Retirement Budgeting... how did it go for you?

[DawgMan]

So as I continue my pre-retirement exercise of trying to right size my budget, I continue to run different spreadsheets and certain categories pop out that I would like to reign in some based on today's spend. In full disclosure, I plan on a fatter RE spend amount than many on this site not based on needs, but wants. I have been fortunate to make a good income over the years that allowed me to sock away a good bit of dough, but also allow the budget to basically slide over the last 4 - 5 yrs, particularly with my DW's discretionary expenditures. So I am now faced with the task of pulling the reigns in before I launch hopefully in the next 18 months since I will move from a variable income to arguably a fixed income (depending what the investment gods deliver year after year). For those who "budget", I would be curious as to how your initial RE budget has worked and where good/bad/indifferent it has moved over the years in certain categories. I will start...

Planned Budget (this is my preferred budget which has plenty of fat, but is equal to or less than my current working budget)

My Clothing: $4K/yr (honestly, I could cut this sucker back... T-shirt and jeans are fine by me)
DW Clothing: $6K/yr (she is spending around $10K now, SAHM. 1 area I need to reign in)
Entertainment: $12,000/yr (this is dinners out, movies)
Groceries: $13,200/yr (food for the house inc entertainment at home, no liquor)
Liquor: $6K/yr (what can I say, we enjoy good wine and a good cocktail!)
My mad $ $2600/yr (may not be enough as I may want to pursue golf more regularly)
DW mad $: $7K/yr (tennis/haircuts/beauty stuff/friend lunches)
Other Misc: $5K/yr (cleaning supplies/misc home goods)
Travel: $20K/yr

So how did you start out in some of these spending areas and how did it play out over a number of years in RE?

 

[ocean view]

What about medical, home, auto insurance? And home maintenance? Transportation (gas, repairs)? Taxes?

 

[DawgMan]

What about medical, home, auto insurance? And home maintenance? Transportation (gas, repairs)? Taxes?

I purposely cherry picked these categories as they are somewhat more discretionary and on my mind as areas that may change. Curious to how THESE particular categories moved from original planning to years later in RE. My guess is many of these may trend down over time, but I have not lived it to know it yet!

 

[Rustic23]

Not anything like that!

My Clothing = Less than $500
Dw Clothing = Less than $1,500
Entertainment, food and booze about $1,000 a month
A 1.75 bottle of Segrams 7 is $20! so by my count you either drink real expensive stuff, or a whole lot of it! ie. at $500 a month thats 25 bottles a month) But hey, you made it spend it on what makes you happy.
My Mad couple of grand
DW Mad couple of grand
Misc $5k sounds about right
Travel $10k to $15k

Don't forget about the stuff that pops up ie new roof, appliances, repairs etc. We budget about a grand a month.

 

[Amethyst]

I spend less than $1,000 a year on clothes in retirement, and thought I was being a spendthrift, compared with working years when all I bought were suits and blouses that lasted decades. I have been buying slightly-used, (or new/seconds) high-end designer clothes from online consignment shops. I now have almost more classy dresses and designer jeans than places to go while wearing them.

Please note, I am not criticizing your DW for spending $10K. I bet she looks gorgeous all the time. Just noting that I am able to step out in high style for a lot less.

My Clothing: $4K/yr (honestly, I could cut this sucker back... T-shirt and jeans are fine by me)
DW Clothing: $6K/yr (she is spending around $10K now, SAHM. 1 area I need to reign in)


So how did you start out in some of these spending areas and how did it play out over a number of years in RE?

 

[DawgMan]

Not anything like that!

My Clothing = Less than $500
Dw Clothing = Less than $1,500
Entertainment, food and booze about $1,000 a month
A 1.75 bottle of Segrams 7 is $20! so by my count you either drink real expensive stuff, or a whole lot of it! ie. at $500 a month thats 25 bottles a month) But hey, you made it spend it on what makes you happy.
My Mad couple of grand
DW Mad couple of grand
Misc $5k sounds about right
Travel $10k to $15k

Don't forget about the stuff that pops up ie new roof, appliances, repairs etc. We budget about a grand a month.

Impressive!

As mentioned in response to another post, I did not inc all my categories, just a few that are in the running for review.

I have $30k/yr for Home imp/car replacement/other run overs

 

[DawgMan]

I spend less than $1,000 a year on clothes in retirement, and thought I was being a spendthrift, compared with working years when all I bought were suits and blouses that lasted decades. I have been buying slightly-used, (or new/seconds) high-end designer clothes from online consignment shops. I now have almost more classy dresses and designer jeans than places to go while wearing them.

Please note, I am not criticizing your DW for spending $10K. I bet she looks gorgeous all the time. Just noting that I am able to step out in high style for a lot less.

Will you marry me?!!!

 

[scrabbler1]

Are you interested in expenses which spike in one year before dropping back, as opposed to expenses which gradually rise over time?

 

[DawgMan]

Are you interested in expenses which spike in one year before dropping back, as opposed to expenses which gradually rise over time?

More curious as to how your initial plan adjusted with reality. Did you spend more/less in these areas then planned and how it trended over time in RE. Being conservative, I am planning for a perpetual static spend (+ inflation), but realize certain spend categories change. Eg Medical could become a big one later if my $hit breaks down!

 

[Amethyst]

Sorry, polyandry isn't in my line. But I do consulting work

Will you marry me?!!!

 

[Cut-Throat]

I spend far more in retirement than I did when we were working... My largest category pre-retirement was 'Savings for Retirement'.



Now that I put nothing into this category, as we are retired, we are free to spend this largest line item. So, not keeping a Budget too much anymore.

 

[RobbieB]

Yup, me too.

I never had a budget when I was working so I don't have one retired either. But I can assure you that I'm spending lots more (2x or better) now that I'm unemployed

 

[GoodWishes]

When we started seriously planning for retirement in our 40s, we looked at our expenses for the past 6/7 years. DH has been using Quicken so he just ran some reports. Starting from those expense reports, we made adjustments like taking out kids expenses, adding more medical costs/travel, etc. We ended up with a expense projection that we were comfortable with. Although we spend in categories different than OP, we also have a large budget.

Now that we are retired (DH stopped working at 51 and I stopped a year later), we don't budget but we do track. We look at our expenses twice a year to make sure it is what we expected.

So far, several years later, we are spending more than we projected. I think we spend ~15-20% more than projected. I don't remember the details, in what categories, without looking.

 

[HarveyS]

Like GoodWishes, I track more than I budget. I've been semi-retired for nearly 4 years. We tracked costs very closely during my career days. Actual stuff we spent money on, not including retirement savings or taxes. Today we track to that number (increased by 3.5% inflation per year), and monitor each quarter. We track to gross categories like visa card, cash out, medical, travel, utilities, etc.. So far, so good.

For your question, I cannot answer all as I don't track expenses to clothing, entertainment, groceries, etc. Mad money (which I call ATM cash out) for DW has gone up by about 33% from pre-retirement. My mad money has gone down (which just means I put more on the visa card). Travel has roughly doubled - which surprised me when I looked at it for this reply. I suppose not having all those airline miles is partly to blame.

At the top level we meet our annual "budget" so I don't worry about the details at all.

While I know it was not your question, I will say that medical is higher than in the past. Dental is way higher than in the past. Income tax is a large cost that I never really worried about when I had W2 income. Today my quarterly payments (to cover dividends and investment gains) are noticeable --- not complaining at all, just stating a fact.

Car repair and home repair is more noticeable now as well. They are both aging and need more TLC than when I was a W2 slave.

Hope this helps.

 

[scrabbler1]

More curious as to how your initial plan adjusted with reality. Did you spend more/less in these areas then planned and how it trended over time in RE. Being conservative, I am planning for a perpetual static spend (+ inflation), but realize certain spend categories change. Eg Medical could become a big one later if my $hit breaks down!

I can't say I had a budget as in some sort of quota system. When I was putting together my ER plan back in 2007-08, leading up to my eventual retirement in late 2008, I used my then-current expenses but with some simple adjustments: I eliminated the FICA taxes (yay!) and the commutation expenses (double yay!) but increased my health insurance premiums under an individual plan, not my former group plan (actually COBRA).

The rest of my expenses were not going to change much. My food expenses would drop a little because I wouldn't be eating out for lunch any more (only a few days because I working part-time). But my electric bill would rise slightly because I'd be home more, especially in the summer months with the A/C running more. I figured everything else would pretty much the same as before.

In the nearly 10 years since I retired, some expenses have changed, though. My medical expenses have been rather volatile. At first, they rose quickly, as the HI premiums rose 50% in 2 years, far more than I had predicted in my medium-term plan. I switched to bare-bones HI policy for a few years until the ACA's exchanges began in 2014. Then I had some medical issues in 2015 which included a 12-day hospital stay and a spike in my medical expenses that year (they have dropped back down since). I have some drug costs and new medical bills which I have had to add to my budget.

Auto insurance rose, too, partly because I increased my liability limits. My cable/phone/internet bill rose, too, but partly because I had been paying an unusually low amount for many years, and the discount train had become derailed.

But the very discretionary expenses you listed, DawgMan, are pretty much non-existent in my budget. What little they are for me are simply part of my broader but still pretty small "Cash" and "Credit card" expenses which amount to between $3,000 and $4,000 a year (mostly food). My total expenses are about 1/3 housing, 1/3 medical, and 1/3 everything else.

 

[DrRoy]

I spend far more in retirement than I did when we were working... My largest category pre-retirement was 'Savings for Retirement'.

Now that I put nothing into this category, as we are retired, we are free to spend this largest line item. So, not keeping a Budget too much anymore.

+1. Our total spending may be close to yours. Clothing and entertainment is around 15% of yours, not counting full on cable TV. Food and alcohol less than half. Travel is more.

 

[DawgMan]

Interestingly I keep hearing the word “tracking” as opposed to budgeting. I suppose that is lose budgeting?? For you trackers, do you have a little alarm that goes off when your overall expenses start approaching/passing your projected annual spend? Eg. If say your a 4% withdrawal guy and that is $40K/yr, do you just adjust as you go? I suppose my anal nature likes to see/compare how my plan played out in reality so I can make/track adjustments needed. OTOH, if your history of spending never/rarely triggers an alarm on your annual planned spend, then flying by the seat of your pants may work just fine.

 

[braumeister]

I track actual expenses continuously, but I only have seven categories (far fewer than most here). I set a planned total expenditure for the year and then divide that up among the seven categories based on estimates of what we want to do in the coming year.

When I see one category getting larger than expected, I adjust the amounts by looking at those which are smaller than expected, and it works out.

So far, we haven't even reached the annual total planned spending plan, although we come fairly close some years. This year should come closer than most due to an expensive new car and a lot of travel.

 

[Dtail]

Interestingly I keep hearing the word “tracking” as opposed to budgeting. I suppose that is lose budgeting?? For you trackers, do you have a little alarm that goes off when your overall expenses start approaching/passing your projected annual spend? Eg. If say your a 4% withdrawal guy and that is $40K/yr, do you just adjust as you go? I suppose my anal nature likes to see/compare how my plan played out in reality so I can make/track adjustments needed. OTOH, if your history of spending never/rarely triggers an alarm on your annual planned spend, then flying by the seat of your pants may work just fine.

Only in my first full year of retirement, but do have an 18 line budget where I track all expenses (including cash up to 50 monthly).
The concept of keeping close tabs on spending allowed us to reduce expenses 60% leading up to retirement.
I do compare the budget vs. actual on a monthly basis, reviewing it in a current YTD mode.
If a controllable expense becomes way over (hasn't happened yet), then I would tweak it.
So far, the only expense over budget is Medical, so will increase that budget for next year most likely.

 

[Golden sunsets]

IIRC your overall budget is going to be around $300,000. Ours isn't as high as yours, but still a lot, around $175,000-$200,000. The categories that your OP cite aren't the areas where we struggle to keep in line or track to, it is the amorphous household reno/ repair/auto replacement category. To that I add weddings and house down payment gifting. For us $30,000/yr doesn't nearly cover that category. We call that spending our "lumpy items" budget and the way that we are learning to control it is by scheduling out years in advance.

So for example reluctantly we have to wait another two years to install central air, an improvement we've desired for a while now, because the 2018 lumpy budget is devoted to new garage doors/new entry door system/rebuilt deck/exterior painting. 2019 is scheduled for a replacement SUV that will run $50ish. We could reprioritize car replacement for another year, but it will be 9 years old next year and we've been planning that purchase for next year for quite a while. There are numerous other projects out there in our future, but they'll have to wait their turn.

Our house is in really good shape, but we are very focused on timely updates that we enjoy as well as always being in a position to put it on the market without major work; a desire that others may not have. So keeping this major spending category in line each year is a bit of a challenge and struggle to track to a self imposed spending cap that keeps our SWR in our comfort zone.

Also-I think your travel budget is a bit low given your wearwithall, unless you are homebodies.


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[iloveyoga]

I don't really track or budget, but I know about how much we spend each month. At 5 years in for me and 14 for DH, we don't spend much at all on clothes, we have become very casual dressers. I do buy whatever groceries we want and we got out to eat quite a bit, but all pretty modest in cost. Our next big planned item will be a new car for me, but that is several years off. It's fun to read how much others spend.

 

[Dtail]

IIRC your overall budget is going to be around $300,000. Ours isn't as high as yours, but still a lot, around $175,000-$200,000. The categories that your OP cite aren't the areas where we struggle to keep in line or track to, it is the amorphous household repair/auto replacement category. To that I add weddings and house down payment gifting. For us $30,000/yr doesn't nearly cover that category. We call that spending our "lumpy items" budget and the way that we are learning to control it is by scheduling out years in advance.

So for example reluctantly we have to wait another two years to install central air, an improvement we've desired for a while now, because the 2018 lumpy budget is devoted to new garage doors/new front door/rebuilt deck/exterior painting. 2019 is scheduled for a replacement SUV that will run $50ish. We could reprioritize car replacement for another year, but it will be 9 years old next year and we've been planning that purchase for next year for quite a while. There are numerous other projects out there in our future, but they'll have to wait their turn.

Our house is in really good shape, but we are very focused on timely updates that we enjoy as well as always being in a position to put it on the market without major work; a desire that others may not have. So keeping this major spending category in line each year is a bit of a challenge and struggle to track to a self imposed spending cap that keeps our SWR in our comfort zone.

Also-I think your travel budget is a bit low given your wearwithall, unless you are homebodies.


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This bolded section is an area where IMHO there are 2 main thoughts on this site.
Does one develop their budget first and then spend their monies to keep to the budget for the most part? or
Does one spend within reason as they wish and see where the WR% falls out in the end?

I am in the former camp, as you appear to be too.

 

[Dawg52]

I don't really track or budget, but I know about how much we spend each month. At 5 years in for me and 14 for DH, we don't spend much at all on clothes, we have become very casual dressers. I do buy whatever groceries we want and we got out to eat quite a bit, but all pretty modest in cost.

Same here. I have a basic budget saved on my computer, but it's just a guideline. As others, I spend a good bit more in retirement.

 

[pb4uski]

.... Does one develop their budget first and then spend their monies to keep to the budget for the most part? or
Does one spend within reason as they wish and see where the WR% falls out in the end?

I am in the former camp, as you appear to be too.

Same here. I have a basic budget saved on my computer, but it's just a guideline. As others, I spend a good bit more in retirement.

+1 I'm in the latter camp... we are frugal and spend prudently. We have a budget in name only.... more of a budget if it came to a point that we need to rein in spending because the SHTF.... we actually spend more but much less than Firecalc or other planning tools suggest that we could spend. Our current WR is ~3.3% but that doesn't factor SS in since we have yet to start SS... once we start SS our WR will plummet to below 2% so we need to get into "blow that dough" mode.

My focus is more on what we could safely spend from our portfolio and then comparing that to what we need to continue to live comfortably.

 

[athena53]

Does one develop their budget first and then spend their monies to keep to the budget for the most part? or
Does one spend within reason as they wish and see where the WR% falls out in the end?

I am in the former camp, as you appear to be too.

I'm also in the first group. I withdraw 3% per year (as a % of my assets when I retired 4 years ago; they've actually increased 3.5%/year AFTER withdrawals). It gets deposited in 3 installments throughout the year. All heck broke loose the year we downsized- lots of unexpected expenses- but average annual WD rate is still under 4%, and decreasing. That leaves room for major catastrophes such as having to replace the car or needing 2 dental implants in one year.

As for specific categories: like Amethyst, I have a beautiful, classic work wardrobe that will last for years, so I don't buy anything in that category. I have a lifetime supply of freebie T-shirts, too. Here are my figures from 2017- I'm widowed so it's just for one person.

Alcohol: $840.
Clothing and shoes: $540.
Restaurants: $1,200.
Groceries: $4,200. Running closer to $100/week this year.
Travel- $15,000 for travel in 2017 plus more for upcoming travel in 2018 and 2019 (deposit on a cruise, airfare for trips in 2018). Clearly a place where I could cut back but that's my passion.

I also donate a lot to charity. So, I track expenses in detail (it's how my brain works) but don't freak out if I'm spending more than expected in any category as long as I'm keeping within that 3% withdrawal amount. I booked my upcoming trip to Scotland, for example, near the end of 2017 when I decided I had enough spare cash from the latest infusion for airfare (Business Class). Similarly, I just decided last week that I want plantation shutters over the kitchen windows and am getting a quote tomorrow- looks like the budget can handle it. Last year I spent $9,400 in home-related expenses, mostly finishing up replacing windows and adding plantation shutters to some of them, and I've spent less than $900 in that category so far this year.