Spending in early retirement

[gayl]

forgot to state that the only increases in 'fixed' expenditures were:
PGE averages monthly bill and it went up $25 a month
gardener went from 80 to 90 a month

 

[ESRBob]

Gayl,
Yeah, it is hard for some of us to cut expenses by much. I found my expenses went up a bit in ER because of the extra travel. For me, the solution has been to do a little part-time work on the side to make ends meet and keep me at the 4% SWR. I found a bit of work adds some structure to my week and gives me something else interesting to do with my days. I know it isn't for everybody, but it has worked out well for me, and solved some of the unexpected budget push. I didn't want to spend the next 70 years of my life worrying about money every day, either. I did that for the first 30 years or so and it got boring.

ESRBob ("S" for semi-retired -- the possible solution to the rock-and-a-hard-place of SWR rates and a growing budget).

 

[gayl]

Do you still save? When I left my job in February '04, I had less than $100 in my savings acct. Through a small settlement (6600), I have increased my savings account to 8600. I think I'll be happy when I hit 10k in a few months. I plan on leaving my 457 acct and IRA alone until I hit at least 59.5 (can draw on the 457 now w/o penalty as I am over 50) to offset inflation as my defined benefit pension plan has an annual COLA cap of 3%. I am glad that I am not the only one whose bills did not go down in retirement ... they stayed the same.

 

[Bob_Smith]

Hi gayl,

I have found it helps to use Quicken. I track every dollar. Each year my wife and I take a look at each spending category. We compare it to previous years and we're able to know, without any doubt, where the money is going. Then we attack the problem areas.

 

[JonnyM]

Do you still save? When I left my job in February '04, I had less than $100 in my savings acct. Through a small settlement (6600), I have increased my savings account to 8600. I think I'll be happy when I hit 10k in a few months. I plan on leaving my 457 acct and IRA alone until I hit at least 59.5 (can draw on the 457 now w/o penalty as I am over 50) to offset inflation as my defined benefit pension plan has an annual COLA cap of 3%. I am glad that I am not the only one whose bills did not go down in retirement ... they stayed the same.

Gayl, so good to here from someone in a similar (DBP and 457) situation that has already "crossed over".

I'm assuming you were government or Schools. Did your employer offer you an opportunity to buy years of service? If so any idea how they come up with that figure?

I am also curious about how other Defined Benefit Plan/457 types "planned" those last years to get the most bang for the buck. I can't relate well to the 4% SWR because it doesn't apply nearly as directly to our retirement benefits. We are more about getting to a specific monthly allotment (read paycheck without the working part) that is determined by years of service combined with age at exit from the workplace.

Many of the Boarders here get to ER by savings, aggressive, consistent savings to reach a nestegg level that will pay them the safe 4 percent forever. For many Government workers we settle for less pay then our private workplace counterparts, but cash in at the end because all those years our Employeer was gutting our gross to fund our potential retirements. I figured out how this was working at 43, (49 right now) kinda late in the game, but by adopting the ER tactic of aggessive savings to supplement for 7, now it looks like 9 years I can still bail at 52 with about 85 percent of my current take home pay. If I find out I can afford to buy back 4 or 5 extra years for the DBP calc, I can exceed current net take home. If not I can use what ever I can cram into the 457 to supplement or keep as backup. Cool.

As to the expectation that my spending levels will go down in ER? I have to go in with two assumptions.

1. Not if I can help it. Mitigated by acquisistion of the fixed assests in recent years that blow my dress up, (guitars and such) that I can change into trade mode in ER.

2. I get what I get. I will have to learn to leave within my defined ER means.

DBP types don't get to adjust their SWR, it is what it is, and we hope the 3% COLAS turn out to be enough over the long haul to keep us protected from inflation. Overall I wouldn't trade for the Nestegg SWR approach. Not having to worry about the market is mostly a good thing.

If I find I am not quite as flush for those impulse purchases as now? Small price to pay to get out at 52!!!
8)

 

[gayl]

I'm assuming you were government or Schools.  Did your employer offer you an opportunity to buy years of service?  If so any idea how they come up with that figure?  

I am also curious about how other Defined Benefit Plan/457 types "planned" those last years to get the most bang for the buck.

I was a public sector employee (county gov't) in California. Although we have the 'Ventura Decision' which would count overtime in figuring the last year's income, mgmt doesn't get overtime. We could, however, sell 1/3 of that last year's vacation accrual and they would honor a years worth on the books. So I sold 53 hrs in Oct, sold another 53 in Jan, and retired with over 53 left on the books in Feb. All counted in my FAS. (Pension is based on 'yrs of service' X 'age factor' X 'highest 12 mos salary.' So if you can increase your FAS (final average salary or highest 12 mos salary) then you can increase your pension.)

I was Tier 2 retirement for years, which meant that my age factor used to be a set .009% -- an employee working 20 yrs with an monthly average salary of 5000 would get .009 x 20 x 5000 = 900 per month.

2 contracts ago, we were offered an 'enhancement' that changed Tier 2 to mirror the older Tier 1 age factors which increased with age. I entered a pre-tax contract to pay the difference between what my 'bank' had accumulated and what would have been accumulated if I was Tier 1 all along. So I signed a contract to pay 1291 per month for 5 yrs IN ADDITION TO MY REGULAR CONTRIBUTIONS to cover the 62k difference in order to convert 15 yrs. As I had paid off my house, I just took that money and gave it to the pension board -- pre-tax.

On the last contract, they came up with the proposal that they would grant us 1 yr for every 2 that we converted, max 3 yrs. And the sliding scale changed to a cap at 3% at age 50 for safety employees (police / fire / correction officers) and 2.4% at 62 for non-safety. We had to have a new law written so this could be done and Sacramento had to agree ... even though it was restricted to just Contra Costa County employees -- and only to those groups who agreed to only an 11% raise over 4 yrs and who would have their pension contributions drastically increase (my sister, a safety employee, pays 13% of her salary towards her pension).

Unfortunately, they hit me with a penalty for breaking my contract so I had to ante up another 22k (they somehow only had to come up with 11k), but it was worth it.  As I was non safety, this meant that my pension went from an anticipated 810 at 55 to 2092 at 52. And I got out.  OMIG>D -- it just hit me! They did not credit me any previous pymts, they only credited me the amt that I wrote on the final check They were supposed to credit me for the amts that I had been paying all along. But I guess it is too late to do anything now.  

Anyway, I had worked assuming that my pension would only cover 1/3, so I squirreled away funds in my 457 to cover another 1/3 and prayed that SSA would be there for the last 1/3. I did draw some out to cover that 22k bill and my cruise thru the canal. But I don't anticipate taking any more out until 2006.

I hear that the school district is offering to add 2 yrs to anyone's age if they retire out now. Too bad I did not work for the schools. Counties just lay off ....

 

[JonnyM]

I was a public sector employee (county gov't) in California.

(Pension is based on 'yrs of service' X 'age factor' X 'highest 12 mos salary.' So if you can increase your FAS (final average salary or highest 12 mos salary) then you can increase your pension.)

I was Tier 2 retirement for years, which meant that my age factor used to be a set .009% -- an employee working 20 yrs with an monthly average salary of 5000 would get .009 x 20 x 5000 = 900 per month.

2 contracts ago, we were offered an 'enhancement' that changed Tier 2 to mirror the older Tier 1 age factors which increased with age. I hear that the school district is offering to add 2 yrs to anyone's age if they retire out now. Too bad I did not work for the schools. Counties just lay off ....

Very close for me as well. Technically I'm "Technical" and not Management, hence not quite as good perks, but I will be cashing out some Vac as you described to bump that highest 12 months. In my County (Stanislaus) we were notified of the enhanced benefit to line up Tier 2 with the older Tier 1 about 2 years ago. Was I smiling that day! I built my own retirement calculater in Excel based on the new formula, here they call it 2% at 55 for non-safety. I was already well into planning ER by then, but that change improved my lot by about 1/3 better then before. Way Cool! I have not squirreled away as much as I'd like in the 457, but I plan to maxmize the contribution those last 2 or maybe 3 years depending. Spouse retired effectively this month. Can't wait to join her living the GOOD ER Life.

Gayl Thanks for the reference to the Ventura Decision. I've seen cryptic references to that for a while now in the Retirement Board minutes. I did not know until now what it represented. I'll be joining up (bailing out?) either '06 or '07 depending on circumstances WITHIN, not beyond my control.

 

[gayl]

I was technically 'unrepresented' as I did not manage anyone, but still locked out of overtime despite working an average of 50 hrs per wk. Counties can get out of paying OT to techies as well as unrepresented. Review your contract and see if you can sell hours, if so, do so. At least we don't have to worry about heath insurance. Mine is still at 18 per mo

 

[gayl]

Hi gayl,

I have found it helps to use Quicken. I track every dollar. Each year my wife and I take a look at each spending category. We compare it to previous years and we're able to know, without any doubt, where the money is going. Then we attack the problem areas.

I track on Microsoft Money. Unfortunately, these days I am tracking how I am spending too much. But maybe I am not alone in having a spending splurge when I stop working. Hopefully it'll slow down

 

[bongo2]

gayl, I may not be understanding you, but it looks to me like you are doing just fine. From your post on another thread you said that you were spending 40% of your pre-retirement income. Since you are also doing a lot of traveling, that sounds completely reasonable. If you want to get into advanced frugality and live on $50 a day, then check "the complete tightwadd gazette" from your local library.

 

[gayl]

I was also living on 40% of my income, pre-retirement. I thought that it would be a lot cheaper to be retired but that is not so. Unlike others who cut down on eating out, I've had lunch out M / W / Th / F this week. I think the 'pinch' I'm feeling is that I can only save about 15% of my income right now.

I took 15k from the 457 to convert the rest of my pension from Tier 2 to Tier 3 but don't anticipate taking any more until late in 2005 (for prop taxes & ins). I've tried digesting the SWR posts but don't feel even intelligent enough to ask a reasonably intelligent question (sort of along the lines of what portion of the annual gain can I withdraw without my 457 funds running out?) This is really important as my COLA on the defined benefit plan is capped at 4%. So I am concerned that eventually I'll have to touch principle to continue traveling or SSA will have to be there in 10 - 15 yrs when I become eligible (not counting on the latter) or I'll have to make a real profit on the tax preparation business

It is my play time now -- I worked hard for 20 yrs and deserve it!!

 

[Cut-Throat]

Unlike others who cut down on eating out, I've had lunch out M / W / Th / F this week.

I could not afford the calories doing this! - You need to substitute another cheaper activity instead of this. I hit the gym for a couple hours a day. I eat only a half a sandwich and a piece of fruit for lunch every day.

People always say to me 'You're lucky - you don't have to diet' - This is like saying to an 'ER' - your lucky you're rich and don't have to work!

My wife and I both have a Gym membership that we bought into at the opening of a beautiful facility - Huge - Indoor/Outdoor Pools - for $38 a month for life - Can never be increased!

So Channel your extra time into activities that will make you healthier and not as expensive. Then you'll always have money for Travel as well as room for a few extra calories

 

[John Galt]

Cut-Throat and I have quite different lifestyles, although
this is in no way critical. He has a $30.00 per month
membership (for life) to a health club. I do not understand why anyone would join a health club, no matter how cheap. I get a terrific workout every day
and don't pay a penny for it. Truly, even when I was spending like there was no tomorrow, I never
considered a health club. A total 100% waste, IMHO.

John Galt

 

[gayl]

I could not afford the calories doing this!

I can't either. I must be up about 5 lbs since retiring despite losing 4 on the cruise! The only exercise I get is sit-ups and hiking. Obviously not enough!

Welcome Gayl--congratulations on your G.D.E.R. ... Actually, I'd much rather spend now at 50, than to save for some lavish spending at 60-70-80-90. AND I'd definitely rather die broke, than a multimillionaire mizer...Even though we've managed to save during our ER, it was NOT our intent. Our only concern was NOT to totally depleat our savings prior to SS kicking in

I'm just concerned that inflation will rear its ugly head. I get a COLA and have targeted funds to kick in at 59.5 (IRA), 457 earns at least 5% per annum and I plan to start withdrawing that much next year, and will take SSA early at 62 (full retirement benefit doesn't kick in until 67). I sometimes become concerned that I might have baled too soon financially. Not that I would ever entertain going back! When I saved so much for so many years, its hard to imagine not saving monthly now.

BTW: what does G.D.E.R. mean? I get the ER part (early retire -- although retiring at 52 hardly seems early)

 

[Cut-Throat]

I can't either. I must be up about 5 lbs since retiring despite losing 4 on the cruise

You lost weight on a Cruise! You're the only one I've ever heard that's done this! You must have not shown up for dinner!

I usually try to limit myself by only gaining 2 pounds when I'm cruising.

 

[John Galt]

, if she makes iRe: Spending in early retirement

I used to be about Cut-Throat's size (in my case
5'9 and 150 lbs.) I am up about 5 lbs. since I remarried.
Wife is an excellent cook and although I ask her to cut back, if she makes it I usually eat it.

 

[gayl]

It almost sounds like you enjoy worrying....  trying to save now for later just doesn't make alot of sense to me.  It should be alot easier to economize, if necessary, when I'm old or at least older. Hopefully, any losses in buying power to inflation will be accompanied with declining living expenses.  SS at 62, will be a windfall and should make up for any 'losses' to inflation...It seems like some here, get some kind of pleasure from concocting doomsday scenarios and finding ways that the sky might fall.  Just enjoy and relax - whatever will be - will be.

I plan on traveling more and more as I am still relatively young and in great shape. Plus my dad lived to 88 with CHF / multiple MI's & strokes so I should live at least that long. Therefore, my expenses won't go down. There is so much hype re: SSA -- whether it'll be around or not -- I agree that I don't have anything to worry about if it's there. I spent my life saving / planning for the future, it's hard for me to retire old habits. I'm still relatively new to this side of the coin and don't ever want to rejoin the rat race. I tried to check out whether I was okay on another site (moneycentral) and was told that I was too extravagent to avoid returning to work. Thanks to everyone here for convincing me otherwise.

Like I said in another post, I am still reinventing myself and that includes discarding old habits.

Cutthroat: I ate the light meals which actually were better than the regular ones and never took an elevator. Lost 2 kilos. Regained 9 lbs since being back (hence up 5 since retirement). Now I'll try the 1/2 sandwich & fruit for one meal a day.

 

[cute fuzzy bunny]

I only went on a cruise once.

It wasnt until the last day that I found out that the number of meals they put on didnt all have to be attended.

And to think I forced myself to stay up late for the 2am caviar bar and then pulled myself out of bed at 6am for the early breakfast buffet, thinking it was all mandatory...

 

[wabmester]

Let me see if I've got this straight, Cut-Throat. You're happy to pay for a gym membership, but you don't like the idea of mowing your lawn?

Gyms are for the working class. As a retiree, I'm in no hurry to get most places, so I may walk or ride my bike. I mow my own lawn (4 of them, actually). I lift plenty of weight in the form of construction debris from remodeling, dragging the trash cans up my steep 1/4-mile driveway, and buying large bags of dog food from costco.

And I've got lots more time for recreation, which is usually paddling, sailing, cycling, or hiking.

Since I've retired, I've lost weight and my blood pressure has dropped considerably. Who needs a gym?

 

[Cut-Throat]

Let me see if I've got this straight, Cut-Throat. You're happy to pay for a gym membership, but you don't like the idea of mowing your lawn?

Well, I never got my heart rate up mowing the lawn. Plus I really never liked the noise or what it did to my allergies or that I had do it during the day etc. etc.

Whatever works for you WABB Blow ME!

 

[cute fuzzy bunny]

Whatever works for you WABB Blow ME!

ROFL. Milk just shot out of my nose.

I wasnt even drinking milk. Weird.

 

[Bob_Smith]

I'm still laughing 10 minutes later! Man, I've got to get out more!

 

[John Galt]

Hello all. TH, something shot out of my nose too.
We are still trying to identify it

Cut-throat my boy, far be it from me to tell you how to spend your money. It has been my opinion for my entire life that "health clubs" are nutty. Why bother?
Take a long hike (plus you get to be outdoors).
I felt perky yesterday so I washed the truck, bathed
the dog, powerwashed the entire house, and installed
a window air conditioner. That's more than enough working
out for me. Even too tired for sex, which BTW can be
an excellent workout, although my ex-wife was an exception to this rule.

John Galt

 

[BigMoneyJim]

By the way, for any of the rookies on this board. Don't ever question Cut-Throats lifestyle

And what's with the fishing? You spend all this money on a fly fishing rig, hip waders and camping out, sit around for hours with a string in a puddle. Heck, there's a Long John Silver's two blocks from me running a special. Way cheaper if you ask me. Don't you have a cheap seafood restaurant nearby?

Oh wait, you're catch-and-release? What the hell is that all about? What a waste of time! Go to Wal-Mart and get a goldfish, a bowl and a net. Catch-and-release at home for much cheaper.

 

[Cut-Throat]

Oh wait, you're catch-and-release? What the hell is that all about? What a waste of time! Go to Wal-Mart and get a goldfish, a bowl and a net. Catch-and-release at home for much cheaper.

What a money saving forum this is. I can probably save $10 grand a year on this suggestion alone!