Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Retirement on $x a year
Old 12-11-2007, 10:27 PM   #1
Recycles dryer sheets
 
Join Date: Oct 2007
Posts: 463
Retirement on $x a year

So one of my big interests is: how much will retirement cost for me?

After reading the existing threads on the matter, I have the following (non-original but hopefully helpful) thoughts:

Every situation is different. Every location has different costs. Every lifestlye has different costs.

Still, there can be useful guidelines.

'I live on $x' is too vague. What does it include? What does it exclude?

The big differences are in these areas: health care, residence (paid for, rent, mortgage), amortising extraordinary costs, taxes.

Any statement of 'living on x$' needs to explicitly state these assumptions: for example, owning a paid-off house valued at $150k is the same (at a SWR of 4%) as $6k of income. Likewise health insurance provided by an employer or the government. Likewise, expenses gross or net of taxes, and what those tax rates are. And, allowing for car replacement every x years, or x% repair costs for a house, and so on.

And the relative cost of living (New York City vs. rural Idaho).

And finally, the comforts and luxuries.

Given these variables, perhaps we can come to a more meaningful idea of what nest egg is required to retire.

Thoughts?
__________________

__________________
TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future

"I've traded love for pennies, sold my soul for less" -Jim Croce, Age
TickTock is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-11-2007, 10:36 PM   #2
Dryer sheet aficionado
Safe Harbour's Avatar
 
Join Date: Dec 2007
Location: Greenville
Posts: 29
Three questions:

1. How much do you spend and how will that change?
2. What much will your portfolio return (asset allocation, expenses, taxes)?
3. What probability of success are you comfortable with?

If you answer these three questions - you will find your answer.
There are many good tools but they all depend on these answers.
__________________

__________________
Safe Harbour
Safe Harbour is offline   Reply With Quote
Old 12-11-2007, 11:19 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by TickTock View Post
So one of my big interests is: how much will retirement cost for me?
In the concurrent related thread, I think we all learned about retirement expense variability depending on circumstances and desires. You won't learn much about what annual income YOU need by asking others what THEY need. Rather, why don't you take a pass at a detailed budget. Specify which line items you're pretty confident on, which line items you're foggy on and which line items simply express personal desires (entertainment, vacation, etc.). Include your personal circumstances such as marital status, etc. Then post the budget for comments and take the responses into consideration.

I think you'll learn a lot more that way.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 12-12-2007, 12:06 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,202
Agree, plus people are going to post whatever personal info they feel is appropriate. I'll disclose whatever I want to share or think I need to share to get a good answer to a question of mine. Sorry if that doesn't help you, but as youbet says, my situation isn't your situation.
__________________
RunningBum is offline   Reply With Quote
Old 12-12-2007, 07:40 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,300
TickTock - very good way to phrase the question.

My approach was what Safe Harbour stated - my situation was mostly going to be the same, I wasn't moving, wasn't planning any major lifestyle changes in terms of $, so I could just add/subtract a few things for an estimate.

For me: Add health insurance. Most other things were likely a wash - I'd likely spend a bit more on activities, but less on gas, and I spend a bit more time researching purchases or ways to save money which helps.

So, another person might be planning expensive vacations, or a new expensive hobby, or maybe they can actually spend less w/o the work demands - so it is still very individual.

youbet makes a good point, I just have not been disciplined yet to make a detailed budget, but I know I should. But it is fairly easy to think through it, and think which items would be impacted and by how much. But detail would be better if you are up to the task.

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 12-12-2007, 07:50 AM   #6
Thinks s/he gets paid by the post
maddythebeagle's Avatar
 
Join Date: Jun 2005
Posts: 2,450
This question should always start with tracking your own current expenses and estimating future ones.....and why start yet another thread when there already is one floating around?
__________________
maddythebeagle is offline   Reply With Quote
Old 12-12-2007, 08:23 AM   #7
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Quote:
Originally Posted by TickTock View Post
So one of my big interests is: how much will retirement cost for me?...'I live on $x' is too vague. What does it include? What does it exclude?...
I made three budgets for myself:
  • Current Budget during the accumulation phase
  • Expected Budget at retirement
  • Bare Bones Budget for a worse-case situation
Once a year I'll look at them and make a little tweak here and there if necessary.
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Old 12-12-2007, 08:34 AM   #8
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,950
Does the following provide what you need to know? Instead of dollar figures it seems like percentages might be what is wanted?

I will have lifetime medical through work. My planning has always included a 150% increase in my ER spending compared with what it has been for the past five years (including emergency and unexpected expenses). Now, it looks like I will have considerably more than that 150% due to a windfall. It's nice to know that I can live happily on less, though, in case the market tanks.

I am single, and with social security and small pension providing 56% of the ER income that is my goal, and my projected portfolio (not including the windfall) providing the rest, I will only actually need an SWR of 2.5% to reach my goal income. So, I am quite sure that my plans will not fall through. This makes me happy, being a nervous Nellie at heart.

For me - - I am moving to a place with a lower cost of living, and lower housing prices. So, the difference in prices between my (paid off) house here and the nicest new house I might want there will pay for the move, redecorating, and even a new Camry. It helps that I would rather not live in a McMansion.

No travel for me, other than possibly some short trips by car with Frank. I want roots and stability and to become entrenched in my new community, instead of travel. I spent much of my childhood abroad and it holds no magic for me at this age.

As for cultural activities available in big cities, for the most part I have no need for them. If I decide to attend a live concert, I would prefer opera done by local Midwestern students to the same opera at the Met, and a symphony played by a local student orchestra to the same symphony played by the NY Philharmonic, because of the enthusiasm and great hopes of the kids. Not to mention the fact that I take no joy in dressing to the teeth, and often these student concerts take place in school auditoriums or outside in an amphitheater or on the grass, so casual dress is de rigeur. Most of the time, a CD or PBS will satisfy my need for musical experiences. Now, art is an exception. I love art, and I know that the St. Louis Art Museum is all that I could ever want as far as art. I have spent much time there a long time ago. It is free, though I usually donate something. It will be less than 4 hours away by car, and once every few years it would be fun to go up there.

And, do I need Superbowl tickets? NO.... I don't watch football. Most of the things I truly enjoy doing are relatively inexpensive.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
An Awkward Analogy
Old 12-12-2007, 03:26 PM   #9
Recycles dryer sheets
JonnyM's Avatar
 
Join Date: Mar 2004
Location: Modesto
Posts: 334
Send a message via AIM to JonnyM Send a message via Yahoo to JonnyM
An Awkward Analogy

Quote:
Originally Posted by TickTock View Post
Any statement of 'living on x$' needs to explicitly state these assumptions: for example, owning a paid-off house valued at $150k is the same (at a SWR of 4%) as $6k of income.

Thoughts?
My thoughts on having no Mortgage don't resolve in my mind as some calculated extra income, more a calculated (as in cleverly planned) avoided expense. My home is a place to live without paying rent, in exchange I agree to pay taxes and upkeep on it (that would be avoided if I rented). It's intrinsic value i.e. what someone else would give me for it is mostly on useful in planning our move to the PNW sometime in the future, hopefully to be able to trade home in midpriced area in CA for Home /plus land in lowpriced area up North.
__________________
It's about the music
JonnyM is offline   Reply With Quote
Old 12-12-2007, 03:36 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,699
Quote:
Originally Posted by retire@40 View Post
I made three budgets for myself:
  • Current Budget during the accumulation phase
  • Expected Budget at retirement
  • Bare Bones Budget for a worse-case situation
Once a year I'll look at them and make a little tweak here and there if necessary.
This is exactly what I do
__________________
Running_Man is offline   Reply With Quote
Old 12-12-2007, 03:42 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W
Posts: 5,884
Hey TickTock,

Quote:
Given these variables, perhaps we can come to a more meaningful idea of what nest egg is required to retire.
There are so darn many variables to work through that it is darn-rear impossible to come up with a formula that fits us all.

The big variable is "income stream"- Pensions, SS, annuities etc

Or, is the big variable "investment draw down"?~ 4%, 5%, 6%

Maybe asset allocation is a key ~ 60/40, 50/50. 40/60?

We all wear different coats when it comes to how we arrive at our "nest egg requirement", I believe.
__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is online now   Reply With Quote
Old 12-12-2007, 09:35 PM   #12
Recycles dryer sheets
 
Join Date: Oct 2007
Posts: 463
Folks, I goofed on the initial post; it wasn't meant to ask for advice on my personal situation, but instead to develop a better general model for retirement expenses that anyone could use to estimate their own required assets.

Looking at the responses and then re-reading my inital post, I was not stating that clearly at all. Sorry.

That's also why I broke off from the other thread; trying to develop a model here vs. various examples of retirement expenses there.

When I see a post of "I live on $x per year", the first thing that I think is what are those four factors mentioned in the inital post (health care, residence, cost amortization, taxes).
__________________
TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future

"I've traded love for pennies, sold my soul for less" -Jim Croce, Age
TickTock is offline   Reply With Quote
Old 12-12-2007, 09:42 PM   #13
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Well, still not retired but I've concluded that we'll consume the same after retirement as before. However, our tax bracket will be lower, deduct current retirement savings and there you have it.

Yep, 100% of pre-retirement expenses. Work costs will be consumed by play and travel costs. Let's hope some of the recently retired folks will chime in.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 12-12-2007, 10:10 PM   #14
Recycles dryer sheets
 
Join Date: Nov 2005
Posts: 355
What Rich said. Prior to retirement, we were saving such that our living expenses matched our post retirement income. We were unintentionally practicing for retirement living. Same net income, more time now.

Your net income minus your annual savings is your current spending. Mortgage and medical need to be in there too. Where it is spent needs tracking, but the amount is easy to see.
__________________
heyyou is offline   Reply With Quote
Old 12-12-2007, 10:15 PM   #15
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,156
What Rich and heyyou said. We practiced retirement spending 2-3 years prior to retiring. We're spending roughly the same after retiring as before, with some shifting away from work related expenses to increased health insurance costs.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 12-12-2007, 10:25 PM   #16
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,950
I'm planning to spend more after retirement than I spend now!! I'll have all that extra time, so I'm allowing some "fun money" to spend on hobbies and various pursuits. ETA: Oops, I already posted that. Never mind........
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 12-12-2007, 10:44 PM   #17
Recycles dryer sheets
 
Join Date: Oct 2007
Posts: 463
I plan on spending the same amount as we do now - plus healthcare costs, minus mortage (and possibly downsizing the house), minus total income tax burden % - and the biggest issue between DW and I, how much to set aside for travel.

The choice is time vs. lifestlye. I believe we could RE now (albiet at a standard of living that neither of us would accept). The longer we wait and save, the higher the standard of living that we can afford... but, the shorter we have to enjoy it.

That choice, I belive, is the central one facing those who LBTM.
__________________
TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future

"I've traded love for pennies, sold my soul for less" -Jim Croce, Age
TickTock is offline   Reply With Quote
Old 12-12-2007, 11:40 PM   #18
Full time employment: Posting here.
UncleHoney's Avatar
 
Join Date: Aug 2006
Location: Columbus
Posts: 769
Just do some reasonable planning and things will work out.

I'm a belt and suspenders type of guy and our monthly income in retirement is about 2.5 time what we plan to spend. I like the feeling that I'm not trapped into just-getting-by and worrying about where every penny goes. Life wouldn't be any fun operating in that mode for sure.

I guarantee life will look different on the other side of the ER fence and you want lots of breathing room to enjoy it.

Right now we are blowing the budget out of the water doing a few planned house projects but but I feel comfortable with it and things will recover in a few months.
__________________
UncleHoney is offline   Reply With Quote
Old 12-13-2007, 08:35 AM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Moemg's Avatar
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 10,040
One piece of advice I can give after learning it the hard way is make sure when you are planning as a couple also plan as a single . I moved to Florida to retire and shortly after my husband died .He had planned well so I received 55% of his pension and medical benefits . I continued to work to save and let our nest egg grow until finally at 59 I called it quits and am living on the same amount as I did pre retirement (My part time salary + 55% of his pension ).I also have an extra travel allowance that some years I use and some years it will roll over .
__________________
Moemg is offline   Reply With Quote
Old 12-13-2007, 11:42 AM   #20
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,407
Long long ago in a galaxy far far away, I did a poll of retirees to find out how their actual post-retirement living expenses compared with their pre-retirement living expenses, after adjusting for any big one time expenses. The consensus seemed to be that the vast majority lived on between 95% and 105% of their pre-retirement expenses. In other words, it seems that those expenses that drop generally equal those expenses that increase.

I've also noticed that any monthly or annual fluctuations in my expenses pretty much level out completely when I consider a rolling six-month window of my expenditures.

Based on those two, my plan is to target retirement when my last six months of expenses is 2% of my FIRE stash, for the 4% withdrawal rate.

2Cor521
__________________

__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
55 year old Texan will retire within the next year russingr Hi, I am... 7 05-25-2007 09:40 AM
First year in Retirement garrynky FIRE and Money 4 03-22-2007 04:44 PM
New retirement plan, 400 million in a year, no money down teejayevans Other topics 1 02-13-2007 01:38 PM
Your TOTAL % return so far this year and last year. modhatter FIRE and Money 49 10-19-2006 05:03 AM
44 year old woman takes advantage of 13 year old boy Dawg52 Other topics 37 05-25-2006 12:15 AM

 

 
All times are GMT -6. The time now is 03:05 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.