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Old 02-09-2012, 12:02 AM   #21
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It was only a coincidence, but in my last 17 months of working (after I voluntarily reduced my weekly work hours for a second time) I happened to earn as much per month as I would eventually earn per month from the dividends and interest from my investments. So when I later planned my ER budget, my aggregate income versus expenses were about the same as what they were in the 17 months prior to my ER. This was somewhat helpful in my early months of ER but without this coincidence it would have been just peachy anyway.
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Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

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Old 02-09-2012, 02:13 AM   #22
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I am in the same situation. Plus, since I worked abroad, I do not have my 10 years of social security contributions yet (I will complete my 40 quarters by the end of this year). So I am waiting a few more months. Haven't excluded the possibility of a part time position when i FIRE, a few days a month only.
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I'd rather work a well paid extra year now at age 46 than have hunt for a much lower paying job in my fifties or sixties.

To the OP's point, I am trying to stay within a fixed yearly amount.
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Old 02-09-2012, 07:05 AM   #23
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We did back-of-the-envelope numbers and noticed that we were already living on less than what the retirement income would be.
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Old 02-09-2012, 07:12 AM   #24
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I have a target amount that I'll spend in retirement and I've been living off that for years and saving the rest. I track my spending so I can see where the money goes.
That is exactly what we do. I do not get into the details as a lot of people but we are happy with our budget
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Old 02-09-2012, 08:15 AM   #25
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Living on a fixed amount to prepare for retirement - Did that and learnt a lot from it including the fact that it is doable, it helped me to adapt and change spending habits and then transition to ER. I recommend my friends who are thinking of retirement to do it for 6 to 12 monrhs and I know a few have decided to delay retirement after they realise they need a higher budget.
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Old 02-09-2012, 10:25 AM   #26
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We track expenses for more than 30 years now.
Our retirement budget is like our expenses of today plus some extra dough for car ( I can use a company car for free now) and more travelling.
We are dedicated LBYMers. So there is some room between our expenses of today and our income. That is where our savings come from...
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Old 02-09-2012, 11:25 AM   #27
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We always had a budget and did well within it. But we used to save a fixed percentage of our income towards retirement. For the last 2-3 years before retiring we froze the budget, adjusted it by the SS inflation rate at the start of each year, and everything else, raises, bonuses, tax cuts and whatever went into the retirement portfolio. Doing that kept our retirement spending level a little lower and increased our savings a little bit. We have been just fine with the SS inflation rate increases for 8 years now, including skipping the 5.8% increase that was clearly not going to be needed in a recession.

The sooner you can fix your standard of living, the sooner you can retire.
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Old 02-09-2012, 11:38 AM   #28
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Well....we didn't do it. That isn't to say that we didn't analyze the numbers to death however.

The thing is that our expenses pre-retirement and those post-retirement for a variety of reasons were not remotely similar. Pre-retirement my husband had a daily compute of over 100 miles a day. Pre-retirement I had a daily commute of about 70 miles a day (and DH and I worked in opposite directions so having a home close to both of us was impossible). We had 3 kids at home and working full time we had a full time au pair. With retiring a lot of that changed. One son moved out. We didn't need the au pair any more, etc.

Also, we sold the expensive house that had been great when we had 6 people living there and was a good location for work. We are just about to buy a house that is much less expensive than the old house but is not located where I would have wanted to be located when I was working full time.

There are a lot of other things as well. Our maintenance expenses and yard expenses are much less now because we have more time to do things ourselves. When I was working full time (I still work very, very part time) I spent over $100 a month on dry cleaning. Now it is minimal and so on.

We did track our expenses for years so we knew how much we were spending and I did a lot of projections for expenses. In our case we have high expenses for the first 5 years since we have adolescents at home but I projected out expenses years in the future.

DH retired almost 2 years ago and, yes, some of those projections were wrong but we have adapted (in some case we projected too low but in other cases we projected too high). The bottom line is that we will make the adjustments we need to make as things go. But there was just no way to live on our final retirement budget while working unless we waited until all of our kids were grown and gone and we didn't want to do that (DH was almost 63 when he retired. He will be almost 66 when our daughter graduates high school).
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Old 02-09-2012, 02:10 PM   #29
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This article is all over the place IMO:
Here's a bit of advice if you haven't saved a dime for your retirement: Try it out first. ??
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Old 02-09-2012, 02:14 PM   #30
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I thought this was how one retires, and something everyone does. Work as hard as as possible on increasing savings and decreasing spending (nicely complementary efforts, BTW). When you have proven to yourself that your savings are enough to support your spending, plus any additional you might be planning for travel etc, then retire.
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Old 02-09-2012, 03:21 PM   #31
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I guess we did it all wrong. Never actually documented spending until last year (5 years post ER). When w*rking and living in the Midwest, I estimated spending as the difference between what I (and DW) earned and what we saved. Crude, but effective when you are still w*rking. Since the savings were anywhere from 25% to 40% most years, I knew there was some "give" in the budget if we ever wanted to change our lifestyle.

BUT, our real ER goal was to move to Paradise. Although we had visited many times and even had our living quarters paid for here, we found it difficult to plan anything approaching a budget. Back-of-the envelope was about as good as we were going to get. My plan was to "over-plan" in case we got it wrong (or lost the envelope).

Update: Our spending last year (discussed in another thread) turned out to be considerably higher than the old envelope would have suggested (well, full disclosure, we DID actually lose the envelope!) We spent more than I ever earned - probably more than I and DW earned together some years (especially when she was FT stay-at-home-with-kids and PT empl*yed).

The good news is that the "over-plan" plan is working. Quite simply, the plan was to save enough to more than meet the "envelope" budget, plus have backups to our backups, e.g., DW takes her small SS, but I'm waiting until 70 or until the envelope method starts to fail. Additionally, we have never exceeded a 3% SWR - and the stash is now significantly larger than it was at ER.

I DO NOT recommend this to anyone else. It was just a matter of practicality on our parts. Without living the lifestyle, it is difficult to budget effectively - nor was budgeting our usual MO. We also encountered several "surprises" post-move. Our medical has been twice the cost we predicted and OUR inflation has far exceeded the "official" rate.

Still, it has gone according to "plan", so, even though it's not for everyone, it works for us. YMMV
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Old 02-09-2012, 06:31 PM   #32
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Unless your RE budget is going to be substantially different than your working budget, I don't think an actual "test drive" would be all that important. You get tossed in the water, you learn to swim...
A close friend of mine is contemplating retirement later this year. Knowing that his wife is a big spender, I politely asked if he knew if his future pension+SS would cover his current expenses. He truthfully admitted that he did not know. I was taken aback that he did not even seem to care!

Yes, one can swim, but with an anchor tied to his neck?

Anyway, one does not need to actually try to live on a budget if he has been tracking it and knows what he spends on, and has enough buffer for surprises.
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Old 02-09-2012, 07:00 PM   #33
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For me, I established a standard of living (budget) for my entire life based on my income at each stage. Transitioning from working to retirement had absolutley no effect on my budget. My entire retirment plan was based on my current standard of living.

Why retire early if you cannot maintain you current stabdard of living? This article doesn't make sense to me!
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Old 02-09-2012, 07:12 PM   #34
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My retirement budget is 1.6X my current spending. It includes lots of travel and hobbies I don't have time to indulge in while working. I have not tried to live on this amount. I think I will manage.
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Old 02-10-2012, 08:57 AM   #35
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Quote:
Originally Posted by Lagniappe
My retirement budget is 1.6X my current spending. It includes lots of travel and hobbies I don't have time to indulge in while working. I have not tried to live on this amount. I think I will manage.
My budget will also be more as I have been an extreme saver (with the exception of a couple of good trips each year).
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Old 02-10-2012, 04:33 PM   #36
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My retirement budget is 1.6X my current spending. It includes lots of travel and hobbies I don't have time to indulge in while working. I have not tried to live on this amount. I think I will manage.
Same here except 1.3X

2 years in and we are achieving that extra spending as planned. It feels so,..... liberating
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Old 02-10-2012, 04:42 PM   #37
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In only a week I start a "trial retirement" year ( a sabattical). As I have been saving for four years for this special year off (first time my life since I was 14 that I didn't have some sort of a job) I will do as much as I can. I hope to travel extensively and at the end of the year I will see how much it would cost to live a "dream retirement". I have heard from retired friends that the yearning to travel diminishes the longer one is retired. I will at the end of the year be able to see how much a simple frugal lifestyle would cost and how much "extra" I would need for the freedom to explore and discover the world.
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Old 02-11-2012, 12:47 AM   #38
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Nowadays all my earnings go to my corporation. I am paying myself dividends. My goal is not to have to top up during the year. It's one way to test the waters.
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Old 02-13-2012, 02:45 PM   #39
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My retirement budget is 1.6X my current spending. It includes lots of travel and hobbies I don't have time to indulge in while working. I have not tried to live on this amount. I think I will manage.
That is my number also... I have been LBYM for many years and my current annual budget is only 15% of my gross annual pay... Target date is set and I'm counting the days until ER...
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Old 02-14-2012, 09:30 AM   #40
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You could say we are, but the other way around. We have been tallying every cent for nearly 25 years. Then we looked carefully at what will change vs. what say the same and plan to live at no more than 5K more than now. We are pretty frugal. Some things will increase (entertainment, for example) and some decrease (transportation, utilities).
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