What is the most common ER budget?

[RockMiner]

Based on a partial review of past postings, I detect what seem to be roughly three common categories of ER budgets:

Frugal: Plus or minus $24K per year

Modest: + or - $40K per year

Loaded: + or - $80K/year

These categories are approximate, but do seem to capture the most commonly quoted numbers. Each one approx. doubles the preceeding, which is a significant jump in my book. Maybe this duplicates previous threads, but I am curious about what fraction of actual ER's fall into each range. I think this is useful information for those of us in the planning stage...

Please, no offense intended to anyone by the descriptions

 

[retire@40]

You also need to distinguish between single persons and families of 2 or more when stating a budget.

 

[RockMiner]

Good point, retire@40...I'm happy to factor in family status if it's given. I'm not sure how to handle this issue except to say my default assumption would be that of an "empty nest" couple. (a budget for two)

 

[LovesLife]

If I may also add where you live might affect the budget. For instance, even though my house is paid for the taxes in my area are lower than other areas. So I think the cost of living in your area should be considered. The other killer item on a budget is your health insurance. I have seen such a large difference between what people pay for insurance premiums.

I guess what I am saying is that it might not be the amount in your budget but how much is left over for extras.

LovesLife

 

[Beachbumz]

OK, just to confuse the issue right of the bat, our budget is 60K per year, so I guess we would be "modestly Loaded"?

We are 37 and married. We spend way to much on travel and entertainment (and housing), so we could drop back to the "modest" level if we had to.

 

[Cut-Throat]

You also need to distinguish between single persons and families of 2 or more when stating a budget.

I hope everyone can see how the U.S. Tax code gets so complicated rather quickly

 

[John Galt]

Put us down for "Frugal" and we could easily go lower.

JG

 

[Zipper]

The Zippers live on ~$4000/mo. net after income taxes. I'm retired (61), Mrs. Zipper (55) still works.

In addition, we have GST/PST consumption taxes in Canada. (15% ON) on almost everything except food.

Gasoline is taxed higher here.

Property taxes are ~$275/mo.

Food is cheaper in ON compared to FL.

Health Care is pretty well a non-issue here.

Cars are cheaper in the USA.

You have a better climate. 8)

 

[fln]

ER at 39/40, 2 years into it both of us- no working spouse here. Our SWR budget is in the 'Modest' range. Actual budget has been approx. 35K due to the mortgage which we did not pay off since we are still in the process of deciding where to live and also because the home is appreciating quite nicely.

Without the mortgage, we would be in the 'frugal' budget range. In the mean time, we're researching where we want to move to eventually and investing the net saving targetting 'loaded' status in x years.

So if you're my demographic, late 30s/early 40s, ER without a parachute (no working spouse, pension not due until 15+ years, SS not due until 25+ years), prepare for some extensive management of your expense, portfolio and anxiety if you're at the 'frugal' budget level. At the 'modest' level, you have options but depending on your goals and personality makeup, it's not yet a bed of roses. It is still worth it to me but don't count on a carefree lifestyle if you're in the frugal/modest budget level.

 

[unclemick]

We're drifting up to the 33k range (3 - no kids) and are trying to get wild and free - 60-80k next year when SS kicks in.

Getting heretical - it might be worthwhile to dredge up Dory 36's old post - take 33% of your current/last working salary/income and play with those numbers.

33% of 100k for us in 1992 - is a number we're just now approaching in 2004.

Basically we didn't change lifestyle too much in ER (ala the Terhorsts').

To repeat, I like frugal - spending money is somewhat painful - but am trying to adjust.

 

[John Galt]

How can you jump from 33K to 60K to 80K with
just SS? Or are you and SO both starting to draw at the same time?

JG

 

[unclemick]

I can't - but it's an excuse to start spending the SEC yield of our IRA's as well - 26k SS(his and hers) plus 25-30 k of IRA's.

After twelve years of practice - at 62 next year - with early SS - we're entering the 'old age part of ER.'

 

[Jarhead*]

OK, just to confuse the issue right of the bat, our budget is 60K per year, so I guess we would be "modestly Loaded"?  

We are 37 and married. We spend way to much on travel and entertainment (and housing), so we could drop back to the "modest" level if we had to.

Beachbumz: Off topic a bit. (ER's don't follow instructions very well).
Noticed you are retired at age 37 with annual budget of $60,0000. (One of my daughters is age 37, and probably couldn't last 6 mos. without a paycheck)
How you did it would probably be interesting.

Jarhead

 

[Jarhead*]

.

I can't - but it's an excuse to start spending the SEC yield of our IRA's as well - 26k SS(his and hers) plus 25-30 k of IRA's.

Plus the fact that you finally figured out you can't take it with you
Sounds to me like you're going to have to replace your
"hobby" of being frugal.
Have fun.

 

[John Galt]

Hey Jarhead! My son is 38 and gainfully employed.
Although he has very little, he could go a very long time
without a paycheck. Resourceful like his Daddy

JG

 

[charlie]

We are 2 empty nesters living very comfortably in
the Dallas area on about $40K per year.

Cheers,

Charlie

 

[Shredder]

We spend about 2600 to 2800 a month or 31,000 per yr on normal bills, taxes, ect. I suppose we could get to 24,000 with little motivation. Still paying morgage and working wife has a car payment, and those two add over 10,000 to bills. Shredder

 

[Martha]

We don't figure out what we spend on individual items and don't make up a budget. We have tried, but it ends up with rather tense sessions on how the other (I swear mostly me) spends money. So we took another approach. We have investment income and income from my work. I take a monthly draw from work and am paid 3 or 4 bonuses a year. I have not changed my draw for 10 years. Except for large capital expenditures, we live off of my draw. Also, out of my draw comes monthly 15% 401k contributions and withholding for taxes. The bonuses are invested.

After I fully retire, I expect we will live off about the same amount. Some expenses will drop (taxes, no more 401k, no more expensive work clothes) and some will increase (health insurance and travel).

Hand grenade budgeting.

 

[John Galt]

Yep, "hand grenade budgeting" pretty much covers
our system also

JG

 

[haha]

Since it was pointed out that budgets are different for singles and couples, I am curious about what the marginal expense of adding a live-in SO is?

My guesses are that overall housing expense for a couple might be > single, but probably < 1.5* the single budget. A couple probably would not want to live in a 1 bedroom apartment, especially if they were retired or working from home. They also would use more gas and electric.

Phone: If they have a landline, couple pay the same as single. Same for sewer. If water is unmetered, same.
Long distance would increase. If cellphones are used, double.

Recreation: Tickets, drinks, tuitions, etc would double. Travel would offer some savings relative to a single traveler staying alone in a hotel. A couple living together might feel less need to go out and about, so that could decrease recreation expense. Hobbies might roughly double. Overall recreation spending change would be hard to estimate, becaue it depends on behavioral responses. Maybe 1.5*single?

Food- somewhat less than double I would think, because it is easier to use larger economy portions, without resorting to mass freezing.

Health Insurance-double.

Car expenses might double (less any discount) if you need 2, but would increase but not double if you can share a car.

I guess that including the cost of larger quarters, a couple might spend on average 1.75 what either of them would spend single. This is trying to hold overall standard of living unchanged. If they are madly in love, like nothing quite as much as mooning at one another over a quiet dinner at home, and spend a lot of free time in bed, couplehood might only cost 1.35* single. At least as long as that condition lasts.

So scaling down to a single from a couple's budget, I suppose one might multiply the couple budget by about 60-75%

Does this meet the "yeah, it sounds about right test"?

Mikey

 

[John Galt]

Yep!

 

[KB]

I agree too Mikey.

When my 2 kids move out, my budget will drop about 1/2 person since many of the expenses are 'house' related and won't drop 50%.

My annual budget is around 26,000 for the 3 of us so should drop somewhat. I'm working on eliminating the extras that I can now, so I have a better idea of how low I can go. I'm saving 45% of my take home right now. Stashing cash and investing....

 

[malakito]

I think we'll fall into the modest range, but it is going to be hard to tell for a while.

Right now I assume that our retirement spending will equal our current spending, for which I use our last six months actual expenses in Quicken times 2. However, with three young kids at home now and not when we retire (at 55 it looks like), our budget could be dramatically lower.

Taxes -- Right now I pay income taxes, SS taxes, medicare taxes, and state income taxes on a large income. In retirement SS and medicare taxes would disappear and income taxes would be based on a lower "annual withdrawal" amount.

Interest -- Right now I pay mortgage interest on a home that houses my family of five (plus two dogs, three cats, and three rats...). When my I've paid off the mortgage, I won't have interest expense at all.

Charity -- Right now we tithe 10% on my gross income. My tentative plan is to tithe on my "annual withdrawal" amount in retirement, which will be perhaps 33-40% of my current amount.

Groceries -- When my kids are grown I expect them to feed themselves. Reduce to 40%?

Clothing -- When my kids are grown I expect them to clothe themselves. Reduce to 40%?

Education -- Right now I pay for private school for my kids. When I retire I plan to have their college accounts funded separately and won't have to pay private school tuition anymore.

Smaller house -- A smaller house means smaller property taxes, smaller utility bills, and lower operating costs.

malakito

 

[Beachbumz]

Beachbumz: Off topic a bit. (ER's don't follow instructions very well).
Noticed you are retired at age 37 with annual budget of $60,0000.  (One of my daughters is age 37, and probably couldn't last 6 mos. without a paycheck)  
How you did it would probably be interesting.

Jarhead

Jarhead, I'll give you the short answer since here since it is a bit off topic:

My wife and I both worked and we chose not to have children, a non-financial decision that did help financially. We did pretty much max retirement accounts the last 10 years or so (although that is only about 170K of our net worth). We were not big 'savers' otherwise.

I started my own {small} CPA practice at age 25, which allowed me to keep taxes down and have some writeoffs. We purchased an Oceanfront duplex that we couldn't afford at age 29, sold the "big house" and downsized when tax law changed in '97, bought OF condo; purchased 2 more OF properties the next 2 years. I sold the CPA practice in 2/03 and the OF properties over the last 20 months (and purchased 1 in FL that we now live in).

Our net worth in 1992 <50K (only that because my WIFE built her own house), net worth today >1.5m

OK, so not so short!

 

[SDY888]

Rock,

We are mid thirties with a 10 month old child, a second is planned / hoped for.
Both currently working (although my wife decided to downsize her job after 1st child).
Current budget for our own living expenses is the equivalent of around US$72k pa. Assuming ''Offspring 2'' comes along, that will rise to around US$80k pa (all in current dollars) for the duration of the kid(s) education. This is the budget we are working on as far as our own retirement planning is concerned.

Simon