Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
I can't figure out how I'll spend $40,000/year in retirement
Old 05-11-2016, 12:00 PM   #1
Recycles dryer sheets
 
Join Date: Mar 2016
Posts: 76
I can't figure out how I'll spend $40,000/year in retirement

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.

To that I'd add annual expenses (vacations or durable goods purchases of 6,000-12,000) - but those varies widely year to year. The bulk of our current income goes to the house, cars, and retirement savings - so, about 40,000/year once we're retired and those items are paid-off, and when we're not contributing to retirement.

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 can't figure out why I'm nervous, possibly because I'm a product of the "you have to replace 80% of your current earnings to retire" articles from the newspapers. We won't be close to replacing 80% but I can't see that we need it once the house is paid off and college expenses are gone, etc.
__________________

__________________
AboutThere is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-11-2016, 12:06 PM   #2
Thinks s/he gets paid by the post
RobbieB's Avatar
 
Join Date: Mar 2016
Location: Central CA
Posts: 2,491
My largest fixed expense is health insurance at $540 / mo.

Lunch costs me more than that.
__________________

__________________
Retired at 59 in 2014. Should have done it sooner but I worried too much.
RobbieB is offline   Reply With Quote
Old 05-11-2016, 12:08 PM   #3
Moderator
Ronstar's Avatar
 
Join Date: Aug 2007
Location: A little ways southwest of Chicago
Posts: 9,352
After you develop hobbies, you'll be well over $40k spending a year


Sent from my iPhone (:.using Early Retirement .//82339)
__________________
Ronstar is online now   Reply With Quote
Old 05-11-2016, 12:11 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
braumeister's Avatar
 
Join Date: Feb 2010
Location: Northern Kentucky
Posts: 8,601
One change I saw, especially after I set up a donor-advised fund at Fidelity, is that our charitable donations are twice what they used to be during the w*rking years. Since we can afford it, why not put it to good use?
__________________
braumeister is offline   Reply With Quote
Old 05-11-2016, 12:13 PM   #5
Thinks s/he gets paid by the post
Major Tom's Avatar
 
Join Date: Nov 2009
Location: SF East Bay
Posts: 3,129
People's needs/wants/desires seem to vary widely. There are folk in this forum who spend anything between ~13K and several hundred thousand a year. I'm at the low end, with an annual spend in retirement of ~17K but I have cheap rent, don't own a car, and don't travel much or have expensive hobbies.

I think a person or couple could pick any annual income and find a way to thrive on it. There is most likely a lower limit, but human beings can be remarkably resourceful at enjoying themselves on very little when needs dictate.

Likewise, folk who love to grouch and grump find ways to do that on a wide range of incomes too
__________________
ER, for all intents and purposes. Part-time income <5% of annual expenditure.
Major Tom is offline   Reply With Quote
Old 05-11-2016, 12:15 PM   #6
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Eagan, MN
Posts: 3,050
I am thinking I will have the same issue. I should have $150K+ per year, and only spend $40K max. In 2016, it's so far less than $2K a month...

I plan on traveling more. Buying a new truck. Tipping more at the gentlemen's clubs, as I try to get in touch with my left-brain, artsy self. I've always been told that supporting the arts is a great thing.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 05-11-2016, 12:20 PM   #7
Full time employment: Posting here.
 
Join Date: Jul 2014
Posts: 616
I agree that people's budgets vary widely, and it's definitely helpful to live in a low cost area, but don't forget to budget for the unexpected "big repairs", dental/medical costs and insurance, deductibles for unexpected medical treatments, a refund to replace/repair aging cars and appliances etc.
__________________
Katiek is offline   Reply With Quote
Old 05-11-2016, 12:26 PM   #8
Full time employment: Posting here.
NYEXPAT's Avatar
 
Join Date: Jul 2009
Location: Miraflores,Peru
Posts: 880
I solved the problem by having a couple more kid's who are experts on finding way's to spend more money.
__________________
NYEXPAT is offline   Reply With Quote
Old 05-11-2016, 12:30 PM   #9
Thinks s/he gets paid by the post
Major Tom's Avatar
 
Join Date: Nov 2009
Location: SF East Bay
Posts: 3,129
Quote:
Originally Posted by NYEXPAT View Post
I solved the problem by having a couple more kid's who are experts on finding way's to spend more money.
LOL!
__________________
ER, for all intents and purposes. Part-time income <5% of annual expenditure.
Major Tom is offline   Reply With Quote
Old 05-11-2016, 12:30 PM   #10
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 16,539
Quote:
Originally Posted by AboutThere View Post
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?
Sure, we are, and there are a bunch of others who have said their spend rates were anywhere from $1,500 to $2,500/month like you. The ones with the $70k+/year spending seem to either travel a lot or live in high COL places like southern CA, NYC, and the like, or both.

Quote:
Originally Posted by AboutThere View Post
I can't figure out why I'm nervous, possibly because I'm a product of the "you have to replace 80% of your current earnings to retire" articles from the newspapers. We won't be close to replacing 80% but I can't see that we need it once the house is paid off and college expenses are gone, etc.
I think that "80% rule" came from someone's rough estimate of what it would take for most people. But individuals vary widely and clearly that doesn't apply to you. It doesn't to us either.
__________________
I heard the call to do nothing. So I answered it.
Walt34 is offline   Reply With Quote
Old 05-11-2016, 12:40 PM   #11
Full time employment: Posting here.
Sojourner's Avatar
 
Join Date: Jan 2012
Posts: 732
Quote:
Originally Posted by Katiek View Post
[D]on't forget to budget for the unexpected "big repairs", dental/medical costs and insurance, deductibles for unexpected medical treatments, a refund to replace/repair aging cars and appliances etc.
+1

If after accounting for those big, occasional expenses you still find yourself wondering how to spend extra retirement money, well there are always things like fine wines, gourmet foods/restaurants, and other little indulgences that you could partake in more frequently. If I were you and enjoyed good vino, for example, I'd probably up my budget from, say, $10/bottle to $15/bottle. After all, life's too short to drink cheap wine... or so the saying goes.
__________________
Sojourner is offline   Reply With Quote
Old 05-11-2016, 12:45 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,428
It is what it is... and one person's frugal lifestyle would be inadequate for some and extravagant for others. It sounds like you have a bottoms up budget... one sense check would be to compare the total to your annual take-home pay less and savings you do from that money... presumably the rest is spent for your living expenses... and then adjust for changes you expect from now to retirement.

We live in a relatively high COL area (property taxes are ~$7k for a ~2,500 sf lakefront home) and our basic expenses (excluding income taxes, charitable contributions and travel/golf/hobbies) are about $50k.... add in charitable contributions and hobbies and we are ~$60k.

But our $50k includes ~$8k of health insurance and deductibles so that and I suspect that your property taxes are less than the $7k that we pay would be close to your $40k.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 05-11-2016, 12:46 PM   #13
Recycles dryer sheets
 
Join Date: Mar 2016
Posts: 76
Quote:
Originally Posted by Ronstar View Post
After you develop hobbies, you'll be well over $40k spending a year


Sent from my iPhone (:.using Early Retirement .//82339)
Avid fly fisherman, amateur astronomer, stereo aficianado,and sometimes golfer. I've worked those hobbies into the annualized, variable expenses (examples: in the last 12 months I've purchased telescope equipment at $700, fishing equipment at $500, and $0 in golf equipment. I have enough LPs and CDs to last me a lifetime of listening, and haven't bought new stereo equipment in years). The telescope will last me forever, and the new fly rod has a 25-year guarantee.
__________________
AboutThere is offline   Reply With Quote
Old 05-11-2016, 12:48 PM   #14
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,044
I am budgeting about $2,500 per month in fixed expenses too in a low cost of living area (generous food allowance, health insurance premiums*, gas, home/car insurance, property taxes, utilities).

Then I have another $1,250 per month going into a sinking fund to cover medical deductibles and co-pays, a new car purchase every 10 years (because even your paid off car will eventually need to be changed), car repairs, home repairs (because things go wrong sometimes, even with a fully renovated house), etc....

So we are at $45K per year, and then there is discretionary spending on top of that.

I think that $40K would be doable (including discretionary spending) if, like is your case, healthcare costs ($15K per year budgeted for us) were fully covered and we kept our discretionary spending under $10K per year.


* We may be eligible for some ACA subsidies next year which might lower our health insurance premiums a bit.
__________________
FIREd is online now   Reply With Quote
Old 05-11-2016, 12:48 PM   #15
Thinks s/he gets paid by the post
Nemo2's Avatar
 
Join Date: May 2011
Location: Belleville, ONT
Posts: 4,319
Quote:
Originally Posted by Walt34 View Post
Sure, we are, and there are a bunch of others who have said their spend rates were anywhere from $1,500 to $2,500/month like you. The ones with the $70k+/year spending seem to either travel a lot or live in high COL places like southern CA, NYC, and the like, or both.
The most we've spent in the last few years is $43,500 Canadian (just under $34K US at current rates), and that involved at least a couple European trips.

We don't spend much...either on travel or on a day to day basis....not 'economizing', just nothing we want or need.
__________________
"Exit, pursued by a bear."

The Winter's Tale, William Shakespeare
Nemo2 is online now   Reply With Quote
Old 05-11-2016, 12:52 PM   #16
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Posts: 1,846
+1 to both Walt34 and Sojourner. The discretionary expenses (and healthcare/insurance) are what ratchet spending up.

We haven't pulled the cord yet, but if we were to exclude 1) travel; 2) healthcare; and 3) "good" wine/food/restaurants, our spending would be far less than we plan. In your case, having healthcare covered makes a huge difference and makes your spending a lot lower than would otherwise be the case.

P.S. IMO, the 80% figure is not a rule of thumb. It is a rule of the broadside of a barn.
__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline   Reply With Quote
Old 05-11-2016, 12:53 PM   #17
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,889
Quote:
Originally Posted by AboutThere View Post
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.

To that I'd add annual expenses (vacations or durable goods purchases of 6,000-12,000) - but those varies widely year to year. The bulk of our current income goes to the house, cars, and retirement savings - so, about 40,000/year once we're retired and those items are paid-off, and when we're not contributing to retirement.

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 can't figure out why I'm nervous, possibly because I'm a product of the "you have to replace 80% of your current earnings to retire" articles from the newspapers. We won't be close to replacing 80% but I can't see that we need it once the house is paid off and college expenses are gone, etc.
Don't forget income tax and property taxes. But yes, I do think that some of us are pleasantly surprised with low expenditures when we retire. The 80% number is just ridiculous, or at least it is for many of us, because we aren't spending that much even while working.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 05-11-2016, 12:54 PM   #18
Recycles dryer sheets
 
Join Date: Mar 2016
Posts: 76
Quote:
Originally Posted by Sojourner View Post
+1

If after accounting for those big, occasional expenses you still find yourself wondering how to spend extra retirement money, well there are always things like fine wines, gourmet foods/restaurants, and other little indulgences that you could partake in more frequently. If I were you and enjoyed good vino, for example, I'd probably up my budget from, say, $10/bottle to $15/bottle. After all, life's too short to drink cheap wine... or so the saying goes.
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.
__________________
AboutThere is offline   Reply With Quote
Old 05-11-2016, 12:58 PM   #19
Recycles dryer sheets
 
Join Date: Mar 2016
Posts: 76
Quote:
Originally Posted by W2R View Post
Don't forget income tax and property taxes. But yes, I do think that some of us are pleasantly surprised with low expenditures when we retire. The 80% number is just ridiculous, or at least it is for many of us, because we aren't spending that much even while working.
Property taxes are the only outlier where I live: about 5,000/year on a 250,000 house, and I've included those.

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.
__________________
AboutThere is offline   Reply With Quote
Old 05-11-2016, 01:07 PM   #20
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 16,539
Quote:
Originally Posted by Nemo2 View Post
The most we've spent in the last few years is $43,500 Canadian (just under $34K US at current rates), and that involved at least a couple European trips.

We don't spend much...either on travel or on a day to day basis....not 'economizing', just nothing we want or need.
Oh, I wasn't suggesting that everyone who travels is a big spender, as you know that is not the case. But generally, travel seems expensive when I price things out. But maybe I'm too picky or a lousy travel shopper.

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.
__________________

__________________
I heard the call to do nothing. So I answered it.
Walt34 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Trying to figure out if I can ER in a year OutdoorsNW Hi, I am... 3 10-22-2013 04:39 PM
NEW Retirement home: how to figure out how much to spend on it? Orchidflower FIRE and Money 21 05-10-2013 08:40 PM
$20,000,000,000 in Taxes. mickeyd FIRE and Money 12 11-01-2006 05:49 PM
$423,000,000,000.00 Howard Other topics 25 02-08-2006 03:59 PM
$2,000,000,000,000- Happy 55th mickeyd Other topics 12 12-28-2004 09:19 AM

 

 
All times are GMT -6. The time now is 12:44 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.