since I've decided not to mess with bridges anymore.

 

[AboutThere]

I have similar numbers... as follows:

- medical insurance + out of pocket max: $17k (already adjusted for ACA tax credit)
- car/home/umbrella: $4K
- Sinking fund for cars: $10K
- Home maintenance/projects: $5K
- HSA - $7750 (DH qualifies for catchup.)

I'm expecting some of this to drop when the kids are launched... especially medical insurance... but that's a ways off.

This explains a lot - thank you for sharing it.

I am 36,000/year below on comparable expenses, unless I'm misunderstanding how the HSA works.