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Old 04-24-2015, 02:55 PM   #121
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I think you are quite wrong but I don't want to dwell on scenarios of losing my spouse so I will let you think you are correct.
I'm pretty curious about how much the spending would actually decline.

Assuming the surviving spouse stays put in the same house, I could see auto/transportation, vacation/traveling, some utilities, groceries, dining out, health care, declining while fixed housing costs remain roughly the same. But it may depend on the person, as you might dine out less or more after losing a spouse (if the surviving spouse wasn't the chef, for example).

I was advising my parents on whether to take the survivor's option on mom's pension. She loses out on some of the monthly payment, but my dad gets insurance against outliving her. With her pension and 2 SS's, they would receive $70k/yr COLA'd. If her pension and SS goes away with her, my dad would only have $25k/yr from SS.

I posed the question to them "could dad live on $25k plus income from the investment portfolio)"? I know his expenses won't drop by half, but it'll be somewhere between 50% and 100% of their joint expenses.
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Old 04-24-2015, 03:32 PM   #122
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Originally Posted by FUEGO View Post
I'm pretty curious about how much the spending would actually decline.

Assuming the surviving spouse stays put in the same house, I could see auto/transportation, vacation/traveling, some utilities, groceries, dining out, health care, declining while fixed housing costs remain roughly the same. But it may depend on the person, as you might dine out less or more after losing a spouse (if the surviving spouse wasn't the chef, for example).

I was advising my parents on whether to take the survivor's option on mom's pension. She loses out on some of the monthly payment, but my dad gets insurance against outliving her. With her pension and 2 SS's, they would receive $70k/yr COLA'd. If her pension and SS goes away with her, my dad would only have $25k/yr from SS.

I posed the question to them "could dad live on $25k plus income from the investment portfolio)"? I know his expenses won't drop by half, but it'll be somewhere between 50% and 100% of their joint expenses.
Expenses that would decline (this is assuming spouse is dying before age 70): Food, water, vacation costs, auto expense, clothing, cell phone, medical, need for prolonged medical care. In addition the need to keep a home paid in event of a long term hospitalization of a spouse would disappear making moving to a smaller living space much more practical. My estimate for these not counting the likelihood I would be living in a smaller and more rural location is about a 18% reduction of expense.
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Old 04-24-2015, 03:58 PM   #123
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Don't forget the possibly significant jump in the tax bracket for the surviving spouse, too. It may not happen depending on income before and after, but I've seen it jump someone out of the 15% joint bracket and into the 25% single bracket. So you can end up with less income, not a major drop in spending, and higher taxes. It's just something that people should take into consideration in their planning.
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Old 04-24-2015, 05:09 PM   #124
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Don't forget the possibly significant jump in the tax bracket for the surviving spouse, too. It may not happen depending on income before and after, but I've seen it jump someone out of the 15% joint bracket and into the 25% single bracket. So you can end up with less income, not a major drop in spending, and higher taxes. It's just something that people should take into consideration in their planning.
Hardly the worse thing about losing DW, but the tax increase was a shock even knowing it was coming.

Expenses dropped a bit after she passed, but hardly by half, maybe 20% tops. Much of that was un-reimbursed medical expenses and much cheaper vacations.

As for the OPs question - At 30 I had a pregnant wife, one kid, a new job, and a mortgage. I couldn't do it on a million... Maybe if DW kept her job....HA!
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Old 04-24-2015, 06:21 PM   #125
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Don't forget the possibly significant jump in the tax bracket for the surviving spouse, too. It may not happen depending on income before and after, but I've seen it jump someone out of the 15% joint bracket and into the 25% single bracket. So you can end up with less income, not a major drop in spending, and higher taxes. It's just something that people should take into consideration in their planning.
Understandable. For married filing jointly, you can have up to $90,800 non-capital gains income in 2014 and stay within the 15% marginal tax bracket ($92,350 if both over 65). For single, you can only have up to $47,050 gross income ($48,600 if over 65). That's using the standard deduction.
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Old 04-24-2015, 07:14 PM   #126
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However, there is a couple with an ER blog (they probably have more than $1m, I don't know) and their plan for healthcare for their kid is to get free healthcare from Taiwan (the mother's home). Which is fine, except they live in the US and are a 15 hour flight from Taiwan. Would you fly a severely sick kid across the pacific? Or, what if you had an emergency where US care is required and then you are on the hook for $$$$ out of pocket. That plan is either unrealistic or just plain irresponsible.
Actually both their blog and the article that drew so many people to it (and into discussing their lifestyle choices) make it pretty clear that they have already moved to Taiwan (initially for much cheaper IVF treatments -- see Making a Baby - Go Curry Cracker!Go Curry Cracker!), and have subsequently stayed on to have the baby. They plan to continue travelling once the baby is about 6 months old.

Good international medical insurance can be relatively inexpensive if you exclude the US as a place for treatment, which they could do because if they needed serious medical care they could always return to Taiwan (which has one of the best medical/insurance systems in the world -- read TR Reid's book on national health insurance systems and be prepared to cry if you are from the US....). You can also buy international policies that cover short-term treatment in the US for a decent price.
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Old 04-24-2015, 07:39 PM   #127
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I think you are quite wrong but I don't want to dwell on scenarios of losing my spouse so I will let you think you are correct.
Actually I know I am right because I lived through this scenario . Food costs went down a little . Car costs stayed the same . House costs stayed the same . All in all I would say a small decrease but certainly not half or even 30% more like 10% or 15%. Of course if the spouse were in a nursing home or had a lot of medical bills it would be higher .
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Old 04-24-2015, 07:52 PM   #128
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Expenses dropped a bit after she passed, but hardly by half, maybe 20% tops. Much of that was un-reimbursed medical expenses and much cheaper vacations.
That's about what I figured - somewhere in the 20-25% reduction since maybe half the expenses remain about the same and the other half of expenses would get cut in half (or close to it).
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Old 04-24-2015, 08:40 PM   #129
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Actually I know I am right because I lived through this scenario . Food costs went down a little . Car costs stayed the same . House costs stayed the same . All in all I would say a small decrease but certainly not half or even 30% more like 10% or 15%. Of course if the spouse were in a nursing home or had a lot of medical bills it would be higher .
No matter, you're still wrong. So there.
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Old 04-24-2015, 09:55 PM   #130
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No matter, you're still wrong. So there.
Ask my SO I am never wrong !
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Old 04-24-2015, 10:34 PM   #131
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The reduction to spending is minimal . You still have the same property taxes , utilities & maintenance on less income .
I don't think a 20% to 30% reduction is out of the question and certainly would not consider it minimal. I would not stay in a larger home if I were single, so housing would drop some (maybe from a 2 or 3bd place to a 1bd apartment for a 20% reduction in housing. Food would go down by 30% to 40%. Medical should be cut in half. Taxes are not a huge issue with Roths and lower spending...could negate *some* of the reductions in spending. Plane tickets go down by 50%. Hotels stay the same.

Anyway, we can't take one or two people's experience and declare that nobody notices a significant reduction in spending on death of a spouse.


Edit: And reviewing my previous post, I never said spending is cut in half, I said spending is reduced on some items.
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Old 04-25-2015, 01:15 AM   #132
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If something happened to one of us, we both agree that the surviving spouse would not want to live alone in a house the size we have now, so housing size and many of the expenses would be cut in half. Car expenses would go from one to two cars so those expenses would drop. Utilities would drop with a house half the size and one less person. Food, medical, dental, hair salons, clothes, hobby costs, cell phone would all be cut at least close to half.

The surviving spouse would lose the lower SS benefits, but keep the higher SS, all the pensions and asset income which would increase due to the money left to invest after downsizing. Taxes would go up, but for or particular circumstances I can't see overall expenses not dropping significantly especially, with a much smaller house and one less car.
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Old 04-25-2015, 08:06 AM   #133
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Larry Kotlikoff answered the question already, and he actually knows something

"Two can live for the price of 1.6"
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Old 04-25-2015, 10:30 AM   #134
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If something happened to one of us, we both agree that the surviving spouse would not want to live alone in a house the size we have now, so housing size and many of the expenses would be cut in half. Car expenses would go from one to two cars so those expenses would drop. Utilities would drop with a house half the size and one less person. Food, medical, dental, hair salons, clothes, hobby costs, cell phone would all be cut at least close to half.
I reckon this is largely situational. My great-uncle and his wife downsized to a 1BR place when they retired. They also sold one of their cars and they only drive once or twice a week for groceries. There's really not a lot of fat to trim if/when one of them passes away unless the surviving spouse moves in with one of their children.
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Old 04-25-2015, 11:26 AM   #135
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Larry Kotlikoff answered the question already, and he actually knows something

"Two can live for the price of 1.6"


Good one! On average that is probably true, although in individual cases of course the spending habits of each spouse may affect the ratio.

Anecdotally, after my divorce my expenditures dropped like a rock. In fact, in my case two could live for the price of 3.
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Old 04-25-2015, 11:00 PM   #136
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Larry Kotlikoff answered the question already, and he actually knows something

"Two can live for the price of 1.6"
Put another way, dropping from 2 people (living for the price of 1.6 people) to 1 person (living for the price of 1 person) results in a 37.5% (0.6/1.6) reduction in living expenses. Sounds about right given some people will right size their house and auto consumption upon the demise of a spouse.
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