Retirement Budgeting... how did it go for you?

[W2R]

I have never budgeted (either in retirement or beforehand) but I do keep close track of my spending, by category. If my spending gets to be too much, I instinctively cut back and delay purchases wherever I can and that takes care of it for me.

Here are my spending averages over the 5 years from 2012-2017. I was retired all of those years and lived alone.

Quote:

Originally Posted by DawgMan Planned Budget (this is my preferred budget which has plenty of fat, but is equal to or less than my current working budget) My Clothing: $4K/yr (honestly, I could cut this sucker back... T-shirt and jeans are fine by me) DW Clothing: $6K/yr (she is spending around $10K now, SAHM. 1 area I need to reign in) Average $496/year; not married Entertainment: $12,000/yr (this is dinners out, movies) Average $3154/year, eating every lunch out and some dinners occasionally. No fast food, movies, concerts, or shows. Groceries: $13,200/yr (food for the house inc entertainment at home, no liquor) Average $2,716/year. Liquor: $6K/yr (what can I say, we enjoy good wine and a good cocktail!) I don't drink, so $0/year. My mad $ $2600/yr (may not be enough as I may want to pursue golf more regularly) DW mad $: $7K/yr (tennis/haircuts/beauty stuff/friend lunches) Other Misc: $5K/yr (cleaning supplies/misc home goods) Not sure what to include in "mad money". Fitness average $1000/yr. Video games average $477/year. Miscellaneous average $3172/year. Cleaning supplies included in groceries, see above. Travel: $20K/yr Don't like to travel! Average $183/year due to one hurricane evacuation in 2012. So how did you start out in some of these spending areas and how did it play out over a number of years in RE?

Basically I determined my expected retirement spending by starting with how much I spent before. From that I subtracted expenses that would be less (like clothing for formal work meetings), and added new expenses that would be more (like entertainment). The resulting estimate was just about exactly right for the first few years from 2010-2014, within $200/year on average. Then I started spending more since I had some good fortune and also SS kicked in, so I therefore had more to spend.

[Markola]

Quote:

Originally Posted by DawgMan ...I have been fortunate to make a good income over the years that allowed me to sock away a good bit of dough, but also allow the budget to basically slide over the last 4 - 5 yrs, particularly with my DW's discretionary expenditures... My Clothing: $4K/yr (honestly, I could cut this sucker back... T-shirt and jeans are fine by me) DW Clothing: $6K/yr (she is spending around $10K now, SAHM. 1 area I need to reign in) Entertainment: $12,000/yr (this is dinners out, movies) Groceries: $13,200/yr (food for the house inc entertainment at home, no liquor) Liquor: $6K/yr (what can I say, we enjoy good wine and a good cocktail!) My mad $ $2600/yr (may not be enough as I may want to pursue golf more regularly) DW mad $: $7K/yr (tennis/haircuts/beauty stuff/friend lunches) Other Misc: $5K/yr (cleaning supplies/misc home goods) Travel: $20K/yr

Dawgman, I hear you about your lovely DW’s tastes and habits. I manage our expenses and could live happily on about 1/3 of what we spend. She, however, isn’t built that way. Some things are more important than money, like I give her stability and she makes my life more exciting. Since we want to keep each other, we came up with a system 10 years ago that we agree is fair and simple. Here it is in case helpful:

1. All income goes into a shared Joint checking account. All Joint bills are paid through it. I keep one month’s expenses in it as a cash flow buffer.

2. The key: We each have our OWN checking and savings accounts. Every other week, we each get an EQUAL amount of Mad Money automatically transferred to our respective checking accounts, which we call our Personal Allocations. Neither of us is accountable to the other for spending this money. We also agree that, when it’s gone, it’s gone. Since we get the same amounts to blow, regardless of who earns what, it is entirely fair.


If one of us wants something big for Personal use that we haven’t saved up for, we take a loan from Joint funds and set up enough automatic monthly fixed amount payments back to Joint to pay it off over time. That’s really rare though.

If there is some expense that is charged to Joint but that seems more Personal, if it’s small I usually decide to not argue and just leave it in Joint. If it’s bigger and was obviously for her own consumption, I slide money over from her personal account to reimburse it and then wait to see if she wants to confront me about it, which is rare, because it’s usually obviously for her consumption.

Over time, we’ve come to respect the system and we hardly ever argue about money. We also spend less money over all, because, God love her, her tendency to damage to our budget is contained this way, and we are sort of forced to talk through bigger Joint wants and needs together. Unlike you, we include our clothing in our Personal Allocations/Mad Money.

There’s no need to budget for the Personal Mad Money accounts. Me being me, and her being her, I park 50% of mine in my savings account while she hardly ever has anything in her savings account. That’s ok, though she’s lately become envious I have enough there to buy myself a new car if I wanted to, which I don’t, but which is small bug in the system I didn’t anticipate. I bought us a new TV this year to show her I’m not totally hogging my own stash, which seemed to help.

I budget the Joint Account using YNAB, which is a friendly to use program connected to that account. I actually enjoy using it every few days to see how the month is going.

Good luck and YMMV!

[DawgMan]

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Originally Posted by Markola I bought us a new TV this year to show her I’m not totally hogging my own stash, which seemed to help.

I can't believe you let her watch YOUR TV!!

I am toying with a system that has some of your approach, taking baby steps to not overwhelm the Princess all at once! I let the horse run wild outside the barn for a number of years so I take some responsibility here. She/we have agreed to do some personal assessment of what is both important to each of us separately and jointly in terms of "stuff" and activities which cost $$. I think we will get there. I have 18 months to turn the ship around!

[audreyh1]

We had tracked our expenses for well over a decade before retiring, so I had a very good idea of what our base expenses would be, and was able to create a reasonable estimate of what we might spend. Savings and some taxes went away, insurance expenses changed, and we added a bunch of extra for travel, dining and hobbies.

At retirement, we were able to spend about as much as I had as pre-tax income, so I wasn’t worried about any tight budget to stick to. I just continued tracking to see whether anything was out of whack compared to expectations. It wasn’t, so we just kept going as we were.

I still track because it’s easy with Quicken and I like to know where our money is going. I simply have a target amount I think it’s reasonable to spend. I have fine expenses detail, but in general all I look at is the very broad categories what we are spending on basic living expenses, travel, gifting, and special expenses like buying computers, camera gear, etc.

Over the years I’ve increased our planned budget to meet what we want. Much of it is discretionary. We also naturally tend to find more cost effective ways to pay for routine things and get rid of expenses we perceive as unnecessary.

We don’t match our withdrawals to our budget or vice versa. Over the past several years we have had higher after-tax income than expenses, so there is extra to splurge if we so choose.

[audreyh1]

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Originally Posted by DawgMan Interestingly I keep hearing the word “tracking” as opposed to budgeting. I suppose that is lose budgeting?? For you trackers, do you have a little alarm that goes off when your overall expenses start approaching/passing your projected annual spend? Eg. If say your a 4% withdrawal guy and that is $40K/yr, do you just adjust as you go? I suppose my anal nature likes to see/compare how my plan played out in reality so I can make/track adjustments needed. OTOH, if your history of spending never/rarely triggers an alarm on your annual planned spend, then flying by the seat of your pants may work just fine.

Basically yes.

Tracking has me sometimes concluding that the “budget” should be increased as we are clearly spending more on X.

A target budget in our case is strictly for planning purposes. I can look at our retirement assets and see that the annual income available is more than what we’ll likely spend and conclude we’re good, carry on.

If our income drops below the target budget, then we’ll have to decide what action to take: cut back on travel? delay a major purchase!

[audreyh1]

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Originally Posted by Dtail Let me explain in more granular detail. We don't fund the "Large item" expense category on a monthly basis (unlike the Short Term expense). Our goal is to fund the LI category with excess monies we don't spend yearly vs. the budget and any other "unexpected" monies which come our way. Thus conceptually, we DO/WILL withdraw the monies yearly and fund this account. This concept goes back to a non majority concept in this forum. Keeping a separate account outside the portfolio for unused monies leftover. Does my response make it clearer?

Yep same here. I prefer to accumulate funds that we might use to buy a new car outside of the retirement portfolio so that we can buy a new car when we want to no matter if the markets take a sudden dive.

For us really large expenses like a new car are extra-budget. If we have the extra funds set aside to spend we do, otherwise we wait. If we have a large amount set aside we might even splurge on something fancy.

[Ronnieboy]

We've never been able to budget, more like I, as DW has no interest in finances at all, something that will have to change eventually.

One of my first posts here probably was which budgeting software was best, I even purchased a copy of Quicken, but to no avail, it never stuck. I am envious of the posters who can pull up what they spent on groceries, gasoline and utilities for the past 5 years.

We're still w*rking with a planned ESR for me in 5 years and total retirement for DW. I only have a rough outline for our retirement spend that I put together 4 years ago and looking at it now it is definitely a work in progress

I had estimated the following monthly expenses:

Cable/Cell phone $200 This should tighten up as kids move out

Power bill 350 We're on equal pay and it is 245 now, I expect/hope to downsize saving on this and also less when kids move out

Nat Gas 160 Equal pay right now at 84 should decrease with downsize

Water/Sewer 130 This has already increased to $155 and will probably go higher with the growth in the area, more for water and sewer.

Property taxes 335 this is already $150 a year under budget, would/should decrease with a downsize.

Home/Car ins 325 just above what we're paying now, should drop when kids get their own insurance.

Car payment/expense/gas 750 This would be an accrual for vehicle replacement, repairs and gasoline use.

Grocery/out to eat 1000 Just a guess, we are eating out now, way too much and with paying for the kids, it is probably higher than this.

Misc travel,clothes,fitness, medical 1000 Definitely underfunded, don't spend a lot on clothes, even working, but would like to add more to travel and medical shouldn't be too bad as long as I can stay part time at current job with full bene's

Home maint 350 Accrual for home items needing replacement

Fudge factor 450 To make up for going over budget on the above

Taxes 750 Estimating 15% in taxes State/Federal

This was also under the assumption that either the house would be paid off or there would be enough over the saving goal to pay in full.

Looks like we need to hammer out some more details since we are looking at 5 years out.
Good thing is current saving is almost to the goal we had for the end of 2021 with the FIRE goal of 2023

[Dtail]

Quote:

Originally Posted by audreyh1 Yep same here. I prefer to accumulate funds that we might use to buy a new car outside of the retirement portfolio so that we can buy a new car when we want to no matter if the markets take a sudden dive. For us really large expenses like a new car are extra-budget. If we have the extra funds set aside to spend we do, otherwise we wait. If we have a large amount set aside we might even splurge on something fancy.

Yes I know your concept. I got my idea from you.

Additionally my side (non market) reason is that since the monies (however fungible) are not in the markets anymore, if I use it, I would not count it as part of my WR% for that year. It works for me psychologically, or at least I hope it will.

[HI Bill]

While I have estimated budgets for both pre- and post-retirement, they're more for informational purposes. I track, annually, what I spend, and what I save. Every paycheck, I calculate my anticipated expenses for the next two weeks, and before the paycheck hits, submit a scheduled transfer to my savings account of the excess funds. That way, I'm not tempted to spend the 'extra'. I retirement, I'll track spending a bit more closely, as I'm trying to keep spending to a level that more or less insures that we wont' run out of money, keeping a 95% FIRECalc success rate intact.

[scrabbler1]

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Originally Posted by HNL Bill While I have estimated budgets for both pre- and post-retirement, they're more for informational purposes. I track, annually, what I spend, and what I save. Every paycheck, I calculate my anticipated expenses for the next two weeks, and before the paycheck hits, submit a scheduled transfer to my savings account of the excess funds. That way, I'm not tempted to spend the 'extra'. I retirement, I'll track spending a bit more closely, as I'm trying to keep spending to a level that more or less insures that we wont' run out of money, keeping a 95% FIRECalc success rate intact.

This is how I planned things out back in my working days. It was more of a back-of-the-envelope budget. I usually extended it out to the next 2 paychecks to make sure I covered any lumpy expense I might need to carry forward any surplus into. When I still had a mortgage I had most of my bills at the turn of the month, what I called my "big 3" of mortgage, co-op maintenance, and monthly train pass. After I paid off the mortgage, and my pay was at its peak, one paycheck covered the "big 2" and all the rest of my monthly expenses, enabling me to basically invest the second biweekly paycheck.

Since I retired, I get paid only once a month, so I have to more carefully plan out the old back-of-the-envelope calculation. I now do an entire spreadsheet because I sometimes have to carry forward 2 months of surpluses to cover the lumpier expenses. I still manage to reinvest some of the monthly (and quarterly) dividends, though.

[RobbieB]

I do an annual net worth calculation, that's good enough for me. I don't care how much I've spent, just how much I have left.

[NC 57]

We built a budget the first year of retirement and continue to update it annually. We retired at 58 and the biggest budget item, as well as the biggest surprise has been health care at $30,000 per year. Our budget is detailed and most expense are overestimated by about 5% to be conservative. We add a $12,000 contingency to the annual budget and we have a separate time phased 25 year budget for those big lumpy expenses (autos, roof replacement, daughter’s wedding).

We will not draw pensions until 65 (2 more years). DW will take SS at 67, I will take at 70. We both draw corporate pensions at 65 which will cover 55% of our current spending. This year we will spend about 2.5% of our financial portfolio. The dividend and interest income from the portfolio generates more than enough cash to fund the spending so our portfolio has continued to grow. Our total spending is about 80% of our pre retirement spending level. The major savings was selling our second home (Florida condo). We replaced the condo with a travel trailer and motor home which allows us choices of warm locations during the winter.

This year I constructed a 30 year revenue projection for the budget. The primary purpose was to look at required minimum distributions from tax deferred accounts in our portfolio and the future tax implications. Even with conservative return projections for the tax deferred accounts, the projection showed we needed to begin drawing down tax deferred accounts now in order to lower the projected taxes on large forced distributions after age 70. I’ll take advantage of today’s lower tax rates figuring the federal government will be raising rates in the 2020’s when we are forced to take RMD’s.

We don’t agonize if we go over budget in a month. The budget is a guideline and does make us think about some exceptional spending items, which is good. Fortunately our total spending over the past 5 years has run about 4-5% under budget each year even with the obscene medical insurance and pharmaceutical cost increases. Budgeting for us has been a worthwhile exercise in that it has made us comfortable with our retirement lifestyle and spending supporting it.

[Koolau]

We've never really budgeted nor tracked (except one year.) Our yearly WDR is less than our permissible FireCalc 99% portfolio-survival. At the end of the year, we always have some money left, so we figure we're good.

We live rather frugally on most things (clothes, utilities, personal care, "toys", etc.) but splurge on living in Paradise - paradise "tax" is typically estimated at one third over average US living. I think we do better than that, but it is expensive. We also keep a place on the mainland.

If OP needs to make any cutbacks in order to RE, it will be most important to be "equally yoked" with SO. We have been blessed by being frugal by nature. We would each much rather cut back on any extravagances than go back to w*rk. The key is that we both look at ER the same way. YMMV

[brucethebroker]

You know, most people here are more likely than not, LBYM types. That will hold over into retirement. On a bad expense year, you will adjust your spending-then loosen up a bit when things are good. Having the time to seriously shop expenses saves money each month, IMO.

I had two very PT side jobs lined up, just in case, when I semi retired. Have let them both go over the past 5 years because the extra $ was not worth the time and hassle factor. And we continue to coast along nicely without that $.

[karen1972]

Seems to me the biggest influence in your items will be how you choose to fill your time in retirement.
- If you're going to spend a lot going to black-tie charity events, then you're likely going to be spending quite a bit on clothing; however, if you're spending your time volunteering then you're likely not going to be wearing expensive clothes.

Some people fill their time shopping, going out with friends, traveling, picking up expensive hobbies and some don't.

I spend my time volunteering and hiking, so my expenses went way way down. My buddy took up flying and bought a plane.. his expenses skyrocketed.

[jebmke]

Quote:

Originally Posted by karen1972 Seems to me the biggest influence in your items will be how you choose to fill your time in retirement. - If you're going to spend a lot going to black-tie charity events, then you're likely going to be spending quite a bit on clothing; however, if you're spending your time volunteering then you're likely not going to be wearing expensive clothes. Some people fill their time shopping, going out with friends, traveling, picking up expensive hobbies and some don't. I spend my time volunteering and hiking, so my expenses went way way down. My buddy took up flying and bought a plane.. his expenses skyrocketed.

Hopefully if you are at black-time charity events you are spending a lot more on charity than clothing. I have managed to avoid the former by doing the latter anonymously using our Donor Advised Fund.

[SecondCor521]

Quote:

Originally Posted by karen1972 - If you're going to spend a lot going to black-tie charity events, then you're likely going to be spending quite a bit on clothing; however, if you're spending your time volunteering then you're likely not going to be wearing expensive clothes.

My volunteering tends to score me free t-shirts, so my already-low clothing budget is even lower!

[daylatedollarshort]

We have seen people at the ballet sitting next to each other and one will be in a tux and the person in the next seat in a flannel shirt and jeans. Another time there were people in evening clothes and at least one guy in shorts and flip flops. We try to dress somewhere in the middle so clothes aren't a big expense for us. Evening type clothes on BART just seem like a good way to get mugged so we never dress up too much these days.

[aja8888]

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Originally Posted by RobbieB I do an annual net worth calculation, that's good enough for me. I don't care how much I've spent, just how much I have left.

Kind of me too, and my memory is good enough to remember where the "big dollars" went during the year. There are too many variables to worry about all of them.

Since DW is not interested in watching the "spend", I just keep a low throttle on her CC and ask about purchases I see that are unusual. (she secretly still spends money on the 24 year old granddaughter).

[Huston55]

Quote:

Originally Posted by daylatedollarshort We have seen people at the ballet sitting next to each other and one will be in a tux and the person in the next seat in a flannel shirt and jeans. Another time there were people in evening clothes and at least one guy in shorts and flip flops. We try to dress somewhere in the middle so clothes aren't a big expense for us. Evening type clothes on BART just seem like a good way to get mugged so we never dress up too much these days.

I live in the North Bay now so, don’t ride BART; but, used to back in the days when we lived in the East Bay. Is it really that dangerous now?