My annual expenditure

[SumDay]

I've never understood this kind of thinking. What you can spend in retirement is a function of what you saved earlier. I just don't see them as separate 'accounts'.

You know, I don't understand it either. I have virtually NO vices. I eat healthy, quit smoking 27 years ago, maybe a few drinks a month. I guess this is my one naughty habit. Not enough to delay our retirement, but I am amazed when I see my Master Card bill each month (which I always pay in full). Perhaps I'll try to scale back 10% each year for the next 5 years I plan to work. I like having goals. Thanks for the impetus.

And by the way, with Amazon Prime you get thousands of free streaming videos to watch on your Kindle. I've just started watching Upstairs Downstairs for free, so there's some squishy cost in all this too.

 

[NW-Bound]

Those who mention percentage of portfolio numbers may have different values because some may be getting Social Security or have pensions. We just started SS last year and that helped a lot with % of portfolio spending.

I cannot speak for others who quoted WR, but as I have repeatedly mentioned here that I have a goal of staying at 3.5% WR, I need to add a clarification.

We have no pensions, no health benefits, and are not at SS drawing age. The 3.5% WR should include very little income tax, as I will be spending after-tax savings. There's much dividend and cap gain inside 401k and IRAs that are tax-delayed.

 

[Lsbcal]

I cannot speak for others who quoted WR, but as I have repeatedly mentioned here that I have a goal of staying at 3.5% WR, I need to add a clarification.

We have no pensions, no health benefits, and are not at SS drawing age. The 3.5% WR should include very little income tax, as I will be spending after-tax savings. There's much dividend and cap gain inside 401k and IRAs that are tax-delayed.

That last part reminds me that tax strategy is quite individual and can also skew the WR. One person could appear to have a lower WR partly because of how they manage their withdrawals.

For us, we took a lot of income this year from my IRA and hence had pretty high tax bills. That was because I could get over the SS marginal rate hump and draw down at a reasonable marginal rate for the remaining dollars. Then next year I'll probably take out much less taxable to keep below the SS marginal rate hump.

Also some people might be drawing a lot from Roth IRA's or even taxable and letting their IRA's build up. Might work OK although too much of this could set one up for high rates in the future when RMD's kick in and also if tax rates move up on them.

 

[NW-Bound]

Also some people might be drawing a lot from Roth IRA's or even taxable and letting their IRA's build up. Might work OK although too much of this could set one up for high rates in the future when RMD's kick in and also if tax rates move up on them.

I may change my withdrawal when I get to 59-1/2. Right now, I am happy to avoid setting up a 72t schedule. I will also look into Roth conversion next year, as I only stopped part-time work earlier this year.

Looks like I should come in a couple hundred under my $15,000 budget. Single, no kids, no debt, low cost area.

I fear that I may have spent that much on beer.

But there are two of us!

Seriously, though, we save our targets and whatever is left, we spend: on travel, entertaining (beer), parties, boat rides, and other sorts of fun. These are truly the best years of our lives...so far.

Surely you jest! But suppose that it was true. Then, how would I spend $15K/yr on booze? Lemme see.

I drink about 1 bottle of red wine every 4 days. As I buy wine under $10, let's assume an average price of $7/bottle with tax. Then, for wine alone, it's (365/4)*7 = $639.

Then, for family parties, as a host I buy perhaps 15 bottles/yr, with fancier labels (whether they taste better or not) at a higher price of $12. So, that's just $180.

OK, I do buy some beers. Hard to tell how much, but my best guess is $200/yr.

That budget of $15K would leave me with $15K-$639-$180-$200 = $13981!

What would I do with $14K extra? Oh, I forgot about strong booze, the 80-proof stuff.

Oh la la, even at $150/bottle for the top-notch stuff, that's 93 bottles. That's almost 2 bottles/week. I might not live to collect SS!

 

[MichaelB]

I fear that I may have spent that much on beer.

But there are two of us!

Seriously, though, we save our targets and whatever is left, we spend: on travel, entertaining (beer), parties, boat rides, and other sorts of fun. These are truly the best years of our lives...so far.

Spending that much on beer is crazy. Now, if you add wine, it makes much more sense. Most definitely agree on the part about both saving and enjoying your money while you can.

 

[Sarah in SC]

Spending that much on beer is crazy. Now, if you add wine, it makes much more sense. Most definitely agree on the part about both saving and enjoying your money while you can.

Y'all must not have enough friends, LOL--my "beer budget" also includes entertaining and going out with friends. And I also include in that guess the really fun stuff, like DH's 50th birthday party last weekend. We rented a place at the beach, cooked a bunch of oysters and barbecue, and inaugurated the shot-ski drinking device. A very memorable (for the ones who could remember) night! And well worth the expense in booze. Here's the birthday boy in his splendid gift shirt with his best buddies.

 

[eridanus]

My cashflow out, post-tax, was under $32,000. Single, no kids. I'm including PITI but not including federal taxes. There's little pre-amortization this year because the car and house funds are flush.

 

[rescueme]

I've never thought in terms of, 'I can afford this while I'm working, but not while I'm retired'. If it is something I really value, I want to make sure I can afford it in retirement.

+1.

Our plan was to budget/spend the same amount in retirement as we did during our accumulation years, and after 5+ years thus far, have no problem with that plan.

If we could not afford to do the things we did before we retired (such as travel, our biggest expense both before and after retirement), we would have continued to w*rk.

We didn't cut back so we could retire; we ensured we had the $$$ to retire and live the way we desired, for whatever time we have left.

 

[NW-Bound]

Y'all must not have enough friends, LOL--my "beer budget" also includes entertaining and going out with friends...

I certainly do not have as many friends.

But, but, but if your friends reciprocate, and each treats mutual friends as generously as you do, then each would also have spent $15K/yr [-]in booze[/-] for parties. And each would have drunk a LOT of booze!

That's a lot more booze than I can see myself drinking.

I've never thought in terms of, 'I can afford this while I'm working, but not while I'm retired'. If it is something I really value, I want to make sure I can afford it in retirement. If it isn't really of value, why spend the money now and impact my retirement spending?

+1.

Our plan was to budget/spend the same amount in retirement as we did during our accumulation years, and after 5+ years thus far, have no problem with that plan.

+1.

Unless some people are so fed up with work that they want to sacrifice some leisures in order to get out of the rat race. And perhaps while working, they spent more money as a way to escape. My wife, back when she was with her high-stress job, took quite a few foreign trips with friends because I was tied up with my work and could not go. She needed an escape from her work. So, she has been to Brazil, Argentina, Bali, Kuala Lumpur, Singapore, and even the island of Komodo (to see those terrible lizards), places that I have not been. Once she quit her work, she did not demand to travel as much. It's my turn now.

I myself want to have at least the same lifestyle as I did before. It should not be too hard as we have always been frugal, and even when we traveled, did not splurge too often.

And now, with the children done with college, I should have more money for self-indulgence. So far so good... But why did I go over 3.5%WR? Something's still wrong!

 

[LauAnn]

ontrack for a little over $16k.

I am nearly right with you at $15,633 as of today.

 

[obgyn65]

To answer your question, as discussed in other threads, I am the medical director of a couple of missionary projects abroad. I like to keep busy but full time clinician is no longer for me - burnt out.

I also have a condo in Europe, very close to where I was born. I would like to spend some time there too, to speak my native tongue again after 25 years + away from my cultural roots.

And yes, I have tried to chill out but it often involves margaritas, pinas coladas or wine...

Is there any way you can scale back at work and begin exploring what life after FIRE may hold for you? You can clearly afford to do lots more (outside of work) than you do today, but what? Alternatively, you may be one of us who thrives on chillaxing and doing pretty much nothing, but have you ever tried that to see?

 

[obgyn65]

Thank you for your kind words as always.

No one is beating anyone else. It's not a race. You bring a very good point about costs when I volunteer abroad. Yes, I still pay for food, supplies, medicines, etc. These costs are about $5-10k a year on average I guess. However, one city in Guatemala has offered to give me a piece of land next to a lake in order to operate a small clinic whenever I want to. I love the idea !

As for healthcare, I have a couple of female colleagues who I have seen in the past - and they would be ok to help me now. I like United Healthcare Plan 100, maybe $5k maximum a year because I am very healthy, except for the occasional bouts of IBS.

A key issue is the rate of inflation over 48 years (I am planning until age = 95). My numbers look good because I use a low rate, but things can change rapidly for the worse if inflation does increase drastically.

While I'm another frugal MD, I can't beat that. My personal expenses this year will total ~$50k. Then again, I'm in Canada, where stuff costs more. And that does include socking away $5k in my TFSA, plus some debt repayment.....hmmm. Must recalculate!

Anyhow, I'm wondering about a couple of things. First, do you own a vehicle? Living in Chicago you may not need one. After ER are you likely to take road trips or move to a suburban or rural location where a vehicle will be essential?

Second, you do a lot of volunteering in Central America. Are your travel and accommodations paid for? If you are away from home a lot and eating on someone else's dollar, your personal food budget will be low.

Third, as donheff said, how will you fill the time you now devote to work? After ER that time may go from a revenue center to an expense.

Fourth, what about the cost of health insurance in ER?

For all those reasons I would not assume that your personal expenses will remain so low when you ER.

 

[obgyn65]

I could not have said it better. Exactly the way I feel. Thank you.

While everyone is different, and some thrive on a self indulgent lifestyle, others will only find satisfaction in challenging themselves to be what they can be. No harm in either situation... but recognizing the need to be involved can provide more satisfaction over the long haul.

The difference between "work" and "satisfaction" is often a matter of relative freedom.

IMO, it is not necessary to make decisions, once one has financial independence, but to take the time to explore every possible area of interest, no matter what direction this exploration may take.

 

[haha]

I can't nor would I wish to compete with the low hands here. But I cover all my expenses, including income tax, within a 4% wr- but since I have some SS (so far anyway), I actually withdraw less from portfolio.

Other than emergencies, I will not spend money that is not provided by cash inflows, not including realized or unrealized capital gains.

The idea of getting poorer each year basically turns my stomach. And as I see it, that is what a person is doing who follows the portfolio liquidating approach to retirement expenses. It doesn't matter if quoted value of a portfolio is up or down in any given year. If you have to periodically sell securities to cover expenses, absent unusual luck, you are liquidating. This could be challenged, if Berkshire or similar is a big holding, and IF you bought it at a very good price.

IMO, best is a portfolio that will throw off currently adequate dividends and interest, even when the government is playing tricks. And this must be done with reasonably conservative investment choices, and some thought to increasing portfolio income over time.

Millenia ago men and women learned to milk cows, so they could get protein from their cattle without having to slaughter them. The Masai still do the same, plus periodic controlled bleeding of their cattle.

Ha

 

[Lsbcal]

...(snip)...
The idea of getting poorer each year basically turns my stomach. And as I see it, that is what a person is doing who follows the portfolio liquidating approach to retirement expenses. It doesn't matter if quoted value of a portfolio is up or down in any given year. If you have to periodically sell securities to cover expenses, absent unusual luck, you are liquidating. This could be challenged, if Berkshire or similar is a big holding, and IF you bought it at a very good price.
...

I'm not sure I understand what your thoughts are on this Ha. Do you mean that those FireCalc lines that go down some before turning up are to be completely avoided? Aren't most of us going to experience some years where the portfolio actually looses altitude? The year 2008 comes to mind. How do we know when it starts down that it will turn up eventually? What if the stock and bond markets did very poorly because of a major war? That was the case from 1938 to 1944 or so. If we had a 2008 followed by a major war ... oh boy.

I do agree with the "getting poorer each year basically turns my stomach" comment. Sorry if I'm being a bit too provocative. Actually I'm pretty optimistic which is why I have a 65/35 AA right now.

 

[haha]

I'm not sure I understand what your thoughts are on this Ha. Do you mean that those FireCalc lines that go down some before turning up are to be completely avoided? Aren't most of us going to experience some years where the portfolio actually looses altitude? The year 2008 comes to mind. How do we know when it starts down that it will turn up eventually? What if the stock and bond markets did very poorly because of a major war? That was the case from 1938 to 1944 or so. If we had a 2008 followed by a major war ... oh boy.

I do agree with the "getting poorer each year basically turns my stomach" comment. Sorry if I'm being a bit too provocative. Actually I'm pretty optimistic which is why I have a 65/35 AA right now.

Well, as best I can tell, if you cannot live on current income, you are making several gambles on outcomes which depend very heavily on "path". May be fine, but this does not appeal to me.

All these plans have flaws, including the current income plan, which in fact has several dedicated critics on this forum. It's an area where we must make a choice.

Also, to try to answer one of your specific questions, one cannot avoid having the lines go down, unless he only invests in very high quality short duration debt, which isn't much income today. But if the portfolio throws off enough income without having to make sales, the investor would at least have a shot at survival during a downturn similar to what Japan has experience over the past 2 decades. If he needed to make regular sales, his portfolio would soon be weakened beyond any chance of recovery, given the ongoing drag from withdrawals.

Dividends are a more robust income source than capital gains.

Ha

 

[Lsbcal]

Thanks for your comments Ha. I'm not so sanguine about dividends, but you may be on the right track for your needs. I'm never sure of my own approach but have managed to survive and prosper so far. There are probably multiple paths to a happy and prosperous old age.

 

[nun]

My mantra for success is "earn a lot, save a lot and spend a little".

Post 65 I won't have to use my portfolio at all as all my spending will be covered by rental income, a small pension and social security checks from the US and the UK. I estimate they will total $65k....of course that assumes no change in SS benefits. But if that happens I can double my rental income by swapping flats or actually spend some dividends.

 

[Sue J]

Ours were $27,788 for normal monthly living expenses of utilities, car, life and home insurance, groceries, gas, medical deductibles and prescriptions, pocket cash, eating out and other misc. (minor home and car repairs, gifts, clothing, stuff, etc.)

1893 Utilities (elec, water, sewer, trash)
652 Internet
1165 DirecTV
574 Natural Gas
720 Savings for medical expenses
676 Car Insurance
816 Life Insurances on both
2400 Property Taxes
570 Homeowners Insurance
10117 Groceries (food, paper products, OTC pharm, pet, etc)
1421 Gasoline
3924 Other
1560 Pocket Cash
1300 Eating out

$27,788 Total monthly expenses

In addition we had some other expenses that don't fit in the monthly budget - a major dental repair for DH, replace a gas grill, a couple larger car repairs, a new chair and new TV. These items came to $2742. We put money in savings every month for things like these.

$30,530 Total for the year

We also had a once-every-30-year expense of a new roof and gutters and had to trim a tree before we did it. Total for that was $7926. We knew this was coming and had the money in savings.

$38,456 Total spent including the roof and gutters

Coming up for 2013 is a change in our retiree subsidized health insurance. Starting in January it will cost us $400/month for the 2 of us, so that's an additional $4800 for the year.

For 2013 I'm planning on between $33,000 and $35,000.

 

[sailor]

Yes $12K/yr in total spending isn't much but I have barely a 6-figure portfolio at age 33 and am unemployed with no job prospects so it's necessary to keep the spending at that level.

Aaron,
you say unemployed - what about pizza delivery?
Any news on the government job you were planning to apply?

 

[67walkon]

Some of you are really amazing. I've got 3 months left before my April 1 departure from the work place. There is no way we can live on what you guys are living on.
1. Health Insurance. Premiums will be right at $9,000 a year, with a pretty big deductibe. We don't see doctors often, but we're budgeting $12,000.
2. Property taxes on 2 homes. Almost $11,000 a year. No mortgages.
3. Homeowner insurance. $5,000 a year.
4. Car insurance. $1500 a year for 3 cars. But, no car loans.
5. HOA dues are about $3,000 a year.
6. Electricity on 1 house is about $400 a year, but over $3,000 on the Florida house. We plan on reducing that $3,000 signficantly by leaving Florida during the hot months and setting the thermostat up much higher than is comfortable when we're here in the summer. But still, it's going to be $2500 or so a year.
7. That puts us at about $35,000 without spending any money for food, clothing, entertainment, auto expense, etc.
8. For budgeting purposes, we have budgeted $10,000 a month spending but really think we will spend a good bit less once we get settled into retirement life. But it isn't going to be $30,000 or $50,000, so I am very impressed by you guys who get by on so little. I guess we could do that if we consolidated to the smaller, cheaper to run house and got rid of a couple of cars. It costs less than $5,000 a year to run that house, including taxes, electricity, gas, etc.

It's really inspiring to hear your stories.

 

[REWahoo]

Aaron,
you say unemployed - what about pizza delivery?
Any news on the government job you were planning to apply?

Or on the trucking job you were considering?

 

[rescueme]

There is no way we can live on what you guys are living on.

+1

 

[Alan]

Some of you are really amazing. I've got 3 months left before my April 1 departure from the work place. There is no way we can live on what you guys are living on.

There are some us who don't aspire to live as frugally as we can, especially now that we are retired. I've checked the Community Rules and that isn't a requirement for membership on the site

This year, excluding income taxes, we've spent ~$74k.

 

[aaronc879]

Aaron,
you say unemployed - what about pizza delivery?
Any news on the government job you were planning to apply?

I quit that job. I don't know if drivers have gotten worse since I last did the job over 10 years ago or if my tolerance for bad drivers is less but either way I can't take the stress of the job. It would be much worse now with over a foot of snow coming down today. After the new year i'll go back to the unemployment agency and take any manufacturing/warehouse job I can get. Probably no more than $10/hr. As for the government job, they wouldn't even give me an in person interview for the lowest position.