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Retirement Expenses - Critique & Abuse Me! THE SEQUEL
Old 04-04-2010, 04:43 PM   #1
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Retirement Expenses - Critique & Abuse Me! THE SEQUEL

The original thread was interesting to me (and hopefully others). I offered up our projected retirement expenses of $60K/yr and asked folks who seem to live very comfortably on $24K-$36K/yr where we should be able to reduce expenses? I have since found what I took as a representative $40K/yr retiree budget from Work Less, Live More for comparison. The categories are different, but my expense numbers remain the same.

Of course we all make our own choices, but the comparison was interesting to me. I don't believe our medical expenses are out of line (with Medicare 9-11 years away), but it looks like we could/should throttle back on cars, groceries and restaurants, as many here suggested.

Medical$5,200$13,000+$7,800+150%
Depr**$3,500$10,000+$6,500+186%
Groceries$3,900$7,100+$3,200+82%
Auto Gas&Maint$2,100$3,800+$1,700+81%
Restaurants$3,000$3,800+$ 800+27%
Utilities$2,580$3,400+$ 820+32%
Auto Insur$1,035$1,600+$ 565+55%
Home&Garden$ 900$1,200+$ 300+33%
Home Insur$ 975$1,250+$ 275+28%
Misc*$7,680$7,500-$ 180-2%
Prop Taxes$2,450$2,250-$ 200-8%
Phone/cell/web/TV$2,280$1,900-$ 380-17%
Clothing$2,400$1,700-$ 700-29%
Travel$2,000$1,200-$ 800-40%
TOTAL$40,000$59,700+$19,700+49%

*Misc includes: Allowance/pocket money, charity, gifts, personal care, misc.
**Depr includes: Cars, major home repairs, TV/PC/appliance replacements, bed/furniture, major travel expenses
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Old 04-04-2010, 05:22 PM   #2
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Some of your expenses will naturally throttle back once you retire . While I was still working the thought of going to more than one grocery store was beyond my comprehension but now that I'm retired I shop at several for the sale items . You may also want to dine out less because you are less stressed from the week and cooking becomes enjoyable instead of a chore .
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Old 04-04-2010, 08:33 PM   #3
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Some items, like say, dining out, kinda jump out to me as well. Having said that though, it is good to have an activity that floats your boat, and makes it all worthwhile. For me, it is sports. I'll spend on golf, cycling, and such, but probably won't eat out at anything more expensive than Wendys.
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Old 04-04-2010, 08:45 PM   #4
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Pardon my ignorance, as I am new here, but are those annual expenses for only one person? Or for a couple? I'm taking the plunge come May 29. I anticipate my annual expenses, excluding taxes, for me alone as a single person, will be in the neighborhood of $20k-25k.
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Old 04-04-2010, 09:11 PM   #5
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I'm assuming the $40k/yr budget is for a couple since otherwise it would make no sense to compare it to your budget for two people. I'd challenge the $5.2k annual cost for medical care in the $40k budget. $2.6k/yr per person to cover health insurance premiums, co-pays, deductibles, non-prescription meds, eye glasses, dental, etc., is very low and not typical.

I like your depreciation expense number better. I dread the thought of wearing out cars, houses, major applicances, etc., and not having set aside plenty to replace them without concern. Folks who under accrue are only fooling themselves. Sure, it probably gives them a nice low WR and therefore when the roof needs replacing the same year that the car drops a tranny, they have the money in their portfolio. But I'm more comfortable accruing and recognizing the expenses as I wear out the merchandise. I also like the way your are accruing for major trips.

Yeah, you could cut back on groceries a tad. $136/wk would be a bit high on the hog for 2 people, even including booze, especially since you dine out frequently.

Your budget of $59.7k (post tax), for the area you live in, looks like a very reasonable number for a couple in retirement paying for their own health insurance and realistically accruing for replacing cars, major house repairs, major appliances and expensive, periodic travel.

I understand this is hypothetical and only answering the question how could you throttle back if necessary. So it's nice you don't actually have to cut back on groceries, restaurants and cars!
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Old 04-04-2010, 09:33 PM   #6
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Originally Posted by Birdie Num Nums View Post
Pardon my ignorance, as I am new here, but are those annual expenses for only one person? Or for a couple? I'm taking the plunge come May 29. I anticipate my annual expenses, excluding taxes, for me alone as a single person, will be in the neighborhood of $20k-25k.
Good for you in calling out your single person status and that you number is post tax. Without that, the numbers don't mean much. We frequently dance around trying to get apple to apple comparisons.

Does your $20k - $25k include medical costs?
Are you accrung for replacing cars, major appliances, house repairs, etc. on an annual basis?
Do you live in an (in)expensive area?

$20k post fed/state income tax wouldn't cut it for me (hypothetical, I'm married) here in the Chicago suburbs. Health insurance premiums (pre 65) and real estate taxes alone would eat up close to half of that number.
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Old 04-04-2010, 10:36 PM   #7
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Yeah, you could cut back on groceries a tad. $136/wk would be a bit high on the hog for 2 people, even including booze, especially since you dine out frequently.
Many of these budgets seem to be unreachable for me, and I do not live high on the hog. I mostly eat at home, and buy much on sale though I do not go to Costco or Wal-Mart for food. Groceries for me are $4732, including low end Trader Joe wine, but no liquor. (And I weigh 150 #) I have someone over once a week or so, but eat at someone else's house at least that often. I don't eat out much, but when I do it is not particularly cheap, as I do not know anyone who goes out to eat where the check for 2 people is less than $40-$45, and usually more. So other than a burger at McD's (alone, for convenience) eating out is an expensive act but necessary for keeping a social life- and here I am not using social life as a euphemism for sexual life.

I drive very little, beg off on some social events because I can’t afford them, live in a 500 sq ft apartment, and don’t have any large medical expenses. I travel infrequently-one trip to the Midwest lin last 12 months, and I have no expensive hobbies. My biggest hobby is walking around and reading library books. My total expenses not including accruals or income taxes are $37,037, down considerably from the prior two years. I spend less than anyone I know in real life. Way less than most of them. I am considered the poor one.

I have Medicare, though Medicare is not as cheap as many people think.

I have kept meticulous records for about 20 years, and I know these figures are correct. Any error would be an understatement coming from missing an entry.

Ha
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Old 04-05-2010, 08:04 AM   #8
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I retired from Dept. of Defense 3 years ago. My expenses including all insurances, utilities, groceries, gas, etc are $24,000 per year. It helps that I have my government hospital and life insurances. My income from pension, 401K, and minimal Social Security is $38,000 per year. Fortunately there are only two restaurants in the area and they are basic meat and potatoes places so not expensive. Unfortunately there is only one grocery store in the town so no opportunity to save money there; although I do occasionally drive 75 miles to a large town with a Walmart. I am single, own my home (about 900 sq ft), and am completely debt free. Living in a rural area is much cheaper than in a large city. If I really want the cultural advantages of the city then Winnipeg, Manitoba is only a 90 minute drive away and is a nice very cosmopolitan place with symphonies, museums, The Royal Winnipeg Ballet, and many restaurants.
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Old 04-05-2010, 08:42 AM   #9
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My expenses including all insurances, utilities, groceries, gas, etc are $24,000 per year. It helps that I have my government hospital and life insurances.
It probably also helps that there is a nine-month weather mandated hibernation period each year in that part of the world. (Although, there is most likely a cost for protection from the elements during that time.)
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Old 04-05-2010, 08:48 AM   #10
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I ran my numbers from the last few years and I'm close to $75,000 after tax for two. No debt, pay for health insurance. The difference in my numbers from yours is we spend less on food. More on car expenses and gas, more on vacations, and more on home and garden. I'm also a golfer, so that is expensive also.

Your health insurance is about the same as ours and I don't see that going down. So everything except the grocery's and eating out look reasonable to me.

Could we get by on less, of coarse we can as many do it. But this is the amount we chose to spend. I have been retired since Oct. 2007 and we have spent from $70,000 to $75,000 per year from 2007 to date.
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Old 04-05-2010, 08:58 AM   #11
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Trying to compare our current budget in retirement to another person/couple makes little sense.

There are too many variations in living conditions and expenses (based on the lifestyle you wish to live - both before and after retirement) that it is impossible to say what is "normal".

For example, my DW/me have always traveled. It has, and remains our largest budget item both before and after retirement.

By the existing posts, it seems that we could take that single expense and if we were single, living in "fly-over" country, and desired a minimalistic existence, that we would have more than enough.

However, for us that is not the lifestyle we envisioned, nor have in retirement.

Different strokes...
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Old 04-05-2010, 10:21 AM   #12
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It probably also helps that there is a nine-month weather mandated hibernation period each year in that part of the world. (Although, there is most likely a cost for protection from the elements during that time.)
Yeah, there is that weather problem. But, heat for the house only runs about $40.00 per month on a balanced billing plan. The weather has it's advantages; there is almost no crime, the occasional burglary of a business place is about all. Never hear of a home invasion incident as a conservative estimate would be 80% of homes have guns and people know how to use them. There is an old saying around here - "40 below keeps the riff raff out."
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Old 04-05-2010, 11:34 AM   #13
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Yeah, there is that weather problem. But, heat for the house only runs about $40.00 per month on a balanced billing plan.
You must have a very well weatherized house, very low gas rates, or both!

Ha
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Old 04-05-2010, 12:17 PM   #14
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Many of these budgets seem to be unreachable for me, and I do not live high on the hog.
I agree with ya Mikey. We don't have any vices, expensive hobbies or obvious money drains. We just like to conduct our lives within the usual societal norms without worrying that we're cutting things so close that needing a new tire for the car would be an issue. And in the Chicago 'burbs, that leaves us with a budget well over what the lowest are posting here.
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I mostly eat at home, and buy much on sale though I do not go to Costco or Wal-Mart for food. Groceries for me are $4732, including low end Trader Joe wine, but no liquor.
That's one area I do work at a bit. We're in an area with many competiting groceries and specialty shops and it's fairly easy to spend a few hours going from place to place harvesting bargains. It helps if the shopper is also the chef and has many recipes commited to memory! I also think there is some economy of scale in cooking for two. So if I multiply your $4732 by 1.8 to increase it for a couple, that's $8518 or $164/wk. We're more like $120/wk and I think eat and drink fairly well. But, as stated, I work at it a bit both on the shopping and preparing end of things.
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I don't eat out much, but when I do it is not particularly cheap, as I do not know anyone who goes out to eat where the check for 2 people is less than $40-$45, and usually more.
We've been using restaurant.com quite a bit and have a half dozen restaurants within a couple miles that accept the coupons that we enjoy very much. Still, $40 - $45 with alcohol and tip is common.
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My total expenses not including accruals or income taxes are $37,037, down considerably from the prior two years. I spend less than anyone I know in real life. Way less than most of them. I am considered the poor one.
DW and I, combined, are actually close to double your number. We certainly live a relatively modest life as well. Our number does include accruals as we're home owners and must set aside money annually for major repairs that will invariably pop up over the next few years (HVAC, roof, driveway repave, etc.) Your rent payments would probably offset these.
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I have Medicare, though Medicare is not as cheap as many people think.
I see that coming for us. We currently pay about $800/mo for retiree health insurance through our former employers. Looking ahead a couple years to Medicare, I see that number dropping but not as much as you'd think. I cringe when I hear friends near our age mention how glad they're be to hit Medicare and no longer have any medical expenses. Boy, are they in for a surprise!


I don't doubt for a minute that the folks who state they are getting by on $14.27 annually are being truthful and accurate. But I do sometimes wonder to what extent we really get apples to apples comparisons for all the obvious reasons:

Pre or post tax money?
Single or couple?
Own home or rent and if an owner do you include repair accurals?
If a homeowner, do you include the value of your own maintenance work?
Health insurance provided or subsidized by a former employer?
Any gifts you don't count? (Friends use their parents Class A RV free = cheap vacations.)
Was a ton of money spent prepping to live cheap? Ie., prepaid expenses.

Still, I'm sure the folks getting by on essentially zero are doing what they say. I think they're blessed (?) with having the experience of living on the cheap being in itself a pleasurable event. The fella I roomed with in college back in the 60's roams the country in his 16 yr old Subaru station wagon with everything he owns in the back. He takes some contract work from time to time (tech writer) and has an ability to enjoy living for next to nothing. It's an end in itself. Accepts room and board from friends from time to time. Moves in with someone as a roommate in exchange for chores or professional work every once in a while. If he latches onto some higher paying contract work, might actually rent an apartment. Obviously, his annual expenses are next to nothing. I find it interesting to follow along with his life adventures, but I don't crave adopting that lifestyle.

I enjoy a bargain or a good deal and knowing our budget is written with a sharp pencil in terms of little waste and maximum value (in terms of what we consider value). But I can't quite get to that point where dumpster diving or simply doing without are enjoyable and fulfulling ends in themselves.
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Old 04-05-2010, 01:36 PM   #15
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The one saving living in a tourist area is there is a lot of competion among restaurants so when we go out our bills are usually under $40 with a few drinks . A local favorite a nice seafood restaurant charges $1.50 for well drinks and $2.40 for wine . Their food specials usually run arond $9.99 and they are very good . I've lived in fly over country (a little town of 2,000 residents ) and you really can save money living in these places but there are trade offs .
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Old 04-05-2010, 05:03 PM   #16
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Yeah, there is that weather problem. But, heat for the house only runs about $40.00 per month on a balanced billing plan. The weather has it's advantages; there is almost no crime, the occasional burglary of a business place is about all. Never hear of a home invasion incident as a conservative estimate would be 80% of homes have guns and people know how to use them. There is an old saying around here - "40 below keeps the riff raff out."
I pay more than that for heat three states south of you. I don't know how you do it.
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Old 04-05-2010, 05:19 PM   #17
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Pardon my ignorance, as I am new here, but are those annual expenses for only one person? Or for a couple? I'm taking the plunge come May 29. I anticipate my annual expenses, excluding taxes, for me alone as a single person, will be in the neighborhood of $20k-25k.
Sorry, expenses for a couple...
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Old 04-05-2010, 05:28 PM   #18
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I pay more than that for heat three states south of you. I don't know how you do it.
A very well insulated small house with new windows. For reasons unknown to me all utilities are very reasonable here. My monthly city utility bill for electricity, water, sewage, garbage disposal, and mosquito spraying runs about $105.
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Old 04-05-2010, 05:55 PM   #19
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A very well insulated small house with new windows. For reasons unknown to me all utilities are very reasonable here. My monthly city utility bill for electricity, water, sewage, garbage disposal, and mosquito spraying runs about $105.
Cavalier, ND- the new LBYM capital of North America!
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Old 04-05-2010, 05:59 PM   #20
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I notice that there is no mortgage payment or rent, which really helps a lot. We hope to be in that position at some point, just not now. That is a big key to making retirement work financially. Given the FIT structure, I am assuming that post tax expenditures of $60K extrapolates to a pre-tax retirement income of about $80K, give or take a bit?
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