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Old 01-21-2012, 12:39 PM   #21
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(not saying it will be objectively presented).
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Old 01-21-2012, 12:54 PM   #22
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There seem to be plenty of opinions on the subject of spending patterns in a long retirement. Most studies I have seen conclude that spending levels off or drops as one ages, but I am not convinced that these studies properly accounted for limitations in the means of the retirees. If you spend down your assets, then your spending will have to reduce to the new limitations of your means. On the other hand, all the older people I know well enough to know about their spending, tended to increase spending as they aged if they could afford it. Medical care certainly, but also hiring help to do things they used to do for themselves, travel continued but at more full service places and less off the beaten path, more spending on convenience. Now maybe that was the spending adjusting to the means in the other direction, but for my own planning, I'd rather be able to increase spending if I want, than be required to reduce spending whether I want to or not.
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Old 01-21-2012, 01:11 PM   #23
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... but for my own planning, I'd rather be able to increase spending if I want, than be required to reduce spending whether I want to or not.
While I hope to have the means to continue the same spending as I do now, just from reading blogs of people who are happy with much less I have come to realize that much of the stuff I am accustomed to is just fluff, even though I am not an extravagant guy.

I often wonder if many posters, myself included, are just worrywarts. Look around, I see so many people living on much less. They would not understand the problems that we are so concerned with.
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Old 01-21-2012, 01:33 PM   #24
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I often wonder if many posters, myself included, are just worrywarts. Look around, I see so many people living on much less. They would not understand the problems that we are so concerned with.
Probably, but uncertainty does that to people, human nature. Projecting longevity, inflation, returns, expenses for 30-40 years is a tough proposition IMHO...
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Old 01-21-2012, 01:49 PM   #25
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Yes. Hence, I find solace in reading about how people could live with much less. For the lack of means, they make up for it with being more resourceful. And they evidently lead a healthy and happy life.

Like Uncle Mick likes to say, we need to be agile, and hostile :-) I would like to think I could, if it comes to that.

And by the way, along with my parents, I have been through some rough economic time in my late teen years. Over the years, I think I have forgotten the survival skills, and became skittish over a little recession here and there... How did I turn into the princess and the pea, as mentioned by Ha in a recent post?
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Old 01-21-2012, 03:58 PM   #26
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I use a 1% inflation level overall. I may be too optimistic, only time will tell.
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I use a flat 3% inflation level for my model, but I imagine that the actual inflation in my spending will be less than that of the general economy as I get older.
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Old 01-21-2012, 09:11 PM   #27
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Has anyone looked at the widow/widower effect?

My mother (81) lives in a retirement apartment with meals and housekeeping included. Before my father died 5 years ago, they traveled frequently (at least 3 cruises a year), lived in a comfortable house with the necessary upkeep, dined out (with good wine) at least weekly, enjoyed buying art at shows, etc.

Now she happily stays in her apartment and plays bingo, does crosswords, and reads. She is living on SS and a fraction of the RMDs from their IRAs - the rest end up in her savings account.

I suspect if my father was still alive that they would be spending much more (even though my dad would still be clipping the Sunday coupons before shopping).

Interested to hear other thoughts on this.
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Old 01-21-2012, 10:07 PM   #28
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Has anyone looked at the widow/widower effect?

My mother (81) lives in a retirement apartment with meals and housekeeping included. Before my father died 5 years ago, they traveled frequently (at least 3 cruises a year), lived in a comfortable house with the necessary upkeep, dined out (with good wine) at least weekly, enjoyed buying art at shows, etc.

Now she happily stays in her apartment and plays bingo, does crosswords, and reads. She is living on SS and a fraction of the RMDs from their IRAs - the rest end up in her savings account.

I suspect if my father was still alive that they would be spending much more (even though my dad would still be clipping the Sunday coupons before shopping).

Interested to hear other thoughts on this.
Well yes, based on observation of my Dad (97) and mom (96) I would say that the projections that show a straight increase in expenditures to age 100 don't reflect reality to any extent that I can see from a sample of two. If anything, from what I've seen for the last ten years or so the line is down not up as far as expenditures are concerned. I believe a number of very credible scenarios have been built up based on lower expenses as one ages.
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Old 01-22-2012, 10:13 AM   #29
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I use a 1% inflation level overall. I may be too optimistic, only time will tell.
All my homemade models have returns and inflation inputs, but I focus on real returns - IMO more important than looking a inflation or returns alone. I typically use real returns of 0-2% - hopefully they'll be higher, but this early in planning I want to be conservative...
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Old 01-22-2012, 10:43 AM   #30
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Well yes, based on observation of my Dad (97) and mom (96) I would say that the projections that show a straight increase in expenditures to age 100 don't reflect reality to any extent that I can see from a sample of two. If anything, from what I've seen for the last ten years or so the line is down not up as far as expenditures are concerned. I believe a number of very credible scenarios have been built up based on lower expenses as one ages.
I had to laugh, since my (departed at age 88) FIL spent much more for the last ten years of his life, as his DW passed a decade early.

It seemed that he just "let loose" and was spending $$$ without regard for the future (of course, at his age, who could blame him ) after the death of his DW, and 50+ years of marriage.

He bought new cars, danced the night away (with more than a few different "partners"), traveled the world, and just "had fun" after he became a bachelor again (drove my DW nuts, with him acting as a "kid", again).

Sometimes, expenses don't go down as you age, if you're lucky ...
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Old 01-22-2012, 11:32 AM   #31
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I had to laugh, since my (departed at age 88) FIL spent much more for the last ten years of his life, as his DW passed a decade early.

It seemed that he just "let loose" and was spending $$$ without regard for the future (of course, at his age, who could blame him ) after the death of his DW, and 50+ years of marriage.

He bought new cars, danced the night away (with more than a few different "partners"), traveled the world, and just "had fun" after he became a bachelor again (drove my DW nuts, with him acting as a "kid", again).

Sometimes, expenses don't go down as you age, if you're lucky ...
Good for him!
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Old 01-22-2012, 11:45 AM   #32
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Our only daughter is making lots of money, advancing rapidly, and is extremely frugal. I don't think she'll let us starve. So that's plan C (plan B being SS). IOW we need to spend more.
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Old 01-22-2012, 11:49 AM   #33
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I expect that when the leading edge baby boomers (those born in the late 1940's) reach a certain age, there will be a greater demand for elder care/assistance leading to higher costs. Those of us who do not plan to depend on family for care in our declining years may end up spending considerably more than present elderly do for this type of assistance. I am talking mostly about assistance in dressing, toileting, showering, checking to make sure one hasn't fallen or wandered off, and so on, for the extremely elderly.

I am sure that higher costs for this sort of assistance will take up any slack in my budget if/when I am lucky enough to live to extreme old age.
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Old 01-22-2012, 12:06 PM   #34
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People like me who are retired but still paying on a mortgage will probably have a different pattern. My spending, assuming I live out a normal life, pattern will probably be shaped like the two humps on a camel. When mortgage is paid off in 10 years or so, I will bottom out just in time for my old age health care expenses to rise.
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Old 01-22-2012, 04:10 PM   #35
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I thought Bengen or someone had proposed a flat retirement spending rate, 0% spending inflation. I know we discussed it, but I can't find an article on it. Spending decreased as people aged as they prefer to stay home longer. I believe there was some supporting data for it, but also the question was it by choice or necessity.
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Old 01-22-2012, 04:14 PM   #36
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My in-laws are in their 90s. My mother is near 80. None of them want to travel, or have any expensive activities. Even without looking at this small sample of 3, I do not feel I want to spend money on anything when I get to their age either. And there is no guarantee that I will even last that long.
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Old 01-22-2012, 08:12 PM   #37
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My Mom is 95 and if she thought she could still handle travel she would . She still goes to the beauty parlor weekly and spends money on clothes , dining out and movies. She really started slowing down in her late 80's but the 90's have slowed her even more so. She now lives in an independent retirement community with the option of assistance if needed . Her spending has shifted more into her needs than her wants .
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Old 01-23-2012, 03:59 PM   #38
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I try to lock in expense not income to deal with inflation. So for example if my house payment is set at retirement with a new 30 year mortgage of 25% of my budget for principal and interest it stays the same for 30 years of retirement. So only 75% of my expenses are going up and after the first 30 years no more house payment so like a big raise.

I plan to get a different house when I retire and might get a mortgage of about 600 a month. After the first few years it will seem cheaper and cheaper compared to if I was paying rent. So if two people both retired on 3K a month and one was paying a mortgage and one wasn't after inflation of 100K the one with the mortgage is less worse off and used to spending less to start with.

I knew a women who bought a house at 65 with a 15 year mortgage so at 80 when it was paid off she had a jump in spending money just as inflation was taking a toll on her finances.
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Old 02-20-2012, 02:25 PM   #39
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I just looked at my annual living expenses from 2000 through 2011 - the 12 years I have been retired. I have always felt that my basic living expenses were more or less flat, or at least had only risen slightly and most of that in recent years.

From Dec 2000 to Dec 2012, cumulative inflation was 29.7% according to InflationData.com's Cumulative Inflation Calculator

However, my basic annual living expenses only went up 2.3% over that time period. Yes - you read that right.

My basic living expenses include normal day-to-day expenses that occur annually which includes discretionary expenses such as travel, eating out, smaller toys and appliances.

It does NOT include expenses I consider "super discretionary" such as charity, gifting $$ to family, or large item one-off expenses such as buying a motorhome or the occasional computer or high-end camera body. Decisions to buy such things are made on a case-by-case basis when and if I feel I can afford them.

My year over year % change from 2000 in basic living expenses went like this:

Year YOY Since 2000
2001 -4.8% -4.8%
2002 +8.5% +3.36%
2003 -19.0% -16.3%
2004 +16.6% -2.4%
2005 -21.6% -23.5%
2006 -7.9% -29.5%
2007 +15.9% -18.3%
2008 +2.6% -16.2%
2009 -13.1% -27.1%
2010 +9.0% -20.6%
2011 +28.8% 2.3%

Some things definitely went up over that time period like health insurance which more than doubled. So obviously other expenses went down over the same time period.

We spent quite a bit more money on travel tours during the first three years. Then switched to much more RVing type travel over the next several years which was lower overall, however spending on fuel, groceries and eating out and maintenance increased during that same time period. Finally, in 2010 we did less RVing, but we moved into a new home with higher baseline expenses.

Just FYI - thought folks might find my "personal inflation" story interesting.

Audrey
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Old 02-20-2012, 02:38 PM   #40
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I find it almost impossible to figure out my personal inflation rate. That is, as opposed to fluctuations in my spending year to year. The easy things to measure are property taxes, utility, phone & cable rates & insurance premiums since I have kept the level of service the same. The move from NJ to CO invalidated the data, but I can calculate those over time.

Other expenses like food, maintenance, transportation, recreation, clothing etc. is much harder (impossible?) to do on a personal basis because the things we buy change from year to year.

As Al points out, there is a difference between personal inflation & personal spending.
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