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Old 08-22-2014, 12:07 PM   #21
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Well, summer is over and I have enjoyed my time with the kids. I try and read a little each day on this forum and few others (MMM, etc) as I have learned a lot from my peers and gained perspective in my new normal. However, one thing that has me perplexed is reading about what others proclaim are their budgets and expenses, especially the ERE and MMM folks who proclaim to live on less than 40K per year. It is my opinion that a lot of these people do not factor in capital expenditures with their typical annual expenses. Let me give a simple example. A small family (3 kids or less) in America is going to have housing, transportation and maybe college expenses. As such, they need to have reserves for replacement for housing components, cars and some college costs. In my case, I have banked enough in college funds for my kids already, but I put about 5k a year in there for over 15 years. As to housing, I assume around 4K per year as a reserve which covers Roofing, Paint, HVAC, Water heater, Appliances and Maintenance equipment (lawn mower, etc) for a 20 yr cycle. Lastly, I buy a new car to me every 4 to 5 years (We drive our cars for 8 to 10 years). This means I need around 25K (today's dollars) each 5 years, so 5k per year.

Thus, if one is being realistic, this small family needs around 14k for cap ex or in my case at least 10K. My insurance costs are running around 24K and my housing costs (taxes, utilities, etc) less insurance and cap ex is running around 6K.

So, what I am saying is I find it hard to believe people are being realistic when they say they can live on less than 40k per year "all in" when I need at least 40K to cover insurance, housing and cap expenditures for large ticket items. My current budget is 70k net and it's tight. Remember, I have no mortgage, college funds banked and no other debt.

I feel compelled to drop in on the MMM and ERE crowd and point out that they may not be realistically factoring in all of life's costs. However, I brought this up here because most of you in the Early Retirement forum are the more experienced group and would like your thoughts and comments.
I can assure you that many of us are "realistically factoring in all of life's costs", and have a very good handle on realistic costs due to being retired for a number of years already. This isn't a theoretical exercise, to many of us.

Not all of us choose to support and maintain a "small family" with college aged kids, multiple cars, and so on. Many of us retire with no debt, in a modest paid off home in a low COL location in flyover country. Some of us do not even like to travel.

If you CHOOSE to spend more, that is your prerogative and I say, go for it! That said, your lifestyle choices are yours, not everyone's.
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Old 08-22-2014, 12:48 PM   #22
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A question on expenses; Church and charitable contributions.

We donate $25 week or $100 month to our church and a little extra at Christmas. We also minimally support breast cancer, catholic charities and the Salvation Army a few times a year. I haven't seen any mention of this in anyone's financial budget......anybody want to comment on how this works into a frugal middle class budget?
Ours isn't frugal, but I'll post what we did last year, pre-retirement. Charitable donations were 11% of our AGI, with 7.5% going to our church, 2% to the local women's shelter and the rest to miscellaneous charities. Some of that remainder went to a donor-advised fund at Fidelity, meaning that I got the deduction last year but can have them send checks to charities at any time.

We made the decision to continue our 2014 church pledge even though I retired in May (3 years earlier than planned, so when we made the commitment last year we assumed I'd be working the whole year). Same with commitments to the women's shelter- we've got commitments of $3K to be paid over the next few years and we'll honor those.

Next year will be another ball game. DH thinks we ought to scale back our giving to the church in proportion to the drop in our income. Frankly, we could afford to keep it at current levels but I'm thinking of doing something in between. I spent a few years as the church Treasurer. I know where DH and I are in relation to the rest of the people in the pews and how many people have decreased pledges or stopped pledging at all while we increased ours every year. It may be time to cut back a little. OTOH, as long as we're taking extravagant vacations I'd feel wrong not giving away some of our blessings.
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Old 08-22-2014, 01:22 PM   #23
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Why would you not scale back church/charitable giving if your income decreases I would expect this just as I might expect you to increase giving as your income increases.
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Old 08-22-2014, 01:52 PM   #24
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I can assure you that many of us are "realistically factoring in all of life's costs", and have a very good handle on realistic costs due to being retired for a number of years already. This isn't a theoretical exercise, to many of us.

Not all of us choose to support and maintain a "small family" with college aged kids, multiple cars, and so on. Many of us retire with no debt, in a modest paid off home in a low COL location in flyover country. Some of us do not even like to travel.

If you CHOOSE to spend more, that is your prerogative and I say, go for it! That said, your lifestyle choices are yours, not everyone's.
+1. I am not sure why the topic would cause the OP to "rant" on . It's not a bad topic to discuss but there are other things that deserve one's "rant" than this.
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Old 08-22-2014, 02:24 PM   #25
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If you look at the cost of attendance for a public colleges, especially in flyover country, and subtract out tuition, books and other school costs, even in California it doesn't cost that much to live like a college student. On some of the frugal forums the students decided to just keep the same lifestyle and use their post graduate incomes to buy years of ER instead of a big house with a mortgage out in the 'burbs with increased transportation costs to and from work. And many these days are choosing to stay child-free.

I do agree that some of the budgets I see with big houses and little kids are underestimating how much both cost over the long haul. And some of the bloggers budgets do seem to leave out a fair bit like dental expenses, gas for all the driving trips they take, or they attribute things like car expenses solely to their spouse and leave it our of their ER budget. But I guess if you don't have a spectacularly low and unrealistic budget it isn't newsworthy, and many online financial writers these days are more interested in catchy article headlines than asking too many questions that might kill the story so they'd have to go find something else to write about.

Some major news outlets had articles about a guy who kept his business expenses low because he had developed an AI application to do the work of 200 tech workers. On the forums people obviously pointed out that anyone who had such an application would in reality be make millions or billions from licensing fees to every major corporation in the world with an IT department, and not just keep costs low for a single mom and pop business, but I never read where one reporter even picked up on this.
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Old 08-22-2014, 02:30 PM   #26
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...I feel compelled to drop in on the MMM and ERE crowd and point out that they may not be realistically factoring in all of life's costs. However, I brought this up here because most of you in the Early Retirement forum are the more experienced group and would like your thoughts and comments.
I used to peruse many other ER sites, but came to the same conclusion as Balance. Many of them IMHO do promote a kind of extreme early retirement that is probably not realistic for the long term. The bloggers after all are trying to promote their point of view, their site, (or book or whatever) and with that axe to grind will rarely want to point out any potential pitfalls. Often the blogger very young or not retired himself.

Rather than being a rant, I felt he was addressing this forum because the members here are NOT like that, that there is a great deal of wisdom here from people who have been there, done that. It is also why I am a member of only this forum. I want to know about the problems as well as possible remedies. I find that here. I think his post was actually a bit of a complement to this forum.

In addition I do feel that there must be a fundamental difference between retiring with young kids, and retiring after they have left the nest. Certainly for me it has been much easier to estimate expenses post kids.
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Old 08-22-2014, 02:45 PM   #27
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I could live like George Clooney on 40 grand per
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Old 08-22-2014, 03:09 PM   #28
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Although I think it's feasible for a person or a couple to retire on 40K/year in some parts of the country it is extremely difficult for the two us to live on less than 60K/year after taxes in the Boston area (our retirement budget is 80K that includes 12K for travel). We live in a new construction condo with no mortgage and have zero debt but we like to travel and go out to eat once or twice a week and periodically splurge a little.

Before we both retired our goal was to maintain the same lifestyle we had while working and we don't like to spend our retirement days clipping coupons and looking for senior discounts and since we can afford it why not.

As some people stated earlier each retired person's lifestyle is different so if a person or a couple with kids are able to spend 40K/year while happy and satisfied and not feel deprived then that's great.
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Old 08-22-2014, 03:15 PM   #29
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$80k a year after taxes is likely about $90k a year before taxes.

For an early retiree using a fairly safe 3% SWR that is a $3,000,000 portfolio.

I think a more appropriate rant would be how we expect a large portion of the population to be able to save that amount and retire early.
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Old 08-22-2014, 03:18 PM   #30
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I found that, since retired, I have a need for a lot less STUFF....


In fact, I'm getting rid of clutter and unused items and simplifying my life, to the extreme..

I can live quite nicely on 36000-40000 per year, gross, I am single and live in one of the Areas that was recently identified as a "best place to retire on 30,000 a year." I still have a mortgage, but it would not pay to pay it off.

I live in a rural area, on a paved state road.... neighbors are nice and quiet and don't bother each other, and it's quiet. I had a new steel roof put on the year or so before I retired (at 57), and have a 2011 SUV with only 10,000 miles on it. After a career of driving, driving, driving, (Supervisor for a Utility) I have NO desire to get in a car or any other conveyance and travel and stay in a hotel, but that's me. I understand a LOT of folks love to travel...

IF you do NOT travel, life is pretty even keeled, expense wise. I figure my gas boiler would be the only thing that would be REALLY expensive to replace, and it is running fine. Plumbers that I have do a yearly maintenance check tell me it's a great unit ( Slant Fin) and should last a long time..but if it gives up tomorrow, so be it, I can afford to replace it....

This may sound funny, but I have recently been thinking about trying to spend MORE money, but I am at a loss on what to spend it on. I don't NEED anything. I don't WANT anything. RMD's and SS at 70 is going to KILL me, tax wise!

I LIKE peace and quiet and the tranquil life of being retired in the country. I will probably spend money on flower bulbs this fall because I love flowers in the spring and summer......

I feel very lucky.
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Old 08-22-2014, 03:21 PM   #31
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Why would you not scale back church/charitable giving if your income decreases I would expect this just as I might expect you to increase giving as your income increases.
While we got through the worst years of the financial crisis in good shape, even running a successful capital campaign to put up a building (we'd been meeting in a storefront), giving lagged in the last few years. Some due to people moving out of the area (typically the ones in highly-paid jobs!), some decreased, some quit pledging. My feeling was that we were/are able to contribute generously without shortchanging the rest of our lives, so that should continue. I'll probably cut it back some, though. DH feels pretty strongly that it's time.
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Old 08-22-2014, 03:44 PM   #32
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$80k a year after taxes is likely about $90k a year before taxes.

For an early retiree using a fairly safe 3% SWR that is a $3,000,000 portfolio.

I think a more appropriate rant would be how we expect a large portion of the population to be able to save that amount and retire early.
We did not retire too early we decided instead to work for a couple of more years to afford our desired level of spending in retirement without having to relocate to a cheaper cost of living area.

DW retired a year ago at the age of 59 and I just retired in June at the age of 60. The withdrawal from our portfolio would be cut in half when we start collecting SS in a couple of years.
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Old 08-22-2014, 04:17 PM   #33
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We did not retire too early we decided instead to work for a couple of more years to afford our desired level of spending in retirement without having to relocate to a cheaper cost of living area.

DW retired a year ago at the age of 59 and I just retired in June at the age of 60. The withdrawal from our portfolio would be cut in half when we start collecting SS in a couple of years.
Ah ok. Yes, I would not consider age 59 or 60 particularly early and would also be comfortable with a 4% SWR at that age.

I was thinking more of mid 40s and needing to fund possibly 45 to 50 years of retirement.
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Old 08-22-2014, 07:20 PM   #34
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I must be on a roll tonight.

I have lived on around 20k/year for the past 9 years(I quit full time employment then and worked for 3 years part time and then quit entirely.) Some of those early years it was closer to 15k, but prices have gone up. Just because one lives on a certain amount doesn't mean they couldn't spend more. The years before that were even less.

I think this year will be a little higher. I am getting new outdoor furniture(supposed to be delivered on Friday). A niece is getting married in Sept. Her dad died 9 years ago and her mom(my sister) lives on very little. I am thinking I will step forward and offer a couple of things to make the day more festive. I've already talked to my sister about what would help. They are coming the 1st of Sept to get ready. I have no kids of my own, so I am happy to do this.

Regarding roofs and so forth, I bought a townhouse 2 years ago that was new. Hopefully I won't need to replace it anytime soon. I do have insurance to pay if it gets hailed out. I have owned 4 houses on my own and one house when I was married. I have only replaced one roof that wasn't paid for by insurance. That was in relation to the sale of that house. I have had only one house hailed out. Other things house wise both of my brothers are good handymen and are willing to do something usually for the cost of a couple of pizzas.

Cars: The car I have now is 11 years old, I hope to keep it for another at least 4 years, but who knows. That car I bought new, but other cars I have owned I bought used. I know live around two brothers who are really into cars and buy lots of used cars between them. I will probably buy used, with their help. I am not into cars, so I will get something dependable and drive it till it drops.

I can't think of really anything I don't have that I want. I am blessed with the want of few things. Life is good.
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Old 08-22-2014, 07:37 PM   #35
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We currently live on $40K per year. We have finished with the biggies (kid's college, kid's wedding, mortgage paid off, no debt whatsoever) live in a low COLA and are now in the serious, I mean serious, accumulation phase. It's hard work and takes laser like focus to stay the course and continually monitor spending and avoid life style creep but it can and is done by millions every year.
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Old 08-22-2014, 08:44 PM   #36
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Fascinating topic. The OP mentioned a lot about capex not being factored in.

I can tell you that one retiree in our neighborhood is solving this problem by ignoring it. House badly needs exterior repairs. There's a huge tree leaning over it, etc. We're literally watching the house disintegrate. "Problem solved." I know she is on a very tight budget and gets tax assistance from the county, meaning her income is well below $30k. I just hope she stays safe. I help where I can, but most of this stuff needs professional intervention, and none of it will be easy. The huge tree is at least a $1k job as it will require a crane. The siding is easily a $5k job as there are structural issues underneath requiring attention. Etc.

I feel bad for her, but the simple fact is owning a home is expensive. And townhomes are not necessarily exempt. My dad (Chicago area) had fixed expenses of over $9k per year in a townhome. The tax burden -- even with senior exemptions -- was heavy. Then add to that the fact that the townhome association raised monthly dues significantly for -- guess what -- roof repairs and exterior siding replacement. Ha, there you are, $9k a year just like that.
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Old 08-22-2014, 08:46 PM   #37
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It's hard work and takes laser like focus to stay the course and continually monitor spending and avoid life style creep but it can and is done by millions every year.
Uh, that's some pretty serious "corporate speak" there. You are scaring me man!
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Old 08-23-2014, 02:03 AM   #38
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Well, summer is over and I have enjoyed my time with the kids. I try and read a little each day on this forum and few others (MMM, etc) as I have learned a lot from my peers and gained perspective in my new normal. However, one thing that has me perplexed is reading about what others proclaim are their budgets and expenses, especially the ERE and MMM folks who proclaim to live on less than 40K per year. It is my opinion that a lot of these people do not factor in capital expenditures with their typical annual expenses. Let me give a simple example. A small family (3 kids or less) in America is going to have housing, transportation and maybe college expenses. As such, they need to have reserves for replacement for housing components, cars and some college costs. In my case, I have banked enough in college funds for my kids already, but I put about 5k a year in there for over 15 years. As to housing, I assume around 4K per year as a reserve which covers Roofing, Paint, HVAC, Water heater, Appliances and Maintenance equipment (lawn mower, etc) for a 20 yr cycle. Lastly, I buy a new car to me every 4 to 5 years (We drive our cars for 8 to 10 years). This means I need around 25K (today's dollars) each 5 years, so 5k per year.

Thus, if one is being realistic, this small family needs around 14k for cap ex or in my case at least 10K. My insurance costs are running around 24K and my housing costs (taxes, utilities, etc) less insurance and cap ex is running around 6K.

So, what I am saying is I find it hard to believe people are being realistic when they say they can live on less than 40k per year "all in" when I need at least 40K to cover insurance, housing and cap expenditures for large ticket items. My current budget is 70k net and it's tight. Remember, I have no mortgage, college funds banked and no other debt.

I feel compelled to drop in on the MMM and ERE crowd and point out that they may not be realistically factoring in all of life's costs. However, I brought this up here because most of you in the Early Retirement forum are the more experienced group and would like your thoughts and comments.

A couple of thoughts first of all if you look at household income in the US, literally 1/2 the country is living on less than 55K, and the 36% are living on less than 40K. Presumably most of those people have either rent or a mortgage so obviously plenty of people are doing it,not just the LYBM crowd here or on MM.

As to your larger point, that it is easy to under budget for capex expenses. I completely agree. I have had my house, (built about 58) for about 12 years and bought my ex GF 1/2 ownership out 10 years ago. During last 10 years I've transferred $4K/month (from accumulated dividends and interest) from my brokerage account into my checking, in a few years I've actually ended transferring some money back to my brokerage account and few years sold some stock to fund expenses.
There have been additional income from rental properties, and other investments, but it was relatively small no more than $500-$1000/month less expense. So I figure I've been spending about $54K/year, certainly not frugal but considerably less than any sane SWR rate.

This last couple of year has seen an insane spike in home maintenance expense, to the point where I feel I've been hemorrhaging money lately.

I've budgeted 50K for kitchen remodel for many years, and also 3K year in general maintenance. I actually averaged only $1K a year so I had in some ways, $20K of unspent maintenance, but I don't actually have a separate labeled house repair fund. But still the list of house expense the last two year has been ugh
New energy efficient water heater $1200
Electrical system upgrade $3,000
New metal roof $21,000
PV System $12,000 (20 year pre paid lease)
Kitchen Remodel 58K -50K budgeted $8,000
Replacing plumbing with copper lines $7,000
New Fence $2,500
Flooring and cabinets for downstairs $3,000 so far probably $7,000 total
A grand total of $61,700 even after subtracting the $20k that should have spent it is still an extra $4200/year. I have lots of cushion but for people on tighter retirement budget this could spell trouble.
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Old 08-23-2014, 08:01 AM   #39
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But still the list of house expense the last two year <snip>
A grand total of $61,700 even after subtracting the $20k that should have spent it is still an extra $4200/year. I have lots of cushion but for people on tighter retirement budget this could spell trouble.
Which is why so many seniors live in houses that are crumbling around them. I have a brother and SIL in that situation. Really sad.
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Old 08-23-2014, 08:34 AM   #40
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Uh, that's some pretty serious "corporate speak" there. You are scaring me man!
Yeah, that did come out pretty corporately. I really need a vacation
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