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Retirement Expenses - Steady or Declining?
Old 11-04-2019, 12:11 PM   #1
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Retirement Expenses - Steady or Declining?

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?
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Old 11-04-2019, 12:16 PM   #2
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I have only been retired for 3.5 years but my expenses went down from what we thought he would need. We did pad your expenses for a plan for the long haul in retirement but it is considerable less.
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Old 11-04-2019, 12:18 PM   #3
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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.
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Old 11-04-2019, 12:19 PM   #4
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Certainly not planning on a declining expense model. Even if our personal expenses drop, we may have to increase outlays for other family members, or simply choose to do so. Then the later years - we are self-funding for long-term care, so we plan for potentially large outlays for each of us.

Our expenses were higher at first 3 years, dropped for about 7 years, even before accounting for inflation, then started steadily rising again.
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Old 11-04-2019, 12:24 PM   #5
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Quote:
Originally Posted by Jerry1 View Post
More per year in the beginning, less in the middle and then a lot in the final years.
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Originally Posted by audreyh1 View Post
we are self-funding for long-term care, so we plan for potentially large outlays for each of us.
This is very sensible.
Just looking at my mother's situation, she lived comfortably in her 80s on around $1K per month. But in her 90s it was over $7K a month due to assisted living/memory care, etc. So she went through her carefully nurtured stash rather quickly in the final years. Fortunately, it lasted nearly as long as she did, so she was OK, but that's not something you want to gamble on.
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Old 11-04-2019, 12:26 PM   #6
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I think ours will be declining or rather it needs to be -

But we are closing in on the end of the home improvements and that will help. Step daughter in second year at UCLA will hurt.

Oh well, lets try 2 more years of really high spending!
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Old 11-04-2019, 12:37 PM   #7
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So far ours has been steady with a slight decline in the last year. However, I believe audreyh1 has the best model. We traveled more in the first couple of years, but slacked off this year. Medical/LTC would be the increase as we age, while travel drops to near 0. However DW's parents were still traveling at 90! He had TRICARE for Life so medical did not really kick in that hard.
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Old 11-04-2019, 12:57 PM   #8
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Ours should be high now, but flat lining at a lower level in a few years. We've traveled a lot and will do so for a couple more years. Home needs a roof and an updated kitchen. Also bought a new car with cash this year. Then, we may also move in the next year or so. After all of that, things should better taper off.
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Old 11-04-2019, 01:02 PM   #9
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When I was putting together my ER plan back in 2007-08, I separated my expenses into 2 categories: medical and non-medical. I did this so that I could assign a separate inflation rate to each type. I created a spreadsheet which projected from age 45, my ER age in 2008, through 2028, when I would turn 65 and gain access to Medicare and all of my "reinforcements" such as my frozen company pension, unfettered access to my rollover IRA, and SS.


For the medical expenses, I assigned 10% inflation, while for non-med I assigned 3%. In the last 10 years, my medical expenses have very volatile, increasing then declining when I took on a bare-bones insurance plan before the ACA exchanges came around in 2014. Since 2015, when I got sick, my expenses have risen but stabilized somewhat. Rising HI premiums will put more upward pressure on my med expenses unless I can regain my ACA subsidy and avoid the cliff.


My non-medical expenses have been rather flat. The only spikes among them have been income taxes when my income spiked. But I don't worry about that because the added income will always be available to cover the added taxes.


Because my portfolio has grown, my WR has been pretty flat, too, around 2%.
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Old 11-04-2019, 01:03 PM   #10
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Quote:
Originally Posted by mountainsoft View Post
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?
Looking forward planed steady via FireCalc and ORP and other planners. Then life happened.

Hindsight of 25 years of ER without going into detail - really el cheapo early for maybe 10 years, lightened up a tad, then Katrina, major move and unplanned deaths, remarriage, etc, etc.

Net net - annual expense high to low varied by a factor of ten low to high. I certainly didn't plan that. BUT if you maintain an agile, mobile, and hostile attitude you can adjust expenses to fit the situation. 1993 to 2019 Mr Market had a few minor dips which were easily compensated for with expenses adjustment and of course re balancing.

heh heh heh - I had a plan and then life required some er adjustments.
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Old 11-04-2019, 01:32 PM   #11
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Retired almost 8 years. Between years 3-7 we did a lot of traveling so spent more. Doing less now so costs are going down.
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Old 11-04-2019, 01:35 PM   #12
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Looking forward planed steady via FireCalc and ORP and other planners. Then life happened.

Hindsight of 25 years of ER without going into detail - really el cheapo early for maybe 10 years, lightened up a tad, then Katrina, major move and unplanned deaths, remarriage, etc, etc.

Net net - annual expense high to low varied by a factor of ten low to high. I certainly didn't plan that. BUT if you maintain an agile, mobile, and hostile attitude you can adjust expenses to fit the situation. 1993 to 2019 Mr Market had a few minor dips which were easily compensated for with expenses adjustment and of course re balancing.

heh heh heh - I had a plan and then life required some er adjustments.
hostile attitude?
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Old 11-04-2019, 01:49 PM   #13
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My plan has my spending money increasing 3.5%/year now until age 80. At age 80 the spending money amount is cut in half. Then that new amount increases at 3.5%/year until age 100. After 5 years of ER, I have yet to spend 100% of the allocated spending money in any year. Gotta learn to "blow the dough".
Why 3.5% increase? Because somewhere, sometime, I read that was the average inflation over the last 60 or 90 years. I cannot find the data source again, and am comfortable if that value overestimates inflation.
So, to answer the question, I have a two-step plan. Steady (with an inflation kicker) until age 80. Then steady again from a lower level (with an inflation kicker).
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Old 11-04-2019, 01:55 PM   #14
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We expect to spend the same amount of money but on different things as we age but we're not there yet (age 68 and 60).

Expensive travel, boats, cars etc. eventually being replaced by health costs, "practicality" and perhaps paying for things we do ourselves now (yard/home maintenance etc). We're already farming out a lot of stuff we used to do on our own for the boat.

And expensive dinners giving way to early bird specials

Mom is now 90 and, despite a ton of spunk and a ton of money just doesn't spend much money at all...happy reading and going to dinner 5 nights a week (in her 28 year old Corolla).
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Old 11-04-2019, 02:09 PM   #15
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Marko, I love that your mom is not cooking anymore. My husband was gone for 2 weeks and I went out daily for lunch.
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Old 11-04-2019, 02:32 PM   #16
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Not cooking anymore? Mom NEVER cooked at all! Growing up we ate in restaurants our whole lives; breakfast, lunch and dinner. "Eating in" was take-out. The best she'd do is cereal on some mornings. She tries but is just not good at anything beyond a sandwich...her own mom was the same way.

Seriously, her stove is 56 years old and is essentially brand new.
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Marko, I love that your mom is not cooking anymore. My husband was gone for 2 weeks and I went out daily for lunch.
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Old 11-04-2019, 02:40 PM   #17
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hostile attitude?
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Old 11-04-2019, 02:44 PM   #18
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Our expenses are pretty stable--at a little too much. We'd lower out expenses somewhat if my wife didn't have frugal travel as a hobby. She keeps coming up with international travel that's too cheap to pass up.

She leaves tomorrow for London, Paris & Barcelona. We just got back from Paris and Barcelona in June, but this trip is with her older daughter. She says she's going to have fun with her RMD's.
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Old 11-04-2019, 02:51 PM   #19
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Thanks for the input everyone...

I've been planning steady expenses throughout retirement, thinking we might spend more on recreation during the early years, and more on medical during the later years. However, I read a few articles lately talking about spending differences in the Go-Go, Slow-Go, and No-Go stages so I thought maybe I was being overly cautious. It sounds like it's probably safer to stick with my original plan with steady expenses.

I am also assuming our retirement expenses will be about the same as they are now. Some costs will go down, but others will go up (i.e. medical). So I think it will work out about the same.

HarveyS,

I use a 3.2% inflation rate myself as that was the historical average I had seen somewhere.
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Old 11-04-2019, 03:05 PM   #20
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If we make it to 67 or 70 (13-16 years from now) and have as much or more than I do now in investments, SS will kick in, and I plan to increase spending by $50K annually, while we (hopefully) still have a few years left to enjoy it! Maybe buying a better house or condo, and / or a fancy sports car! Maybe a serious upgrade on the home theater speakers and projector, if the hearing and vision hold up...!
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