The Cost of Working

[chinaco]

My planned ER date is not far off. I am studying our finances, to get a better understand of our Income while I am working versus after I ER.

One area I have been exploring is the cost of working. Those expenses that are related to earning a wage. I am just getting into it... but, I found over 8% gross reduction out of my gross pay in 3 areas:

• SS Contribution
• Medicare Contribution
• Fuel cost reductions not driving to work.

I know when I look closer, I will probably find that savings on wear and tear on our vehicles, parking costs (work downtown), lower car insurance (because of reduced driving mileage), work clothes, etc... I will probably find that I will save upwards of 10%... perhaps 12% in (gross income) costs to work.

I will, of course have some expenses in ER that will offset some of those savings (most notable are Mega Corp ER Health Ins Premiums).

Has anyone on the forum done a detailed analysis of pre/post work cost differentials? That is expense of working versus new expenses in retirement?

I am also looking at our pure out of pocket cash flow after tax to better understand our pre/post working budget.

But I must admit, most of my ER expense assumptions (over the years) has been using a replacement of a percentage of gross wages.

It is almost like finding money. Whoopeeeeee!

 

[Ronstar]

I havent got into detailed analysis since I've cut back to part time, but my auto fuel costs seem to be reducing almost proportionally with hours worked. I was at $350 per month when working full time. At half time, I'm about $200. I expect to be about $100 per month in gas in full retirement

 

[plex]

Gas costs when working: About 200-250/month. Gas costs when not working, 10-20/month. Reason #9453 for retiring as soon as possible.

 

[billin]

I would look at clothing costs, food cost if it would mean fixing your own instead of a restaurant or buying more preprocessed foods, fuel costs and vehicle wear and tear or possibly cutting loose a vehicle altogether, being able to do some things for yourself instead of hiring them out, probably many more.

 

[rescueme]

A big item for me is elimination of state/local income tax on all retirement income, which combined is over 4%.

See the following for your indivudial state rules:

Taxes by State

Since I paid state/local tax on my retirement contributions while wor*ing, I don't need to do so now. All gains are tax-free. Additionally, I pay no state/local income tax on my SS income (once I draw it)...

 

[freebird5825]

My biggest savings in FIRE is Fed and NYS income taxes, hands down. I cringe when I go back and look at my tax burden when I was drawing a paycheck.
Add in FEGLI, FICA, and my TSP deferred contributions (a good "expense" of course).
Next is lunches out (I had to escape to see the daylight ) and w*rk clothes. dh2b still commutes so we still have the gasoline costs.
Then comes takeout food for days when I just forgot to set up something in the crockpot or had no time to do so in the rush to beat the AM get-to-w*rk clock.

 

[IndependentlyPoor]

If you are willing to move, you might be able to find a cheaper house that serves your retirement needs as well or better than your current digs. Houses located near employment centers and good schools tend to command a premium, and those are two requirements that FIREd folks generally don't have. (OK, I know that you FIRREd (retired really early) folks may still have chilluns in school, but I think you are in the minority.)

 

[CuppaJoe]

My biggest savings in FIRE is Fed and NYS income taxes, hands down. I cringe when I go back and look at my tax burden when I was drawing a paycheck.
Add in FEGLI, FICA, and my TSP deferred contributions (a good "expense" of course).
Next is lunches out (I had to escape to see the daylight ) and w*rk clothes. dh2b still commutes so we still have the gasoline costs.
Then comes takeout food for days when I just forgot to set up something in the crockpot or had no time to do so in the rush to beat the AM get-to-w*rk clock.

Exactly! I expect to continue paying zero in taxes until I'm well past age 65 when possibly my health insurance premiums will be less.

 

[audreyh1]

Clothing!!!!

And the occasional dry cleaning.

That was also a major cost reduction as my wardrobe got a lot simpler.

Car insurance - no longer driving to work, but recreation only usually gives a nice drop in your car insurance.

And as other said - the daily lunches/breakfasts. You tend to do more at home.

Audrey

 

[Onward]

A big cost of working is the cost of big-ticket items and trips that are required to relieve the stress and break up the grind of typical corporate life.

 

[Nords]

Has anyone on the forum done a detailed analysis of pre/post work cost differentials? That is expense of working versus new expenses in retirement?

I've never found the study, but I've read that a 1980s analysis of work-related spending set it at 20%. This became the basis of the "retire on 80% of salary" sound bite.

It also depends on lifestyle: housecleaner, yard maintenance, in-home nanny/au pair, childcare, after-school care, pet walker, pooper-scooper services... all can be taken over by ERs.

After you've been ER'd for a year, the analysis you're doing now will seem superficial compared to the analysis you'll have the time & energy to do during the first six months of ER. A complete review of all insurance policies, a complete review of all utility expenses, a complete review of cooking & dining practices... you'll keep finding more things to check.

 

[friar1610]

Here's one more...if you travel. When you're retired you can more easily pick and choose when you travel to take advantage of lower airfares (e.g., midweek vs. weekends), hotel deals, etc. Also, although I haven't done it, I understand there are good deals to be had for people who are in a position to leave at the drop of a hat to fill seats still left unsold a couple of days before departure.

And another I did early in my ER...our washing machine crapped out and because I had the time to do it, I went to a bunch of different stores doing comparison shopping. Ended up saving at least $100 bucks, if I recall correctly. Wouldn't have had the time to do that when I was working. Yes, I did spend time doing the comparison shopping, but I looked at it as a challenge and really got into it.

 

[audreyh1]

A big cost of working is the cost of big-ticket items and trips that are required to relieve the stress and break up the grind of typical corporate life.

Oooh! Good point!

Not only that, but you usually pay full price, because you don't usually have the schedule flexibility for discounts. And your time is limited, which means you pay to get somewhere as quickly as possible and can't extend your vacation to amortize the travel cost better.

Audrey

 

[W2R]

A big cost of working is the cost of big-ticket items and trips that are required to relieve the stress and break up the grind of typical corporate life.

And don't forget the little-ticket stuff just to make life a little bit easier or as "good for me" presents to oneself.

 

[IndependentlyPoor]

Maybe somebody already said this, but cooking dinner can be a very pleasant thing to do when you are retired. You amble down to the market, look around for whatever looks fresh, good, or inspires you, pour a glass of wine, put your favorite playlist on the iPod and cook.

Cooking dinner after a hard day's work can seem like the last straw and eating out seems like a reasonable expense (and it may be) to reward yourself.

No matter how much you spend at the grocer's, it is hard to even come close to the expense of eating out.

 

[Moemg]

Maybe somebody already said this, but cooking dinner can be a very pleasant thing to do when you are retired. You amble down to the market, look around for whatever looks fresh, good, or inspires you, pour a glass of wine, put your favorite playlist on the iPod and cook.

Cooking dinner after a hard day's work can seem like the last straw and eating out seems like a reasonable expense (and it may be) to reward yourself.

No matter how much you spend at the grocer's, it is hard to even come close to the expense of eating out.

That is so true ! When I worked cooking was a chore . Now it's enjoyable especially with a glass of wine !

 

[Retire Soon]

Once you retire, you'll no longer be saving for retirement in a 401k, 403b, etc. This will be money freed up to spend elsewhere.

 

[Onward]

And your time is limited, which means you pay to get somewhere as quickly as possible

And because you're rushing to get there as quickly as possible, the stress-reducing vacation you've overpaid for actually further stresses you out. The only lasting effect is the cost of the trip on your credit card, which makes you even more indentured to the j*b you were trying to escape in the first place.

And don't forget the little-ticket stuff just to make life a little bit easier or as "good for me" presents to oneself.

Definitely. The latte factor!

 

[W2R]

Definitely. The latte factor!

"That meeting was so rough but I pulled it off like a champ! I DESERVE a latte!"

"That meeting was so rough and I'm lucky to even have a job after that! I DESERVE a latte!"

"I didn't even get invited to the meeting!!! Something must be up! I DESERVE a latte!"

 

[Onward]

"This j*b has been kicking the crap out of me for longer than I can remember. I DESERVE a latte!"

Cha-ching.

 

[freebird5825]

..."I didn't even get invited to the meeting!!! Something must be up! I DESERVE a latte!"

I am SO glad I didn't get invited to that 2 hour meeting.
Give all THE SURVIVORS a latte.

Heeheeeheeee...I had a knack for fully prepping my senior tech advisors for those meetings and not really caring if I presented or not. If I was asked to, I would willingly do so.
I had this little devilish streak that eventually "caused" the bigwigs to NOT invite me to "power" meetings because I would use too much simple logic for their taste. I often wondered if they ever caught on to my...um...scheme.

 

[W2R]

"This j*b has been kicking the crap out of me for longer than I can remember. I DESERVE a latte!"

Cha-ching.

Oh SO typical of the working mentality!

"And not only do I deserve a latte, I deserve an iPhone!! I earned every penny of it, the hard way. After all, it's my money. I earned it. Besides, everyone in management has one and I am on the verge of that promotion. I need to fit in and look the part."

 

[Tesaje]

I've been retired almost 3 months now and spend so little that I can't figure out what I was spending so much on while working. I took my lunch most days, made my coffee in my office, rode the train so only about 10 miles of driving each day, the last 6 months, the train was fully subsidized by my employer so no cost there. I quit buying clothes 3 years ago. Even this month when I bought a bike and tricked it out, I've only managed to spend about a quarter less than my average monthly expenses when working. The first 2 months I only spent about 1/4 what I used to. And I've made zero effort to be frugal. It really is like found money. But a bit mystifying.

 

[clifp]

After you've been ER'd for a year, the analysis you're doing now will seem superficial compared to the analysis you'll have the time & energy to do during the first six months of ER. A complete review of all insurance policies, a complete review of all utility expenses, a complete review of cooking & dining practices... you'll keep finding more things to check.

In general I have more time to be a smarter shopper. This includes everything from insurance, to travel, to meals, and certainly a lot for investments.

When I was working an I saw something I knew I need in the future (like a tool, or linens) I'd buy it. Now days if it above $50, I'll shop around more unless I know I need immediately.

 

[audreyh1]

I've been retired almost 3 months now and spend so little that I can't figure out what I was spending so much on while working. I took my lunch most days, made my coffee in my office, rode the train so only about 10 miles of driving each day, the last 6 months, the train was fully subsidized by my employer so no cost there. I quit buying clothes 3 years ago. Even this month when I bought a bike and tricked it out, I've only managed to spend about a quarter less than my average monthly expenses when working. The first 2 months I only spent about 1/4 what I used to. And I've made zero effort to be frugal. It really is like found money. But a bit mystifying.

WOW!!!!!

Audrey

P.S. At this rate, you'll have enough "excess" to buy yourself that camping van you've been considering.....