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WSJ: Where Retirees Underestimate Spending
Old 04-23-2018, 12:38 AM   #1
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WSJ: Where Retirees Underestimate Spending

The article is behind the WSJ’s paywall, so here’s the summary:

“We spoke to financial advisers about some of the most frequent mistakes people make when it comes to estimating how much they’ll spend in retirement.”
  1. Helping family
  2. Big-ticket periodic items
  3. Entertainment
  4. Health care
  5. Long-term care
  6. Living a long life

Source: https://www.wsj.com/articles/where-r...ing-1524061487
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Old 04-23-2018, 04:25 AM   #2
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Quote:
Originally Posted by Human View Post
The article is behind the WSJ’s paywall, so here’s the summary:

“We spoke to financial advisers about some of the most frequent mistakes people make when it comes to estimating how much they’ll spend in retirement.”
  1. Helping family
  2. Big-ticket periodic items
  3. Entertainment
  4. Health care
  5. Long-term care
  6. Living a long life

Source: https://www.wsj.com/articles/where-r...ing-1524061487
Not exactly earth shakingly new information, IMO.
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Old 04-23-2018, 04:39 AM   #3
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So basically, everything.
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Old 04-23-2018, 06:21 AM   #4
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Originally Posted by Human View Post
“We spoke to financial advisers...
Tells me all I need to know.

But seriously it's rare that I read anything in the press nowadays that does more than scratch the surface of whatever topic of the piece may be about. Plus, both the "financial advisers" and the WSJ may have conflicts of interest with the whole idea of RE.

It's true those are probably the "biggies" to worry about, but I think most people who reach a point where they can RE have already thought about them.
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Old 04-23-2018, 01:15 PM   #5
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All those times We've spoken with advisors. #6, life expectancy is the only thing I remember them speaking about. They all tried to push the fact that you need at least 80% of current income and expected loans for cars, home, etc for the rest of your lives. Not once did they ever talk about individuals having every thing paid for in retirement.
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Old 04-23-2018, 01:19 PM   #6
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Quote:
Originally Posted by Human View Post
The article is behind the WSJ’s paywall, so here’s the summary:

“We spoke to financial advisers about some of the most frequent mistakes people make when it comes to estimating how much they’ll spend in retirement.”
  1. Helping family
  2. Big-ticket periodic items
  3. Entertainment
  4. Health care
  5. Long-term care
  6. Living a long life

Source: https://www.wsj.com/articles/where-r...ing-1524061487
Looks like WSJ is looking for page filler material.
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Old 04-23-2018, 01:44 PM   #7
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Quote:
Originally Posted by Human View Post
The article is behind the WSJ’s paywall, so here’s the summary:

“We spoke to financial advisers about some of the most frequent mistakes people make when it comes to estimating how much they’ll spend in retirement.”
  1. Helping family
  2. Big-ticket periodic items
  3. Entertainment
  4. Health care
  5. Long-term care
  6. Living a long life

Source: https://www.wsj.com/articles/where-r...ing-1524061487
Not really a surprise. Here's what I've done in those areas

Helping Family.
All my family is back in the UK so I can avoid them most of the time.......seriously my help is currently large Christmas checks to my grand nieces and nephews and money left to them in the will.

Big Ticket items.
I bought a new car and spent on home repairs (new roof etc) before I retired, but I still have a large cash slush fund for such items separate from my regular spending account

Entertainment.
I cut the cord to save on cable bills. I have an annual pass to the local cinema that cost me $300 and spend as I've always done on meals out and booze. I go on bicycle touring holidays which are inexpensive; a couple of thousand dollars will easily cover a couple of months.

Health Care.
State retiree health benefits. $100/month premium and low deductibles.

Long term care
I bought a policy that will pay $300/day with a max payout of $350k back in 1997. The monthly premium is $30.

Living a long time.
I'll get SS checks from both the US and the UK and have a defined benefit state pension that will give an index linked lifetime income. I also own a rental property. So I can rely on those for life.
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Old 04-23-2018, 01:46 PM   #8
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I read this as things people don't think about, or under estimate. If you look back to some of the 'Do I have enough' post here, one or two of these has been under considered by some of the posters.
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Old 04-23-2018, 03:07 PM   #9
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Helping family is one that rings true for me. I could spend a lot of money helping adult children who are struggling to get established with their lives, if I chose to. I sorta knew before I retired that was going to be the case (to some extent), but I didn't know it was going to go on for as long as it has. We've had to set some limits.
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Old 04-23-2018, 03:12 PM   #10
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I would be curious on how much people actually spend on helping family. Aging parents especially who have not saved as well as we have for their retirement and cannot afford to maintain their standard of living. We have to constantly help DW's father every time there is an unexpected expenditure. He lives alone in a 3 bedroom house and does not want to move. He also insists on spending $200pm on Smokes and $100pm on Lottery tickets. What makes it worse is he is 4000 miles away.
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Old 04-23-2018, 03:29 PM   #11
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Quote:
Originally Posted by Human View Post
The article is behind the WSJ’s paywall, so here’s the summary:

“We spoke to financial advisers about some of the most frequent mistakes people make when it comes to estimating how much they’ll spend in retirement.”
  1. Helping family
  2. Big-ticket periodic items
  3. Entertainment
  4. Health care
  5. Long-term care
  6. Living a long life

Source: https://www.wsj.com/articles/where-r...ing-1524061487
There's also an unexpected desire to "blow some dough".

The key point is whether one has enough margin in the WR to handle all the above.
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Old 04-23-2018, 04:39 PM   #12
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Quote:
Originally Posted by Hyper View Post
All those times We've spoken with advisors. #6, life expectancy is the only thing I remember them speaking about. They all tried to push the fact that you need at least 80% of current income and expected loans for cars, home, etc for the rest of your lives. Not once did they ever talk about individuals having every thing paid for in retirement.
That's my one question quiz for any FA I meet. As soon as they start spouting % of income needed in retirement I'm done listening.
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Old 04-23-2018, 05:19 PM   #13
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Overall, we are in good shape financially. All the calculators project that our assets will cover us no matter how long we live. We expect to leave a decent legacy to our children.

Helping family
Have already done a fair amount of that. Helped with house down payments. Helped daughter-in-law pay off school loans. Funding 529s for grandchildren.

I don't expect too much more as children are financially settled now.

Big-ticket periodic items
We really aren't the big-ticket type. We don't buy expensive cars. No need for a boat. We already own the house we expect to retire in. No need for expensive repairs or additions at this time.

We may splurge on a big vacation once my wife finally joins me in retirement, and a bit of travel but nothing extraordinary.

Entertainment
We don't spend excessively here. Movies, plays, etc. No really expensive hobbies.

Health care
Who knows? We've got good, inexpensive subsidized ACA plans at the moment. In a few years we'll have Medicare.

Long-term care
We've got a decent Long Term Care Insurance plan. The premiums aren't currently too expensive, and we'll start using my HSA to pay for them once reaching 65. If we were forced to self-insure we could.

Living a long life
Have some serious longevity on my father's side. I am currently being treated for lymphoma but it is going fine so far. Family longevity on my wife's side is a bit less, but she's pretty healthy other than being pre-diabetic.

We plan to delay at least my Social Security (and maybe hers) until 70 as longevity insurance. That and a few annuities we have should provide a very good base for long lives.
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Old 04-23-2018, 05:27 PM   #14
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My comments are in blue, below:
Quote:
Originally Posted by Human View Post
  1. Helping family Which people also do before they retire.
  2. Big-ticket periodic items Which people also pay for before they retire.
  3. Entertainment Which people also pay for before they retire.
  4. Health care OK, I suppose most pay more but Medicare helps at age 65.
  5. Long-term care Yes, this is something to think about although it seems to me that the costs are difficult/impossible to predict so far in advance.
  6. Living a long life Why would anyone plan for retirement income to run out before they have lived an unusually long life?
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Old 04-23-2018, 05:40 PM   #15
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Originally Posted by nun View Post
Not really a surprise. Here's what I've done in those areas

Helping Family.
All my family is back in the UK so I can avoid them most of the time.......seriously my help is currently large Christmas checks to my grand nieces and nephews and money left to them in the will.

Big Ticket items.
I bought a new car and spent on home repairs (new roof etc) before I retired, but I still have a large cash slush fund for such items separate from my regular spending account

Entertainment.
I cut the cord to save on cable bills. I have an annual pass to the local cinema that cost me $300 and spend as I've always done on meals out and booze. I go on bicycle touring holidays which are inexpensive; a couple of thousand dollars will easily cover a couple of months.

Health Care.
State retiree health benefits. $100/month premium and low deductibles.

Long term care
I bought a policy that will pay $300/day with a max payout of $350k back in 1997. The monthly premium is $30.

Living a long time.
I'll get SS checks from both the US and the UK and have a defined benefit state pension that will give an index linked lifetime income. I also own a rental property. So I can rely on those for life.
You are truly set in these 2 areas.
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Old 04-23-2018, 07:09 PM   #16
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  1. Helping family 529's set up for grandchildren. $X from my RMD divided among our sons annually. All our parents are gone, unfortunately
  2. Big-ticket periodic items We have 2 new paid for cars and no mortgage
  3. Entertainment Local road trips. We have cut way back on travel. We used to spend $20K to 40K annually
  4. Health care Medicare advantage
  5. Long-term care Enough money to cover it
  6. Living a long life My day died at 92, my mom at 102. Taking the average, I am figuring 97, I just joined the United Flying Octogenarians
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Old 04-24-2018, 12:14 AM   #17
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Quote:
Originally Posted by ShokWaveRider View Post
I would be curious on how much people actually spend on helping family. Aging parents especially who have not saved as well as we have for their retirement and cannot afford to maintain their standard of living. We have to constantly help DW's father every time there is an unexpected expenditure. He lives alone in a 3 bedroom house and does not want to move. He also insists on spending $200pm on Smokes and $100pm on Lottery tickets. What makes it worse is he is 4000 miles away.
Aging parents have become a fairly big expense for me. Fortunately, I’m not having to provide for them. Instead it’s the frequent travel to where they live, as they need a significant amount of help. I didn’t account for this in any of my retirement spending projections.
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Old 04-24-2018, 05:41 AM   #18
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Quote:
Originally Posted by Hyper View Post
All those times We've spoken with advisors. #6, life expectancy is the only thing I remember them speaking about. They all tried to push the fact that you need at least 80% of current income and expected loans for cars, home, etc for the rest of your lives. Not once did they ever talk about individuals having every thing paid for in retirement.
+1.
Until I learned better, I was scared to death about the 80% rule (seemed pervasive on all FA sites, WSJ, AARP, etc). But once I started tracking our situation, I realized that we were living year in-year out on substantially less than 50% of earnings.

80%might be needed for some, but for us, pure hogwash.
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Old 04-24-2018, 06:18 AM   #19
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+1.
Until I learned better, I was scared to death about the 80% rule (seemed pervasive on all FA sites, WSJ, AARP, etc). But once I started tracking our situation, I realized that we were living year in-year out on substantially less than 50% of earnings.

80%might be needed for some, but for us, pure hogwash.
+2
We slashed our expenses quite a bit before FIRE, so the monies we made before FIRE has no formulaic relevance to retirement needs.
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Old 04-24-2018, 06:24 AM   #20
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+1.
Until I learned better, I was scared to death about the 80% rule (seemed pervasive on all FA sites, WSJ, AARP, etc). But once I started tracking our situation, I realized that we were living year in-year out on substantially less than 50% of earnings.

80%might be needed for some, but for us, pure hogwash.
+1 Don’t ask the barber if you need a haircut- Warren Buffett

Although I’m not retired, I see from up close how retirees spend. Time, social and giving back considerations rule over spending money.
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