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Made a Mistake on Spending Level?
Old 06-12-2014, 05:17 PM   #1
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Made a Mistake on Spending Level?

I am 47 years old and spend about $60,000/year for all living expenses for a family of 4. This excludes mortgage and education expenses (as these I view as temporary) but otherwise includes all other expenses (food, vacations, maintenance, cars, insurance, utilities, entertainment, everything). Any remaining money is saved for retirement.
This spending level has been fairly constant over the years (adjusted for inflation).
In about 3 years (at age 50) we plan to retire. Conservative estimates put our available budget at about $90,000 for the rest of our life. So much for a constant spending level.
What do you think?
1. We messed up and should have retired earlier
2. We messed up and should have spent more while working
3. Good planning as it is better to have 1.5 times spending to enjoy retirement to the fullest
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Old 06-12-2014, 05:21 PM   #2
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As long as you have been reasonably happy with your lifestyle over the past few years, I see no mistake at all (#3).
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Old 06-12-2014, 05:30 PM   #3
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Definitely #3.
Did you account for taxes?
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Old 06-12-2014, 05:41 PM   #4
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#3 You will have significant robustness to things going forward and not comprehended by current models/assumptions.

I have taken a similar approach myself (but then I assume that DW and myself will both get at least 2/3 of the social security that we have accrued so far under current law as well as the PBGC insured pensions).

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Old 06-12-2014, 05:51 PM   #5
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Nice, but if you are spending $30,000 a year on your mortgage and have any inkling to put 4 kids through college, then something is messed up.
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Old 06-12-2014, 05:58 PM   #6
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I think it's great. You can always increase the quality of your vacations going forward or leave a bunch to kids or charity. Good problems to have. Congrats.
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Old 06-12-2014, 07:00 PM   #7
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Originally Posted by RetireAge50 View Post
.....What do you think?
1. We messed up and should have retired earlier
2. We messed up and should have spent more while working
3. Good planning as it is better to have 1.5 times spending to enjoy retirement to the fullest
Yes.

But it is what it is, so go with #3.
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Old 06-12-2014, 07:02 PM   #8
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Starting at age 50 will no longer have a mortgage and college for 2 kids will be paid in full. Yes!

Good point on the taxes this will eat into some of the excess but with Roth funds , standard deductions, personal exemptions, and already taxed funds hoping to keep them to a minimum.
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Old 06-12-2014, 07:03 PM   #9
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#4 ---No regrets. Plenty of room now for random acts of kindness.
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Old 06-13-2014, 06:39 AM   #10
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Doesn't hurt to have a little extra, no one knows what awaits us down the road.
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Old 06-13-2014, 07:12 AM   #11
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In about 3 years (at age 50) we plan to retire. Conservative estimates put our available budget at about $90,000 for the rest of our life. So much for a constant spending level.
I think it depends on how conservative your estimates are and how long it took your stash to go from supporting 60k to 90k.

If you're talking about going from a 3% WR to 2%, then yes I think you might have been able to fire earlier or spent more. On the other hand, if you w.r. goes from 4% to a little under 3%, then I think waiting is justified.

Also due to other obligations it's very hard to be able to pull the plug right when you reach your number. With returns like last year, it's very easy to overshoot.
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Old 06-13-2014, 07:22 AM   #12
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I am planning on 200%+ of spending level.

You need after tax money, not pre-tax. Spending is after tax money.

Maybe you get a new car, and them you have payments that you do not now.
Maybe health insurance is much more expensive after you quit a job.
Maybe kids (which I do not have) expenses, like college, eat up money.
Maybe you want to buy an RV and travel, or just travel.
Maybe you have a situation that no RE planner has ever encountered, and you need more.
Maybe a significant legal, medical, or homeowner insurance items comes up. Hose falls off a cliff, flood, sink hole that is not covered, etc.

You do not want your finances to come to a catastrophic end, because of an unforeseen event.
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Old 06-13-2014, 07:40 AM   #13
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Nothing wrong with No.3. We're in similar situation in could have gone much earlier, but actually enjoyed the j*b until the last year or two. Struggle with the inability to spend bucks that are clearly discretionary, even though we're spending at about 60% of what models say is OK; it's hard to just part with dollars that have always had a certain value (based on what it took to earn them). Good example -- DW car is 2003 Acura with 80k miles. Works fine. Paying 50-60k for new car would barely dent the portfolio. But, it just seems like a waste of money given that current one works fine. Besides, I like that the neighbors think we're just poor retirees!

Waking up one morning and realizing you over saved for retirement should be no problem assuming you didn't deny yourself meaningful enjoyable experiences along the way. I know it seems many here are/were desperate to pull the plug ASAP but if you can enjoyably get well beyond that point I don't see a problem.
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Old 06-13-2014, 08:07 AM   #14
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Allowing for location, I think that $90k of inflation adjusted lifetime income for a couple (empty nest) ought to enable a very comfortable and secure retirement. Nice job.

It reads like you have a few reasons to continue working until you are 50, so using your "extra" savings to retire even earlier isn't an option, true? If that is the case then you could consider some increased spending now. How about a family vacation paid for by mom and dad? Rent a beach house for a week? Buying good memories is never a bad thing.

I happen to think that 1.5 x current spending is a pretty good place to be. That's the point in my spreadsheet where I'd feel comfortable pulling the plug.
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Old 06-13-2014, 08:42 AM   #15
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Doesn't hurt to have a little extra, no one knows what awaits us down the road.
+1

In the next market crisis like that last one in 2009 hits, the lower spending level will feel about right.
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Old 06-13-2014, 09:02 AM   #16
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We ended up being able to support 1.5 times budgeted spending. In our case it wasn't good planning particularly, it was the fear of leaving without health insurance. (long before ACA)

Having said that, it has been really nice to have such a big cushion in retirement.
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Old 06-13-2014, 09:09 AM   #17
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Good planning as it is better to have 1.5 times spending to enjoy retirement to the fullest
I vote for this option. Especially for early retirees. We'll be in a similar situation (annual expenses $45K, firecalc says we could spend $65K).

If your portfolio doesn't take any serious hits the first few years of retirement, then loosen the belt a bit.
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Old 06-13-2014, 09:31 AM   #18
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Looks like success to me regardless of how you classify it. Probably a nice buffer too if ss gets its wings clipped.
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Old 06-13-2014, 09:45 AM   #19
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Looking back makes no sense. You have a solid budget now, that's great!
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Old 06-13-2014, 09:58 AM   #20
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If you're talking about going from a 3% WR to 2%, then yes I think you might have been able to fire earlier or spent more. On the other hand, if you w.r. goes from 4% to a little under 3%, then I think waiting is justified.
+1
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