Retirement Expenses - Steady or Declining?

[pb4uski]

Quote:

Originally Posted by Jerry1 My plan assumes a steady amount (adjusted for inflation). However, my expectation is more of a curved assumption. More per year in the beginning, less in the middle and then a lot in the final years.

+1

[davismills]

Retired in 2013 and expenses actually have been less than we forecasted. Possibly because we're a bit anchored with the last surviving parent. About 10 percent less.

Had we been free to travel at will, they could have easily been 10 percent more.

[GravitySucks]

I expect it to go down at 65 when Medicare kicks in and again at around 75 when travel might calm down. Looking at mom and dad and the other relatives after 80 they hardly spend anything. Even most medical cost didn't increase enough to make a difference.
In reality I expect to make revisions every 5 years. My first five were very frugal as I worried about SoRR. Last year I loosened up some but couldn't find enough to spend it on. This year a knee injury and family issues have kept me grounded, but home repairs all came at once. So while this 5 year period is supposed to be the big spending years I doubt that it will be over all.

[HI Bill]

Check out the MarketWatch calculator. It has go-go, slow-go, and no-go periods, which are adjustable, and account for changes in taxes, health care, and other spending categories as one ages.

https://www.marketwatch.com/calculat...ing-calculator

[Cobra9777]

Quote:

Originally Posted by Jerry1 My plan assumes a steady amount (adjusted for inflation). However, my expectation is more of a curved assumption. More per year in the beginning, less in the middle and then a lot in the final years.

Quote:

Originally Posted by pb4uski +1

I was going to say +2. But then I opened my spreadsheet and looked at the spending projections for the next 30+ years. It's all in nominal dollars with individual rates of inflation for each of 19 categories (high on medical/energy, 1-3% on most everything else). I've also made some very detailed assumptions about consumption patterns, such as heavy travel, hobbies, and home improvements early on, then phasing out at various rates as we age. Less driving and fewer cars as we age, which impacts several categories like gas, insurance, maintenance, even tolls/registration/inspection. More medical expenses as we age. More household services as we age, like someone else to mow and do other household maintenance. Lots of discrete life events as well, such as downsizing the huge house at ~70, Medicare at 65, property tax freeze at 65, and LTC later on. Downsizing the house impacts multiple categories in a very significant way.

Anywho... I zeroed out all the inflation rates and the resulting trend line was a fairly steady decline over the years. Only exception was a sharp decline in the year we downsized and a sharp increase very late in life when LTC kicks in (big unknown). Otherwise, very steady downward trend. I was a little surprised by this, so looking at the details... lots of categories are flat like recurring monthly bills, groceries, etc. Yes, medical and home services are up, but this is more than offset by other declines, mainly travel, hobbies, home improvement, and occasional new cars. Other smaller declines (excluding those related to the downsize) include everything related to fewer cars and less driving, less entertainment, less eating out, and less new clothing/shoes.

So there you have it. Even though medical and home services go up a lot as we age, as a percentage of total spending, those categories are significantly less than our current spend on travel, home improvement, hobbies, new cars, etc. I was a little surprised by this result. I haven't looked at this spending tab in a long time and I always look at it with inflation. So maybe this exercise will prompt me to take a closer look at some of the assumptions, especially related to medical late in life.

[W2R]

Quote:

Originally Posted by mountainsoft Not counting increases for inflation, are you planning for a steady annual expense throughout retirement (i.e. 45K per year forever), or a declining expense model (i.e. 50K during the first ten Go-Go years, 45K during the second ten Slow-Go years, 40K during the remaining No-Go years)? If you're already retired, have your expenses gone up, remained steady, or declined over time?

I retired on 11/9/2009, ten years ago, at age 61. The graph below shows my spending record for taxes, medical, everything, including expenses related to buying, re-landscaping, and moving into my Dream Home in 2015.

Overall, I would say that my expenses are slowly increasing by more than inflation, plus I would say that buying a Dream Home in cash can mean a lot more spending that year.

Without the Dream Home, 2015 was very close to the same as 2016.

2019 is just an estimate since we still have two months left.

Growing older is the pits! Lemme tell you. It is, no matter what people tell you. In my opinion, having money to spend on whatever I want helps a lot in dealing with what Father Time does to one's physical self.

[Teacher Terry]

While it's not fun getting older I knew a few people that were denied the privilege and I think they would have preferred to stay.

[doneat54]

Planned on level expenses. No inflation factored in. 2.5 yrs in, and it has worked pretty well (except for the second home we bought this summer past!). DW started a new job this past summer too, and not sure about annual bonuses that could provide (or not provide) a travel budget, which right now, we do not have....

[W2R]

Quote:

Originally Posted by Teacher Terry While it's not fun getting older I knew a few people that were denied the privilege and I think they would have preferred to stay.

Oh and just think! Your expenses would be zero.

In other words, I don't think that is what we are talking about in this thread. I think we are talking about planning to fund our later years.

[Teacher Terry]

I know W2R, but when you mentioned getting old was the pits that the first thought I had)

[donheff]

Our routine spending has been pretty flat so far (15 years in for me, 10 for DW). I anticipate a decline in our 80s as travel tails off but if we just up our game with more luxurious (easy) travel it may keep up for a while. Hopefully our LTC policies will prevent any horrendous increases in our twilight years. Spending has be far enough below my pre-retirement planning assumptions that we have absorbed some big expenses without a hiccup (DS's house down payment, DD's wedding and house down payment).

[corn18]

53 now, planning to retire @ 56. All numbers are in 2019 dollars.

56-60 = $115k + $25k travel
61-70 = $113k + $18,750 travel (not sure why this went down)
71-80 = $100k + $18,750 travel
80-dead = $100k

SS+COLA pension = $102k, so any money left over @ 80 can be spent or saved for legacy.

[Midpack]

Our spending has increased a little, but our WR is very low if you believe most retirement spending guidance. But we planned to spend conservatively and ramp up spending much later if our portfolio holds up well. If real returns fall in the bottom 5% historical, we’ll not spend more, but we won’t have to cut back severely.

[Dtail]

Quote:

Originally Posted by HNL Bill Check out the MarketWatch calculator. It has go-go, slow-go, and no-go periods, which are adjustable, and account for changes in taxes, health care, and other spending categories as one ages. https://www.marketwatch.com/calculat...ing-calculator

One of the calculators I use. One can also alter the expense categories by inflation.

[CyclingInvestor]

61, retired 13 years.

Planned on increased inflation-adjusted spending after retirement, as I expected dividends (which provide all my income) to increase in excess of inflation. I figured more vacations, remodeling, etc.

Dividend growth has been better than expected, so my spending is up too, about double (inflation adjusted) from 13 years ago.

[jollystomper]

Quote:

Originally Posted by Jerry1 My plan assumes a steady amount (adjusted for inflation). However, my expectation is more of a curved assumption. More per year in the beginning, less in the middle and then a lot in the final years.

This is my plan as well, but something we will look at adjusting every year. If our net cash+equities is up, we may up the spending. If it is down without a clear reason we might try to reduce our spending, but only if without doing that our long term plan would be significantly impacted.

[imoldernu]

Our plans began in 1989, and detailed here:
http://www.early-retirement.org/foru...ent-62251.html

More or less, even though there was a master plan we simply adjusted on an annual basis. Now 31 years later, even though we have no market investments, and no pension, our expenses continue to naturally decline. We're both in our 84th year and we have more than we started with @ age 53 when we retired.

Though both of us are healthy, the activity level has gone down considerably since we turned 75. Spending has gone down naturally so we've turned to Amazon to buy toys and whatever peaks our interests.

When we put our expenses down on paper, they come to about $50K, but in real terms, we're spending about $35K. The big expenses just don't seem to happen... health, auto, travel, and even things like income taxes (zero for 25+ years), house taxes and HOA taxes have not increased. Illinois:

Quote:

There are currently four exemptions that must be applied for or renewed annually: The Homeowner Exemption, Senior Citizen Homestead Exemption, Senior Citizen Assessment Freeze Exemption, and the Home Improvement Exemption. The most popular exemptions increased for Tax Year 2017 (payable in 2018)

Our house taxes have been almost the same for the past 6 years @2500. The full tax without these exemptions would now be about $6K or more.

Part of the plan/budgeting comes from two early actions... An annuity that is now paying off and LTC policies that limit the amount we would have planned for reserves in the late years.

It's not just a matter of estimating inflation costs, but of taking a realistic look at how age affects our interests and activities... The $4500 we used to plan for "eating out" costs, now comes to about $500. Snowbirding costs are now gone completely, and this year we'll sell our beloved "Woodhaven Lake" "man cave."

Truth be told, all of this was not on the table in the beginning, and only clear now in retrospection.

[Telly]

Retired 17+ years. Adjusted for inflation, declining expenses so far. In this exercise, I'm leaving out the $ used for FIT on Roth conversions. There have been some notable expense step-declines. The biggest was when youngest child received Bachelors degree, and our college support ended. Second biggest was probably my joining Medicare. I continue to do a multitude of DIY, many of them are things that most people would not do/can't do themselves. It's my life, I always have. Eventually, I know that will change, though I don't want it to. If it were all up to me, we would have done a major downsize to a 55 & over community already, and I might have been seen there pushing an electric lawn mower short distances for many years to come, while living in a new house.
So... without that, I expect a level of increased expenses in the future, when I am unable to do those many things that I do.

[DrRoy]

I do not forecast a decline just to be conservative, although it might happen. We will likely not have the energy for all the travel that we do now. Then again, we might do more cruises when we are older, which are easier, and spend as much or more.

[marko]

One thing we found to be dramatic and immediate right after RE was the drop in our clothing budget. Without trying, we use and spend about 95% less on clothing than when we were working. After 15 years now, our closets are nearly empty compared to before.

My job required some pretty expensive suits ($5K each) and business casual clothes. Now I find that I wear the same shorts/jeans and shirt for 3 days. I spend about $500 a year on clothing a year now. Between DW and I our clothing expense has dropped about $10K per year.