View Poll Results: As a retiree, how do you plan for big ticket expenses?
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Don't buy them.
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10 |
11.36% |
Buy only when my portfolio is booming
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8 |
9.09% |
Save up for them by setting aside a portion of my withdrawals
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71 |
80.68% |
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08-03-2019, 03:23 PM
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#41
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Thinks s/he gets paid by the post
Join Date: Jan 2011
Location: Fair Lawn
Posts: 2,963
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Big ticket items are often - maybe usually - a normal part of life. Be it house repair, need for a car, etc. one needs to plan for them, or simply pay for it as needed. As at least one other responder noted, if I got whammied with multiple big ticket items over a short time frame, maybe I'd just take a more modest vacation that year.
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08-03-2019, 03:41 PM
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#42
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2014
Posts: 7,373
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My tactics don't fit into the listed choices.
My W/D rate has been averaging just under 3.5%. There's some "fat" in that withdrawal and that allows for minor catastrophes such as a dental implant. Anything I don't spend from the withdrawals goes into the grandkids' 529s.
My car is a 2012 so I know it won't last forever but then I don't have luxurious tastes. The replacement will likely be another boring 2-year old sedan bought off-rental. Whatever I'm likely to spend would not raise the average W/D rate to 4% (have been retired for 5 years now). Roof has 44 years left on the warranty. I'm 66. HVAC was all replaced 4 years ago.
In a really crappy market I could stop the 529 contributions or cut back on travel or charity, which together make up 40% of my expenses. I hope I don't have to.
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08-03-2019, 04:10 PM
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#43
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Moderator Emeritus
Join Date: Apr 2011
Location: Conroe, Texas
Posts: 18,735
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IJBSWINI
__________________
*********Go Yankees!*********
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08-03-2019, 04:18 PM
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#44
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Recycles dryer sheets
Join Date: Oct 2007
Location: Georgetown
Posts: 423
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I have a rough annual budget of $60K for everyday expenses and $110K for "big ticket items." I sort of allocate and preplan the big ticket items. 2018 was over $100K for travel, 2019 was $75K for home improvements and $20K for travel, 2020 will be $80K for travel (most of it to prepay a large portion of 2021 travel), and 2021 will be $60K for travel and $45K for a new car. Beyond that I haven't done any planning although I know I will need expensive dental work at some point. I feel this works for me as I can look at cutting back, if need be, but also not to be worried when my planned $50K backyard project stretched to $75K.
Marc
__________________
"Adventure is just bad planning"
Roald Amundsen
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08-03-2019, 04:18 PM
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#45
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,154
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I just buy something when I need it?
__________________
Retired since summer 1999.
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08-03-2019, 04:41 PM
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#46
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Moderator
Join Date: Nov 2014
Posts: 9,182
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D. Planned for big ticket items as part of my retirement budget. For example, if I want a $50K car every 10 years, I have $5K in my annual budget. Therefore, most years I should be under budget.
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Every day when I open my eyes now it feels like a Saturday - David Gray
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08-03-2019, 07:01 PM
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#47
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 1,671
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Quote:
Originally Posted by athena53
In a really crappy market I could stop the 529 contributions or cut back on travel or charity, which together make up 40% of my expenses.
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A bit unconventional but we did the opposite. We traveled and spent more on some one time things in 2009-10 because prices were great and, in the case of travel, there were no crowds.
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08-03-2019, 08:09 PM
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#48
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Thinks s/he gets paid by the post
Join Date: Jun 2017
Location: Western NC
Posts: 4,633
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Quote:
Originally Posted by RunningBum
Examples in the OP were >$50K expenses like a new car, home improvement or RV. Many choose or are forced to retire on a budget that can't afford things like that. If you were forced out due to health reasons and unable to find other work, you may have to accept that. Hopefully they can afford to make necessary home repairs and replace an old car with a reliable newer pre-owned one, but that wasn't in the OP, nor are those >$50K.
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I've structured my life to avoid as many lumpy expenses as possible.
I own a townhouse...all outside maintenance (including roof repairs) is covered by the monthly fee...so no surprise lump-sum cost like a new roof.
New car? RV? Those can be rented instead of bought.
Many households choose to lease in retirement, so transportation becomes just another recurring monthly expense.
Especially if they've downsized to one vehicle...normally a leased vehicle will always be in warranty, so no surprise repair bills.
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08-03-2019, 08:16 PM
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#49
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,154
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Quote:
Originally Posted by jebmke
A bit unconventional but we did the opposite. We traveled and spent more on some one time things in 2009-10 because prices were great and, in the case of travel, there were no crowds.
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Yes, I remember great deals being available then.
__________________
Retired since summer 1999.
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08-03-2019, 08:36 PM
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#50
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Quote:
Originally Posted by ncbill
I've structured my life to avoid as many lumpy expenses as possible.
I own a townhouse...all outside maintenance (including roof repairs) is covered by the monthly fee...so no surprise lump-sum cost like a new roof.
New car? RV? Those can be rented instead of bought.
Many households choose to lease in retirement, so transportation becomes just another recurring monthly expense.
Especially if they've downsized to one vehicle...normally a leased vehicle will always be in warranty, so no surprise repair bills.
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People who are counting on steady income such as SS and pension will feel more comfortable with the above method.
Retirees like myself who have no pension and rely on withdrawal from an investment account to supplement SS will look at expenses over several years to be sure that the big expenses will average out and do not send us on a ruinous path.
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"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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08-03-2019, 08:43 PM
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#51
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Full time employment: Posting here.
Join Date: May 2008
Posts: 599
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I have financed some big items with a HELOC that gives me a flexible repayment plan, interest under 4%.Plan was to pay off in 10 months or for the largest project 2 years.
For the kitchen remodel, I thought about it for a couple of years-so that is the saving up part-mental only, no actual money was moved. That was the only year I went over a reasonable withdrawal rate. I also just financed a car.
I just pulled out a chunk of money from a stock sale that paid off half the remaining balance of my mortgage. If I pull the rest out I will have a 8k tax bill. If I wait til next year I will only have a 3k tax hit. But it will free up cash flow so much that I can live on SS and one quarterly dividend that I take in cash. So future RMD's will be reinvested as taxable investments to draw on. I keep dithering about what I want to do.
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08-03-2019, 09:08 PM
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#52
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Moderator Emeritus
Join Date: Apr 2011
Location: Conroe, Texas
Posts: 18,735
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Quote:
Originally Posted by audreyh1
I just buy something when I need it?
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Yes!
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*********Go Yankees!*********
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08-03-2019, 09:23 PM
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#53
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Thinks s/he gets paid by the post
Join Date: Jul 2012
Location: Texas
Posts: 3,024
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Quote:
Originally Posted by audreyh1
I just buy something when I need it?
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I had assumed something more colorful for the S.
__________________
Retired at 52 in July 2013. On to better things...
AA: 85/15 WR: 2.7% SI: 2 pensions, SS later
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08-04-2019, 04:52 AM
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#54
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,305
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Quote:
Originally Posted by RunningBum
Examples in the OP were >$50K expenses like a new car, home improvement or RV. Many choose or are forced to retire on a budget that can't afford things like that. If you were forced out due to health reasons and unable to find other work, you may have to accept that. Hopefully they can afford to make necessary home repairs and replace an old car with a reliable newer pre-owned one, but that wasn't in the OP, nor are those >$50K.
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Fair caveat, though I didn’t see any indication the OP was a forced retirement. And sadly, if you’re forced to retire I’d think you still want to budget for infrequent big ticket expenses along with manageable spending overall.
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No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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08-04-2019, 09:00 AM
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#55
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Thinks s/he gets paid by the post
Join Date: Jun 2013
Posts: 2,523
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I answered C. We tend to plan things out way in advance. If an emergency occurred then we would suck it up and buy the item. But the planning in advance allows me to feel better about the total expense for the year, because we have planned for it. In 2017 we spent a lot on updates to the inside of our home, knowing that in 2018 we would be spending quite a bit on the outside of our home. This year we tackled some major landscaping issues. Next year is the replacement of our 10 year old SUV. That will be expensive, but we have kept our current car for 10 years and our other vehicle which is a sweet convertible is a 2007 and only has 53,000 miles on it. I've sketched out what we will do in 2021 as well. Handling things in this manner gives me a sense of control that I find comforting.
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"Luck favors the prepared mind"
Pasteur
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08-04-2019, 07:56 PM
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#56
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Recycles dryer sheets
Join Date: Dec 2013
Posts: 174
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Quote:
Originally Posted by MichaelB
D. Include this extra spending in the pre-retirement finances calculation.
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+1
If you saved and planned well than $50k should not be such a 'significant' amount
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08-04-2019, 08:19 PM
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#57
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Thinks s/he gets paid by the post
Join Date: May 2019
Posts: 2,821
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Quote:
Originally Posted by audreyh1
E. Pull the large amount from the retirement account, and reduce future income by recalculating your SWR.
Just another option.
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Bingo. E. I would make the determination if I wanted or needed the previously unplanned big ticket item enough to justify the reduction in my future drawdown to compensate for the money taken from my $tash.
The D option I would say it true for predictable spending. Someone mentioned buying a new car. I have a sinking fund in my budget for that future expense. The C option is somewhat correct, except I'm not actually withdrawing anything - I'm leaving the money where it is until I need it, and I'm simply "accounting for it" with the sinking fund.
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08-05-2019, 08:03 AM
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#58
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2010
Posts: 5,915
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Buy as needed. Pull the money out of savings or investments account. No real impact since we comprehended these these infrequent expenses in our projected expenses prior to FIRE.
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08-05-2019, 09:39 AM
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#59
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Dryer sheet wannabe
Join Date: Jun 2019
Posts: 15
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Thanks for all the replies. I'm glad most of the votes were for "C" and missing option "D" because those are what make sense to me. For those who said "I just buy something when I need it", my reply is that maybe the better way of asking my question would be "How do you decide if you need to say 'no' to something you want"? You can't always say yes.
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08-05-2019, 11:20 AM
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#60
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Moderator
Join Date: Oct 2010
Posts: 10,725
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I'm in the JBSWINI (actually JBSWIWI because my Dad taught me we have very, very few true "needs") camp, generally, but I've got a "struggle" (if you want to call it that), in that I'm balancing the impact of the tax impact with spending. IOW, I'm spending less than I "could" if I didn't mind giving up the PTC. That will be out of the way in a handful of years, then the next damper is that I'll need to "unbury" some after-tax funds. At that point, I might make a big purchase on a toy of some kind because the spend won't have a tax impact. I'd be seriously considering such a toy now if it weren't for the smack-down I'd get from the tax collector.
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