So I've read all the articles/threads talking about differences in expenses for before- and after- retirement. E.g. health insurance/care goes way up, mortgage is paid off (ideally). I'm curious to know what the board members' personal experiences were. I'm somewhat planning that whatever drop in some expenses we'll have will be met equally with a rise in some other area like healthcare. OTOH, we definitely have a lot of expenses that just seem like things we spend to make things smooth for our current situation (2 high-stress jobs, 1 kid). Examples are house cleaning, eating out, paying for home improvement/maintenance that we could probably learn and DIY if we had the time... One of the things I'm looking forward to in retirement is getting away from all that stuff and trying to lead a simpler life. I'm curious to know if others have had experience really downsizing their lifestyle after getting out of the rat race?
Changes in Expenses after FIRE
- Thread starter 2021Dream
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walkinwood
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If you're planning on ER in 2021, it is so far away that you should probably focus on keeping lifestyle inflation at bay and saving as much as you can. So much can change between now & then.
Having said that, we ER'd when we could budget (SWR) about 10-15% higher than our costs while working + health insurance. We hit a big bump in the first year (2008) and had to drop our budget significantly (25%). Since then, we raised it, but are very happy with a budget close to what we were spending while working - and healthcare is now included in that budget. We have moved from a high cost area (NJ) to a moderate cost area (Denver CO), and we hope have the same standard of living on slightly less from next year because healthcare & property taxes are much lower here.
My recommendation is to estimate post-ER costs when you're within a few years of ER & give yourself a 10-15% leeway above that. When you hit that number as an SWR, you're probably safe.
Having said that, we ER'd when we could budget (SWR) about 10-15% higher than our costs while working + health insurance. We hit a big bump in the first year (2008) and had to drop our budget significantly (25%). Since then, we raised it, but are very happy with a budget close to what we were spending while working - and healthcare is now included in that budget. We have moved from a high cost area (NJ) to a moderate cost area (Denver CO), and we hope have the same standard of living on slightly less from next year because healthcare & property taxes are much lower here.
My recommendation is to estimate post-ER costs when you're within a few years of ER & give yourself a 10-15% leeway above that. When you hit that number as an SWR, you're probably safe.
Koolau
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Discussed in other posts, our retirement budget (spending, actually) is significantly higher than pre-retirement spending. This shift is primarily due to our move from a relatively low cost area to a high cost area (and the costs associated with travel because of the new area.) There have been some surprises. For instance, our first, almost-to-the-penny tracking of spending last year was an eye opener. We were spending even more than we thought. Still, the "plan" we set up will cover our spending into the future unless there are bigger surprises. So, there is nothing wrong with any particular spending level in retirement - as long as the incomes from various sources will cover the spending and allow one to continue into the future. That's what FIRECALC and other calculators are for - to help us monitor the health of our plans. YMMV
2021dream, spending in retirement is a much discussed topic here. Here are a few recent threads you may find interesting
http://www.early-retirement.org/forums/f28/spending-as-retirement-progresses-59692.html
http://www.early-retirement.org/for...less-income-than-before-to-survive-60408.html
http://www.early-retirement.org/forums/f28/how-does-spending-change-during-retirement-60574.html
While there is no quick and easy answer, many here would agree that tracking your expenses now to better understand them and then listing your spending needs in retirement in a good approach.
http://www.early-retirement.org/forums/f28/spending-as-retirement-progresses-59692.html
http://www.early-retirement.org/for...less-income-than-before-to-survive-60408.html
http://www.early-retirement.org/forums/f28/how-does-spending-change-during-retirement-60574.html
While there is no quick and easy answer, many here would agree that tracking your expenses now to better understand them and then listing your spending needs in retirement in a good approach.
obgyn65
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I also expect my spending during retirement to go down, but I am not sure how to factor this in my calculations... Threfore, I am interested in reading others' views on this topic also.
Independent
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Like many people on this board, we kept track of our actual spending before retirement. It wasn't hard to separate out obvious decreases as we aged (kids expenses, mortgage) and deduct them.
You mentioned home maintenance, that's harder. But, simply knowing what you're spending today can give you an upper bound on your savings - e.g. separate your current spending between materials and labor.
Increases due to medical expenses are harder to estimate due to changing health and changing laws. But, you can get online medical insurance quotes today.
Increases in discretionary items are easier to estimate because you can set a budget ($X per year for travel) and live within it.
It turned out that we were very accurate with the exception of medical.
You mentioned home maintenance, that's harder. But, simply knowing what you're spending today can give you an upper bound on your savings - e.g. separate your current spending between materials and labor.
Increases due to medical expenses are harder to estimate due to changing health and changing laws. But, you can get online medical insurance quotes today.
Increases in discretionary items are easier to estimate because you can set a budget ($X per year for travel) and live within it.
It turned out that we were very accurate with the exception of medical.
scrabbler1
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When I was working up my ER budget, I saw that my commutation and FICA taxes disappeared while my health insurance and dental expenses rose by about the same amount. My income taxes dropped slightly (I was working PT before I ERed so they were already low), while my day-to-day cash expenses were pretty much unchanged (I make the same twice-a-month trip to the ATM now as I did before).
I have never explicitly had a budget (except maybe in college), but have always instinctively been a LBYMer. Although, in 2004, I started seriously watching how much and on what, I spent. So, for four years (I retired in Jan 2008), I kept track of expenses and since retiring, I have continued the tracking habit. What I have discovered is that expenses have gone up in retirement, in the neighborhood of 20%. Mostly due to recreation (includes travel) and health care. Still below my retirement income with a current WR of <1%, but I was surprised by the increase after retirement.
M Paquette
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We figured that the end of mortgage payments, and the drop in tax expense would pretty much all go to individual medical insurance for us. So far that has been the case, within a couple hundred dollars a month.
Chuckanut
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My assumption is that I will spend about the same amount of money in retirement as when working. My only spending adjustment were for 1) Reductions - No more contributions to pension plan, IRA and SS, and 2) Additions - $600 a month for medical insurance.
The pension contribution, SS tax and other retirement savings have been a huge hit on my take home pay for many years. In comparison, the $600 a month for medical insurance is small. So, it looks like I finally get my reward.
The pension contribution, SS tax and other retirement savings have been a huge hit on my take home pay for many years. In comparison, the $600 a month for medical insurance is small. So, it looks like I finally get my reward.
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W2R
Moderator Emeritus
When you retire, you will no longer have to save for retirement. That made a huge difference for me.
Also, if you get a pension or SS, that will help minimize dependancy upon your portfolio. Not such a huge difference for me, so far.
Health insurance can mean your expenses are greatly increased. As a federal retiree, I still have the same health insurance.
You will have more time to DIY, but also more time to shop or go on trips.
When projecting what you may spend in retirement, I'd suggest starting with your present spending, and adjusting for differences that you expect (such as health insurance). Be realistic.
Also, if you get a pension or SS, that will help minimize dependancy upon your portfolio. Not such a huge difference for me, so far.
Health insurance can mean your expenses are greatly increased. As a federal retiree, I still have the same health insurance.
You will have more time to DIY, but also more time to shop or go on trips.
When projecting what you may spend in retirement, I'd suggest starting with your present spending, and adjusting for differences that you expect (such as health insurance). Be realistic.
+1
And as you will have 24 hours a day to 'fill' in retirement that you will also need to fund, be aware that your expenses for hobbies, travel, dining out, education, recreation, entertainment, etc. may vastly increase over what you are currently spending.
omni
freebird5825
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One of the main areas where costs are lower for me is in the food and eating out category.
Pre-FIRE - lunch out almost every day, food shopping done within convenience (on the way home from w*rk) and time constraints, meals out above per diem allotment while on travel.
Post-FIRE - more time to shop at uncrowded and different discount stores, buying meats in bulk and dividing up for the freezer, fewer pizzas and takeout food, and time to grow my own vegetables and herbs. I have invested in grow lights and Earthboxes for indoor growing (see "Container Gardening" thread if curious). I often use grocery store vegetables (buy only 1 item) as a free seed source.
I retained my housecleaner after FIRE, but was able to cut down on the frequency of the visits because I can do the in-between maintenance myself.
I am doing more long overdue cosmetic fix-ups and minor household repairs myself. I order a lot of my repair supplies online (with free shipping of course) to save gas and time. There are very few impulse buys, the kind that happened when I used to go to a big box or hardware store.
I am living on half of what I grossed when empl*yed, but seem to have a lot more disposable income.
Pre-FIRE - lunch out almost every day, food shopping done within convenience (on the way home from w*rk) and time constraints, meals out above per diem allotment while on travel.
Post-FIRE - more time to shop at uncrowded and different discount stores, buying meats in bulk and dividing up for the freezer, fewer pizzas and takeout food, and time to grow my own vegetables and herbs. I have invested in grow lights and Earthboxes for indoor growing (see "Container Gardening" thread if curious). I often use grocery store vegetables (buy only 1 item) as a free seed source.
I retained my housecleaner after FIRE, but was able to cut down on the frequency of the visits because I can do the in-between maintenance myself.
I am doing more long overdue cosmetic fix-ups and minor household repairs myself. I order a lot of my repair supplies online (with free shipping of course) to save gas and time. There are very few impulse buys, the kind that happened when I used to go to a big box or hardware store.
I am living on half of what I grossed when empl*yed, but seem to have a lot more disposable income.
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scrabbler1
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Interesting how omni's and freebird's post just before this one describe very well how my day-to-day cash expenses roughly offset each other in ER. I spend slightly more in my hobbies and volunteer work (because I can do them more) but slightly less overall for food because I didn't go out and buy lunch regularly once I stopped working.
Live And Learn
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This the area where I'm having the hardest time for retirement spend budgeting. I know I can give myself "an allowance" and force myself to live within it, but I am honestly dumbfounded on how much I should budget. I know I currently spend only about $20 - $30 a week (outside of gasoline, which is a work expense as far as I'm concerned) - mostly because I work too many hours to spend anything ! I've tentatively budgeted $65 per week in retirement for DH and I ($130/wk combined). I'm thinking the money would be spent on some sort of class for me or my husbands hobby ($20/wk), gas ($10/wk - we're homebodies), clubhouse entertainment ($15/wk), plus $20/wk equal to whatever I'm spending today.
Does that $65 spending cash per week each seem "generous" or does it seem that we'll be struggling and denying ourselvs too much.
Mulligan
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Live And Learn said:
Only you can define generous. Also, only you can determine what this amount entails. For example we have had a few threads in the past where some people consider eating out as food budget while others consider it entertainment ( I do). FWIW- I budget $100 a week for entertainment purposes, and I am single. My entertainment budget does not include my travel expenses. When I went into retirement, I knew financially my budget wouldn't change, which it hasn't. Definitely brainstorm all possible spending options and make your spouse discuss with you their ideas so you are on the same page. Personally I wasn't going to retire until I knew I had a cushion each month, and would not have to change my spending habits. If you continue to be homebodies, that definitely takes a little pressure off the budget.
As previously mentioned, if you want to try estimating your post-retirement expenses, it's essential to get at least 2 or 3 years of really detailed current expenses in your spreadsheet or budgeting software.
Just as a trivial example, pre-retirement we typically spent $5-10 every day (each) on lunch with co-w*rkers, and occasionally twice that amount. Post-retirement, we enjoy and prefer eating lunch at home nearly all the time, for less than half that cost.
In other words, your estimates will only be as good as your current record keeping, so count those pennies while you're in the rat race.
Just as a trivial example, pre-retirement we typically spent $5-10 every day (each) on lunch with co-w*rkers, and occasionally twice that amount. Post-retirement, we enjoy and prefer eating lunch at home nearly all the time, for less than half that cost.
In other words, your estimates will only be as good as your current record keeping, so count those pennies while you're in the rat race.
foxfirev5
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I am working toward estimating my retirement cost of living. I anticipate the cost to be less than my current net wages due to a reduction in retirement savings.
The wild card is health care. More specifically my company is secretive about cost of retiree healthcare and I don't want to tip my hand just yet.
The wild card is health care. More specifically my company is secretive about cost of retiree healthcare and I don't want to tip my hand just yet.
rescueme
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I agree, since that's what DW/I did in preperation for retirement.
As it turns out, we spent the same amount of net income (that's a better target, IMHO - since it dosen't consider taxes nor retirement contributions) in the first few years. I've now been retired five years (DW just joined me) and our total spend rate is slightly above that initial target - due to normal personal rate of inflation, along with extended travel.
In our case it was easier since we did not have any "delayed wants" in retirement (such as travel). In fact, travel was always our greatest expense before retirement, and remains so today. Really, we're living the same lifestyle on the same income in retirement as when we were both wor*ing.
It's actually quite easy if you're the type (anal
) as I/DW are in tracking our expenses. As the saying says, you can't plan for where you want to go unless you already know where you have been ...
Katsmeow
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Yes, we downsized considerably after DH retired and I went to a very part time schedule.
In our case we sold our very large, very energy efficient house that required lots of utilities and maintenance and now have a smaller house (not that small -- we still have 2 adolescents at home) that is newer, much more energy efficient so maintaining it and utilities are much less.
Auto costs went down a lot. We do still drive a lot (mostly kids related) and I still drive to work once or twice a week. But it is a lot less miles overall than before and much less need to take the toll road.
Dining out has gone down some but groceries otherwise have not. Clothing budget and dry cleaning much, much less.
We are now spending less than half what we spent before DH retired and before I ESR'd
In our case we sold our very large, very energy efficient house that required lots of utilities and maintenance and now have a smaller house (not that small -- we still have 2 adolescents at home) that is newer, much more energy efficient so maintaining it and utilities are much less.
Auto costs went down a lot. We do still drive a lot (mostly kids related) and I still drive to work once or twice a week. But it is a lot less miles overall than before and much less need to take the toll road.
Dining out has gone down some but groceries otherwise have not. Clothing budget and dry cleaning much, much less.
We are now spending less than half what we spent before DH retired and before I ESR'd
Calico
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Use in several posts and forums, but I don't what FIRE stands for.
Financial Independence Retire Early
racy
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Since retiring 10 years ago our life is simpler regarding child rearing, corporate responsibilities, rat racing, etc. Now our time is our time. But I wouldn't say we downsized our lifestyle. We hired house cleaners, we're taking longer & better vacations, and enjoying better restaurants. While working we were accumulating; now we're enjoying that accumulation.
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