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Old 12-11-2014, 01:15 PM   #21
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That's an interesting view Alan. Income taxes are our biggest spending category and I always include income taxes in our budget related calculations. Just another way of looking at things I guess.......

I think it likely that OP should have asked for absolute dollars of housing expenditure as opposed to housing expenditures as a percentage of retirement spending. Then he could have taken the dollar amounts and compared them to what he plans to spend. Percentages seem to bring in a lot of "it depends" based on what is included in the dividend and the divisor.

Income taxes are our biggest category as well, but they are unusually high because I am choosing to be very aggressive in doing ROTH conversions.

The OP did say he was calculating his percentage on gross income, but if I did my calculation only on income then it would be a % based on pensions + dividends + cap gains, and my spending is currently much greater than income, which is why I calculated it on spending, and that spending does not include ROTH conversions.

Comparing Apples to Pomegranates I guess.
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Old 12-11-2014, 01:43 PM   #22
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Ouch, I misread the OP's question about the denominator. I used % of expenses (i.e. budget), not % of gross income. Because my investment income is about twice my expenses, I would have to halve my original figure of 30% (to 15%) if using % of gross income instead of % of expenses.
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Old 12-11-2014, 02:18 PM   #23
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Currently housing is less than 10 of our gross income. We don't quite know what we will do after DW retires. It could jump to nearly 30% if we decided to keep renting in the San Francisco area. Or it could stay below 10% if we moved back to the southeast US or Europe.
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Old 12-11-2014, 02:36 PM   #24
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Mortgage $0. Property taxes are ~$2402. Insurance ~$1,433. Maintenance, $3,000 likely much less.

So, less than 10% as I am planning on over $100K income.
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Old 12-11-2014, 03:24 PM   #25
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My annual expenses (I had no mortgage) on my very modest 30 yo Northern Virginia TH (sold this summer for $400K) were as follows:

4K Prop Tax (2014 rate)
1K HOA
0.6K Ins
3.5K Utilities (including FIOS bundle)
4k Maintenance/&Upgrades (average over 13 years of ownership)

So about 15K/yr , which is/was 23% of my 65K after Fed/State tax budget.

I am looking at newer homes in areas where the property tax will be half of what I'm paying now and with little or no HOA fees so I'm hoping to drop the 15K/yr down to about 10-12K/yr.
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Old 12-11-2014, 06:35 PM   #26
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OP here.
Several folks questioned why I asked the question the way I did (as a percentage of gross income) so I'll try to clarify.

My rationale is (and I may be all spun around the axel on this since I'm not yet retired) that my portfolio at the time of retirement will throw off about 80k of cash from which I must pay taxes and expenses. (Who knows what taxes will be in four years)

DW and I have some options on whether we stay living in our Pre-retirement house or try to down size in order to live more comfortably (financially). Our house is modest and moving would likely mean going to an apartment.

If we stay in our current house, it will cost us close to $20K annually, which will be about 25% of our 80K of income.

I was wondering if that large a percentage was typical and if so, maybe it is less worrisome and more doable then I fear.

That said, I realize that everyone's situation is different but from a pre retirement perspective things like housing look very scary.

Thanks, EMI GUY
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Old 12-12-2014, 04:56 AM   #27
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OP here......
.......
If we stay in our current house, it will cost us close to $20K annually, which will be about 25% of our 80K of income.

I was wondering if that large a percentage was typical and if so, maybe it is less worrisome and more doable then I fear.
........
Do the rest of your discretionary and non-discretionary budget line items (Taxes, Medical, Cars, Food, Entertainment....) fit into the pre-planning budget you are now doing? Then IMO, you are probably OK especially if you throw in a Management Reserve line item of 5-10% into your budget.

It sounds like you have the option staying put in the home you are happy with for a year or two to see if your actual expenses are lining up with your $80K before tax budget before doing the downsizing/selling/moving "thing" if that's what is needed.
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Old 12-12-2014, 07:57 AM   #28
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I was wondering if that large a percentage was typical and if so, maybe it is less worrisome and more doable then I fear.

That said, I realize that everyone's situation is different but from a pre retirement perspective things like housing look very scary.
I don't think it matters much what the percentage is as long as you have a reasonable overall WR and you haven't neglected to include capital expenditures / maintenance.

Also folks are using different withdrawal rates. Some people may be at 2% and others are happily spending 4 or more. Some people have their healthcare covered for a nominal amount and others have to allocate a huge chunk of their budget.

While working, I think the recommendation was to not let the mortgage exceed 35% of gross income. But if you add taxes and maintenance I think it could get to 50% easily.
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Old 12-12-2014, 10:17 AM   #29
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For me, the amount for RE taxes, insurance and all utilities is about 16% of *only* my net pension income. If I throw in rental income and dividends, then it's about 9%. I haven't added in any maintenance (budget 5K a year) since I have a specific income stream for that category.
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Old 12-12-2014, 01:45 PM   #30
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Here is my "housing" budget:

2k taxes
3k insurance
2k electric
1k Water, Garbage
3k Alarm system, Pest control, lawn care, HOA
7k Maintenance (includes "accrual" for roof, water heater, painting)
19k Total

19% of total budget

Edit: thought I'd add in the breakdown of maintenance:

938 HVAC
733 Roof
395 Appliances
500 Exterior Painting
250 Interior Painting
120 Water Softener
167 Hot Water Heater
1460 Pool
2700 All other - things break !
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Old 12-12-2014, 01:55 PM   #31
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My total yearly expenses is about 25% of my net monthly pension income. This includes mortgage, taxes, insurance, heat/cool, water, trash, and cable.


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Old 12-12-2014, 07:40 PM   #32
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Ours is about 15%.


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Old 12-13-2014, 01:52 AM   #33
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Honestly I just don't see what can be obtained from any of these figures. How we spend our money in or before retirement ultimately depends on what we value most. I spent $0.00 (0%) on travel last year, and I am sure others spent considerably more on that. My unused travel money can be spent on my house, since I am a homebody and value my house a lot, thus I am looking for a nicer place.

The best way to work through these figures in retirement planning, IMO, is to use your present housing expenses and any expected changes in them, to project what these expenses probably will be in retirement.
It's true that "it depends"....but for someone who's relatively new to the retirement budgeting/financing realm, it can be interesting to see what rules-of-thumb people might have.

And it can have some indirect implications. For instance - the larger of % your housing budget is, the less slack you have to cut back in dire times (or sudden tax policy changes, which is a very real possibility in the not-too-distant-future). You can slash travel, and/or substitute different things in food or other budgets without too much noticeable impact to quality of life if your portfolio hits hard times, but I would imagine that most of one's housing expenses are mostly fixed and/or not subject to adjustment as easily as other cost categories, barring a move to a cheaper area or significant downsizing (which would entail a significant decision and transaction costs as well as a large hit to your quality of life, since most people don't move on a whim, and most people select their housing stock in retirement based on what they want and can afford, not typically a "Live Beyond Your Mean splurge").

Seeing that the experienced ER pros have run their budgets and forecasting through the ringer 10 times from Sunday and mostly have housing % in the low teens to upper teens % can give someone a nice warm fuzzy that they aren't way out of line if they are in the upper teens/low 20s for housing as a % of budget/expenses.
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Old 12-13-2014, 05:53 AM   #34
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Amen I say, Amen!
Thank you, just what I was thinking but was unable to put into words!
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Old 12-13-2014, 06:39 AM   #35
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My housing costs are around 7%. But you probably wouldn't be interested in the housing accommodations of a hermit.

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Old 12-13-2014, 12:05 PM   #36
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My housing costs are around 7%. But you probably wouldn't be interested in the housing accommodations of a hermit.

Hermit
OP might not be interested; but, I could definitely see the hermit lifestyle in my future. If only I had Howard Hughes money, 7% could maintain quite a hermitage.
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Old 12-13-2014, 12:20 PM   #37
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Ours are between 30-35% of gross depending on vacation rental income. We have a mortgage which represents about half of our housing cost.
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Old 12-13-2014, 03:05 PM   #38
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Ours is about 25% of our gross pay. With DH retiring in Feb. 2015, it will still be 25% of our retirement monthly budget. Difference is, we have enough in cash to pay it off if need be. Just too tight to let go of those $. House won't be paid for 12 more years, unless we decide different.
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