Made a Mistake on Spending Level?

[RetireAge50]

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

 

[CoolChange]

As long as you have been reasonably happy with your lifestyle over the past few years, I see no mistake at all (#3).

 

[rodi]

Definitely #3.
Did you account for taxes?

 

[gauss]

#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).

-gauss

 

[LOL!]

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.

 

[RenoJay]

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.

 

[pb4uski]

.....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.

 

[RetireAge50]

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.

 

[heeyy_joe]

#4 ---No regrets. Plenty of room now for random acts of kindness.

 

[MichaelB]

Doesn't hurt to have a little extra, no one knows what awaits us down the road.

 

[photoguy]

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.

 

[Senator]

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.

 

[H2ODude]

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.

 

[NoiseBoy]

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.

 

[NW-Bound]

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.

 

[Alan]

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.

 

[mrfeh]

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.

 

[eytonxav]

Looks like success to me regardless of how you classify it. Probably a nice buffer too if ss gets its wings clipped.

 

[Totoro]

Looking back makes no sense. You have a solid budget now, that's great!

 

[Live And Learn]

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

 

[NW-Bound]

Though I am older than the OP hence closer to SS eligibility, I have been using SS as a reserve, in addition to spending at a low WR. I recently decided to download the SS calculator, then to enter in our income records to see for once what SS we will get.

And then, out of curiosity I tweaked the WR in FIRECalc to see what I could spend before going broke in 30 years. FIRECalc told me I could withdraw $65K/year more than I am doing now.

That was worth a chuckle. I have enough now, and am not craving for anything like a fast car or a 3rd house. And I still do not want to pay for a business class air ticket. And I really do not think I will last another 30 years, but if I do the chance is high that I will become a decamillionaire.

I am not telling my children any of the above. They would want to stop work and go straight into ER along with us. Nope, I do not have enough for them to ER now, nor do I want them too. They will have to earn their keep.

 

[W2R]

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

4. You may need this money for the unexpected irregular expenses that do not affect you some years but arise during other years, an extreme example being your present educational expenses. You may also need it for replacement costs.

Examples might be a new roof, a new car, a daughter's wedding, a funeral, disaster damage unreimbursed the the insurance company, dental implants, a new HVAC system, and so on. Some years there is nothing. Other years are worse.

 

[nash031]

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

I don't think it's a mistake. You're still retiring earlier than 90% or more, and you're going to have too much money. Not a problem, in my book. Go buy a Porsche (treat yourself however you feel you can!).

 

[daylatedollarshort]

I feel like whatever we don't spend can help support the kids so they can live not lavish but at least not financially stressed out lives and the rest can go to the food bank or an elephant sanctuary.

When I look at purchases now even though technically I don't have to pinch pennies I still like to get bargains. What is left over after we die and the kids won't need can go to a sanctuary for abused circus and zoo elephants. So I don't feel we oversaved. There is financial security in having enough plus any excess can go to charity.

 

[RetireAge50]

Thanks for the replies. This forum has a lot of smart and down to earth folks.
I think the power of compounding is one of the major reasons NOT to keep spending balanced over time. The sum of constant spending over a lifetime is LESS THAN the sum of delayed spending (so I leaned toward delayed spending).
Also there are things demanding our money now like mortgages and college educations so keeping our spending down and working a few extra years will allow our investments to continue to grow.
As for our lifestyle we spend money on vacations, sporting equipment, dining, electronics, art supplies, Honda automobiles, and last year’s thing. And (for now) we generally do not spend money on fashion, jewelry, fine dining, BMW’s, or the latest thing.
But I plan to spend (or give) the money during my lifetime so assuming I live into my 90’s it will be gone (otherwise I guess it will go to the elephants).