Retirement Spending Is Not a Straight Line

[youbet]

We only have our son and I cannot imagine him (currently living and working in another city) doing much of the care giving. So I'd like to ensure we have plenty of $'s for the future.

Our situation as well except our son lives 20 miles away. But with a time consuming job and three kids, overviewing out spending to guard against ripoffs is all we could expect.

Right now I do all the gardening and we use very few services. A lot of this is not to save money but because we prefer it this way.

The only regular service we currently use is lawn service. I can still walk behind the mower just fine but we now travel 2+ months a year and that was way too much to ask a neighbor to handle. We're mentally preparing ourselves to spend much more if we need a handyman, cleaning person, shopper, etc. later on.

We find that DW is more challenged by trips that involve long plane flights and maybe cold (unseasonable) conditions. So age takes its toll on our versatility. Little aches and pains. Shorter hikes, etc.

Currently we own a camper and our trips involve towing that around the country and visiting places we never had time to visit earlier in life. We're heading out for 3 weeks to see the Badlands and Yellowstone shortly. We also like to fish. We're anticipating the camping thing (despite our little trailer being quite comfortable) only lasting another 2 - 3 years. Then, if we're willing and able, it will be flying west, renting a car and staying at the lodge at Yellowstone.

But who knows? Maybe we'll feel up to staying in our own home and continuing travel (with the help of extra services) or maybe we won't. Maybe one of us will have a stroke and we'll wind up in an assisted living arrangement long before we really wished to give up independence. Ya pays yer money and ya takes yer chances!

Our risk from our assumption that we'll keep spending at about the same rate is that we're not doing a few things now that we might do if we were confident we'd want to spend less later.

 

[Katsmeow]

If the question as to whether or not an octogeneran will spend less is strictly academic, it makes no real difference other than as a chat topic. But, if your intention is to actually spend more today on the assumption that you'll desire to spend less later, then you have to accept the risk of that being true and your opinion matters and has consequences.

For those of you who feel that beginning in your late 70's, you'll desire to spend less, who of you are actually spending more now because of that belief? If you're not actually spending more now, it makes little difference what your opinion is other than as chat.

At this point we are in a high spending time period in any event because we still have 2 kids at home, one in college and the other starting soon. So, for the next few years we are spending a lot more than we will be after they are gone.

That said, I've prepared sample budget looking at each item of spending for the future, year by year. I do have some categories of spending decreasing as we get older based upon what I have seen with relatives and others (for example, dining out). At the same time I do have some expenses that I increase (for example, yard work. Right now, DH does it but we realize that with an acre he won't always be doing it). I do find that the overall does decrease in the future. I do think that once the kids are gone and I have a better representation of how certain expenses change once they aren't here (utilities, groceries, for example) that I will firm up those budget categories and may well end up spending a bit more in the nearer future than what I expect to spend 20 years from now. FWIW, I expect this to be a difference of a few thousand dollars, not a huge difference. For long term care possibility we don't have LTCI and if we don't get it I expect we will be setting aside some money for that future possibility.

 

[youbet]

OK Kat, that's great. It sounds like you have a firm belief that you'll desire to spend less as you get older and therefore are choosing to spend more today based on that belief.

Depending on how things work out for you and DH, that may very well turn out to be optimum for you.

 

[Katsmeow]

OK Kat, that's great. It sounds like you have a firm belief that you'll desire to spend less as you get older and therefore are choosing to spend more today based on that belief.

Actually I don't think that is what I said at all.

I said we are spending more now in any event because we have kids at home and in college. That is, our spending now is higher than it will be in the future independent of whether we decide later to spend more based upon thinking spending will be less in the future. We are spending more now because kids are still at home and in college not because we expect to spend less in old age.

As for that later period (after kids are gone), I also don't think I said I had a firm belief I would spend more then based upon lower spending in the future. I think I indicated a possibility I might spend a few thousand more a year depending on what the budget indicated after the kids are gone.

I tried to show the tentative nature of this through my language:

I do think that once the kids are gone and I have a better representation of how certain expenses change once they aren't here (utilities, groceries, for example) that I will firm up those budget categories and may well end up spending a bit more in the nearer future than what I expect to spend 20 years from now. FWIW, I expect this to be a difference of a few thousand dollars, not a huge difference.

 

[teejayevans]

Building a plan based on a real decline in future spending is a dangerous approach. The downside risk is much greater than the upside and represents a scenario with few options if the reality is different. I'll continue to assume our later years will be just as expensive even if the spending mix is different.

Which is one reason why I think postponing SS till 70 makes sense, it will give you a nice monthly paycheck. Maybe enough to live off depending on your lifestyle, in case you overspend in the early years.
TJ

 

[Major Tom]

There are folks here on the board who have described how they are living on a small fraction of our yearly spend. I think I recall $20k being tossed out. I doubt they'd want to reduce that to enable constant spending throughout life since they'd likely be giving up some basic necessities.

I've been living on ~17K/year for the last 4 1/2 years since stopping work (the most recent 2 1/2 of those years have been as a result of portfolio draw) and, at least in my case, you are correct. Although I know I could reduce my expenses significantly if I absolutely had to, thankfully, that need doesn't exist, and it wouldn't come without a significant reduction in quality of life (i.e. giving up my pets, less healthy diet, etc)

Although as time progresses, I'll be able to find ways to keep my budget at this level, the hope is that I can slowly increase my spending as I age. With a WR of ~2.5% based on the starting portfolio value and SS coming along in 12 years, the option for increased spending should be a near certainty. The only thing I'm a little concerned about is whether, after living on a lower income, I will be able to increase my spending without feeling that I am frittering the money away needlessly. Not that income excess to one's needs is actually a problem though...........

PS - I spent $75 yesterday having the rear wheel on my bicycle replaced. This was a major transportation expense (no motorized transport here). The wheel was repairable and no doubt if I were Jacob, I'd have bought the tools and learned how to do the repair myself. Telling the mechanic in the bike shop to go ahead and install a brand new wheel felt a little indulgent compared to the option of repairing it at home myself. Back when I owned an older Volvo wagon, 3K/yr maintenance and repair bills were normal. Nowadays, $100 - 150/yr for bike maintenance is normal and could be reduced even further were I to take my living to Jacob levels but instead, I chose to pay a guy to repair the bike for me and felt like I was living the life of Riley as a result. It's all relative.

PPS - the neat thing about living on 17K/yr is that 20K/year would make me feel frisky, and 25K/yr would feel positively opulent.

 

[Midpack]

We are watching this play out on two fronts. DW's Mom went into a nursing home, obviously her expenses increased by at least two fold, and she'll be there for her remaining years.

Nursing home and assisted living expenses aside, I am watching this play out in real time with my parents in their early 90's who are determined to stay in their home. So they've hired maids, lawncare, pool maintenance - all things they did for themselves until the past 2-3 years. They have also had to hire people for most basic household breakdowns that my Dad would have happily fixed himself, he simply can't do it himself anymore. And I live 2200 miles away, so I do all I can when I am there - I repaired their fence gates last time, Dad knows what to do just doesn't have the strength to do it. Bottom line, their living expenses have increased by at least 1/3rd, and the inconvenience of having to call someone and wait to fix things has been frustrating for them. DS has offered to move in with them, and that will eventually be the next chapter one of these days.

So expenses will probably go up somewhat at least with/without nursing/assisted living IME.

 

[Mulligan]

We are watching this play out on two fronts. DW's Mom went into a nursing home, obviously her expenses increased by at least two fold, and she'll be there for her remaining years.

Nursing home and assisted living expenses aside, I am watching this play out in real time with my parents in their early 90's who are determined to stay in their home. So they've hired maids, lawncare, pool maintenance - all things they did for themselves until the past 2-3 years. They have also had to hire people for most basic household breakdowns that my Dad would have happily fixed himself, he simply can't do it himself anymore. And I live 2200 miles away, so I do all I can when I am there - I repaired their fence gates last time, Dad knows what to do just doesn't have the strength to do it. Bottom line, their living expenses have increased by at least 1/3rd, and the inconvenience of having to call someone and wait to fix things has been frustrating for them. DS has offered to move in with them, and that will eventually be the next chapter one of these days.

So expenses will probably go up somewhat at least with/without nursing/assisted living IME.

Great example for increased spending. They have already beaten the odds of a 1in 10 chance of being alive at 90. Their long healthy retirement life hopefully will be passed on genetically to you. I think that is awesome a 90 plus year old couple are still living in their same home. I would be like them and do everything possible to stay in my house until the end of my life. Having a nice nest egg to draw on ensures that possibility.

 

[W2R]

Great example for increased spending. They have already beaten the odds of a 1in 10 chance of being alive at 90. Their long healthy retirement life hopefully will be passed on genetically to you. I think that is awesome a 90 plus year old couple are still living in their same home. I would be like them and do everything possible to stay in my house until the end of my life. Having a nice nest egg to draw on ensures that possibility.

+1 Personally I have a hard time understanding why some assume that expenses will be lower in old age (edit: this first/previous comment is not meant to refer to any particular post in this thread, but is meant as a general comment). Even though one may not travel as much, and may not be engaging in as many physically demanding pursuits, it will really be nice to have a bigger budget to pay for one's comfort as well as necessities during the later stages in life.

I am only 65 now, and hopefully not very close to extreme old age, but even now I really enjoy and appreciate certain comforts that I didn't need when younger. For example, I am sitting about 12 feet from a 60" television. With early cataracts, a heavy dose of astigmatism, and other vision problems, I love the fact that I can SEE this TV whereas I would have been perfectly happy with a 19" TV when younger. I also regard my gym fees and lawn guy as necessities at this age. Pretty soon I will probably have to get a housekeeper too, although I am putting that off as long as possible.

Like Mulligan, I would love to stay in my own house until the end of my life if that turns out to be possible. I didn't always feel this way, but the older I get, the less appealing group living seems to me.

 

[NW-Bound]

Many posters have shared positive experience with moving their parents into assisted living arrangements. I have to remember that, so when our time comes, we will be more willing to give up the large single home we can no longer take care of, nor be able to enjoy.

There are phases in life, and we need to adapt as our needs change.

 

[Midpack]

I have to remember that, so when our time comes, we will be more willing to give up the large single home we can no longer take care of, nor be able to enjoy.

Makes perfect sense but...

Only one data point, but that's what my parents thought too - until they were faced with the actual costs of staying at home vs an apartment, assisted living and/or a nursing home. My Dad has found he can hire "people" for anything and everything at far less cost than even the cheapest assisted living facility. And there is no way they would have the same amount of space/sqft, which they seem to enjoy, in any assisted living site. After having 3000+ for the past 35 years, they're not sure they could adjust to something half the size for 3X the cost.

And my MIL had to be forced by her doctor and family to go into assisted living even after going seriously downhill physically. She wouldn't have ever done it on her own. We looked into her having 24/7 nursing care at home (which she now requires), would have increased her spending literally 8 times! Not an option for our families.

So easier said than done for some at least. Again, only one data point, YMMV.

 

[NW-Bound]

People generally are resistant to change, as I myself am. Then, I read about other posters who wrote that after the move, their parents admitted that they should have done this long before. So, that opened me up to the possibility.

Hopefully, I still have a couple of decades before I need to decide on that for myself. However, my own mother may need to start thinking about this in a few more years.

 

[ERD50]

...Nursing home and assisted living expenses aside, I am watching this play out in real time with my parents in their early 90's who are determined to stay in their home. So they've hired maids, lawncare, pool maintenance - all things they did for themselves until the past 2-3 years. They have also had to hire people for most basic household breakdowns that my Dad would have happily fixed himself, he simply can't do it himself anymore. ... Bottom line, their living expenses have increased by at least 1/3rd, and the inconvenience of having to call someone and wait to fix things has been frustrating for them. ....

So expenses will probably go up somewhat at least with/without nursing/assisted living IME.

Thanks for that data point, it is exactly what I figure could happen to us. It might not, but if it does, what is plan B for those who did not prepare?

RE - downsizing...

Makes perfect sense but...

Only one data point, but that's what my parents thought too - until they were faced with the actual costs of staying at home vs an apartment, assisted living and/or a nursing home. My Dad has found he can hire "people" for anything and everything at far less cost than even the cheapest assisted living facility. ...

So easier said than done for some at least. Again, only one data point,

YMMV.

I've always thought of my home as a 'back pocket' buffer against increasing costs as I age (I don't count it in my FIRECalc runs). But recently I did some mental estimates, and I agree with you, it doesn't seem to be any big bonus for us, unless maybe we also moved to a lower cost area.

Take the full equity times 4% (mortgage would be gone by then), add in property tax, and it's a big number, but it doesn't sound so big compared to rents in a nice place.

-ERD50

 

[Mulligan]

Many posters have shared positive experience with moving their parents into assisted living arrangements. I have to remember that, so when our time comes, we will be more willing to give up the large single home we can no longer take care of, nor be able to enjoy.

There are phases in life, and we need to adapt as our needs change.

Probably good advise. However, I am more like Midpacks parents. I have lived in my house only 10 years, but it has already become part of my identity. His parents have been there 35 years, so I can only imagine what place in their minds the home means to them. Hopefully I have a few decades to change my mind and become adaptable, but as of now, someone would have to trick me and tie me up to get me out of my house and into a nursing home.

 

[timo2]

People generally are resistant to change, as I myself am. Then, I read about other posters who wrote that after the move, their parents admitted that they should have done this long before. So, that opened me up to the possibility.

Hopefully, I still have a couple of decades before I need to decide on that for myself. However, my own mother may need to start thinking about this in a few more years.

One of the memorable pieces of advice my Dad gave me was that 'most people wait 10 years too long to move after retirement". And he practiced that thought. He built a smaller house by a resort lake, and within 2 years of retirement, moved there. Then when he got tired of the stairs, he moved to a one story condo in the same area. My Mother still lives there at 88. I'm planning the same type path.

Conversely, as if to reinforce the point my Dad was making, my MIL and Aunt-in-law both stubbornly stayed in their big houses until they fell down and hurt themselves, and had to go directly into a nursing home.

 

[NW-Bound]

A subdivision next to mine consists of smaller homes with less square footage and less yard. The houses are also single-story. We often go through the area in our walk and like the area. Because it is a more upscale neighborhood, the price range is the same as my neighborhood, if not a bit more expensive even.

Thought about it, but it's not yet the time. I would have no place to keep my motor home, for example. Maybe in another 10 years.

 

[W2R]

One of the memorable pieces of advice my Dad gave me was that 'most people wait 10 years too long to move after retirement". And he practiced that thought. He built a smaller house by a resort lake, and within 2 years of retirement, moved there. Then when he got tired of the stairs, he moved to a one story condo in the same area. My Mother still lives there at 88. I'm planning the same type path.

Conversely, as if to reinforce the point my Dad was making, my MIL and Aunt-in-law both stubbornly stayed in their big houses until they fell down and hurt themselves, and had to go directly into a nursing home.

He sounds pretty wise! I like his advice.

It's hard for me to imagine retiring in a big house with stairs. That must be quite a burden. I suppose that if I was in a house like that, I'd stay on the first floor almost all the time and get one of those stair lift chairs to use when I absolutely had to go upstairs.

In a sense, I guess I was lucky. I divorced at 50, never a pleasant process, but the silver lining is that by the time I could afford to buy a house I was already 54. Consequently my house is reasonably practical for my old age.

 

[youbet]

Actually I don't think that is what I said at all.

I said we are spending more now in any event because we have kids at home and in college. That is, our spending now is higher than it will be in the future independent of whether we decide later to spend more based upon thinking spending will be less in the future. We are spending more now because kids are still at home and in college not because we expect to spend less in old age.

As for that later period (after kids are gone), I also don't think I said I had a firm belief I would spend more then based upon lower spending in the future. I think I indicated a possibility I might spend a few thousand more a year depending on what the budget indicated after the kids are gone.

I tried to show the tentative nature of this through my language:

I do think that once the kids are gone and I have a better representation of how certain expenses change once they aren't here (utilities, groceries, for example) that I will firm up those budget categories and may well end up spending a bit more in the nearer future than what I expect to spend 20 years from now. FWIW, I expect this to be a difference of a few thousand dollars, not a huge difference.

Oh, sorry Kat. I misunderstood.

It sounds then that while you've observed some folks who are spending less as they age, you're not actually applying that concept to your own current budget via the 95% formula, the Bernacke plan or similar.

I've observed some folks who spend less in geezerhood too. But I've also observed many who spent the same or more, despite the data indicating otherwise. So, as stated a number of times, our WR is based on planning for continued spending at current levels as we move ahead.

Since you're planning on the difference between your current and future spending (adjusted for the kids moving out, etc.) not to be too different from today, it sounds like our outlooks are more similar than it first appeared.

 

[Lsbcal]

He sounds pretty wise! I like his advice.

It's hard for me to imagine retiring in a big house with stairs. That must be quite a burden. I suppose that if I was in a house like that, I'd stay on the first floor almost all the time and get one of those stair lift chairs to use when I absolutely had to go upstairs.

In a sense, I guess I was lucky. I divorced at 50, never a pleasant process, but the silver lining is that by the time I could afford to buy a house I was already 54. Consequently my house is reasonably practical for my old age.

DW and I get plenty of exercise. I'm 65 and cannot imagine when the stairs will actually be an issue. But from all the talk about seniors needing one story structures, this has me wondering how many years of stair climbing I have in me.

 

[haha]

DW and I get plenty of exercise. I'm 65 and cannot imagine when the stairs will actually be an issue. But from all the talk about seniors needing one story structures, this has me wondering how many years of stair climbing I have in me.

It's mostly random. Right now I am glad I don't have to go up and down steps all day long, as I have painful one hip arthritis. But I do make at least 5 trips up and down daily. Soon I hope that hip will be repaired, and I'll be back to normal. My Doc says I 'll be able to climb the stairs into my apartment 2 days post op.

I know and have known many mid-eighties people who not only climbed stairs, but took care of stock, gardened, etc. Still, if we live long enough, there will come a time when it is hard to impossible to handle stairs with safety. Then, if we can still cook, take care of hygiene etc., it will be time time for an apartment in an elevator building.

I would say one important thing is that an older man have the sense to stay off his roof. More than anything, that seems to be a problem.

Ha

 

[Bestwifeever]

I live in a two-story house with the bedrooms upstairs (and the first floor is 8 steps up from the sidewalk), so I like articles that tell me that is a good thing :

The Doctors TV Show - Show Synopsis - How You Can Live to 100!

Dr. Wareham ... built a two-story house when he was 80 years old....

"I made [the house] purposefully two stories tall," Dr. Wareham says. "When I was building my house 15 years ago, I read an article that was put out by Stanford, and they said that if you climb a flight of stairs 20 times a week, you will decrease your incidence of heart disease by 46 percent. It's pretty hard to live in a two-story house and not climb the stairs three times a day, and that made 21 times a week. So that accounts for my two-story house, and I think it's helped keep me healthy."

If we ever move to a one-story house, we'll look for articles that say that's a good thing.

 

[MichaelB]

All my previous generation relatives lived in two story houses, some still do. Those that left did so not because the stairs were difficult to maneuver, but to go to assisted living or nursing homes because they were no longer mobile, even on one floor. My grandfather had a prosthetic leg and he lived in a two story 'til the end, in his 80's.

 

[Lsbcal]

Thanks for the positive "2 story" stories. Words of encouragement as DW does not like it when I bring up the subject of moving as we get into advanced years.

 

[NW-Bound]

Falling down the stairs was what started my FIL decline. He was already 89, however.

Thinking back, skipping the stairs would only buy him perhaps another year or two, as he fell again twice within that period, after recovering from the hip injury and relocating to downstairs. Each time he fell, he broke something new until he entered the nursing home.

One just buys some time, that's all.

PS. I remembed it wrong. First, he cracked a shoulder blade because of the way he landed on the stairs landing. Then, the 2nd time, he broke a hip. The 3rd time, he broke an arm. After that, he became bed-ridden and wheelchair-bound in the nursing home.

 

[mathjak107]

spending i would think assuming you have the money shifts to doing things for kids and grandkids instead of yourself.

i guarantee you give an extra million bucks to an elderly group and they will have no problem spending it.

to date the spending studies looking at spending as we age have been inconclusive .

older folks have less social security, less money as a pension since they earned less than more recent workers and may have mental differences as well.

the 85-95 group may be great depression babies and their spending may have lagged their entire lives.

we really do not know if cuts in spending are voluntary or just the fact older have less to spend as a group.

no study ever followed the same group from 60's through to their 90's to see what they do,.