Expenses after FIRE - Huh??

[rmark]

Match spending to expected after tax withdrawals + savings for large purchases and emergencies.

 

[spideyrdpd]

HMM
Arent you guys following the 4% rule and then budgeting ?

I would say you guys are unusual :
since you
A. dont carry much debt.
B. have no house debt or try to pay off your homes. Most people might be doing this at retirement or in retirement.
C. tend to lbym's anyway.

 

[rmark]

My parents have vacationed near Durango, Colorado for 20 years and now summer there in their trailer, since they have retired. They've noticed that the private cabins along the scenic drive to the campground slowly turnover, each of them coming up for sale every couple of years. Few seem to have long term owners.

 

[starboardtack]

Now I have to spend more before I get toooo old to enjoy it. I'm a humper - cheap first ten, higher, plan lower starting when I hit my 70's or whenever I get slower.

Find myself in the humper/dipper category too after 6 years FIREd.  Data I have seen indicates a sharp reduction in spending and, with previously acquired insurance in place, expenses, occur during late retirement years, and for easily understood reasons.  This seems to get scant coverage.  Personally, lost interest in fast cars and more landlubber property to mow maintain.  Also found my 50% of pre-retirement income spending calc near next to useless.   As have others have pointed out, control of expenses is key.  Not difficult in my situation and with my sweet and frugal DW.  Plan on challenging lybym record while on circumnavigation beginning next Fall before I get toooooo oooold for anything except memories, if can find them.  Perhaps then I will swallow the anchor and have more time to take a shot at the dryer sheet hall of fame.    But, not yet........

 

[astromeria]

Overall, we're shelling out ~50% less than we did when we both worked full time. We spend more on travel--and when DH retires from teaching, we'll have to spend a lot more on health insurance. BUt in semi-retirement we spend a LOT less on...

-- Savings...from ~$50k/year to ~$5k/year (I'm retired, DH is working at a slower-lane job that pays half his former salary).
-- Housing: $25,000/year mortgage payments to ZERO (paid cash for "retirement" house)
-- $8,000/year in property taxes to $2,000/yr
-- Taxes: top bracket to 25% bracket, and will be even lower when DH retires. Also lower state income tax (CA to SC).
-- Restaurants: save close to $10k year on much less eating out & takeout now that I'm not dragging home after dark.
-- Cars: went from driving 40k miles/year on two cars to 12k miles total, spending less on gas, maintenance, and insurance.
-- Used to pay for kids' education and for them to fly home--now as independent working adults, they buy their own plane tix
-- Charleston Symphony season tix are less than half the cost of San Francisco Symphony(!)
-- Replace clothes less often; rarely wear dry cleanables; spend a lot of time in shorts, t-shirts, and bare feet.

 

[Rich_by_the_Bay]

Overall, we're shelling out ~50% less than we did when we both worked full time.

I wasn't including things like down-sizing, kids thru school, and other passages since these hit different people at different ages. Thinking more about how the lifestyle changes affect expenses.

If I recall, you moved from Ca to SC around the time you FIRED. I guess that's one great way to optimize you other life pleasures in retirement and who knows - may end up doing the same some day.

 

[astromeria]

Most Americans' biggest expenses are housing, transportation, and taxes. To lower them, one needs to make lifestyle changes, likely by paying off or moving to smaller/cheaper (and perhaps new or already remodeled) housing, replacing vehicles less often or at least less expensively (and maybe owning fewer vehicles), and setting up retirement income (and possibly location) for lower taxes.

Little savings can also add up. From ~$100/month in hair salon for both to practically nil (DH goes to Supercuts 3x/yr at $15 inc tip; I cut my own hair and no longer color it). No more professional manicures. Get the house cleaned every 6 weeks instead of every 1-2 weeks. Have more time and inclination to research purchases and save--e.g., discovered that 2nd class travel on the Italian Intercity (IC) trains is just fine for us, no need to pay 50% more for Eurostar 1st class (and we met interesting people, too, like foreign students and ordinary Italians). More likely to borrow than buy books, CDs, and DVDs now and go to cheap weekday matinees instead of weekend evening movies. Much more likely to invite people over instead of meeting them at a restaurant. Spend a lot less on gifts and charity: I now volunteer time instead of money. But even adding all this up, it doesn't seem like a big lifestyle change to me--only being retired feels like a big change (and entirely for the better!).

 

[txdakini]

Two things from retirement news and studies.

First studies have shown that spending declines as retirees age. From one study:

Expenditures at age 45-54 = $48,748
Expenditures at age 55-64 = $44,330
Expenditures at age 65-74 = $32,243
Expenditures at age 75+ = $23,759
all this with some increases in medical costs.
for more about this go to www.fpanet.org/journal/articles/2005_issues/jfp0605-art7.cfm
So this might enable you to model your retirement spending a little differently.

And from the book: Live Long and Prosper by Steve Vernon

He quotes from another book, Authentic Happiness by Martin Seligman that distinguishes between the pleasurable life, the good life and the meaningful life.

Pleasurable life means great vacations, nice clothes, interesting hobbies, good entertainment. His point about this lifestyle is that while these things are not bad, they don't necessarily contribute to happiness and any happiness derived is temporary, often stunningly short compared to amount spent.

Good life consists of identifying and applying our signature strengths to the main realms of our lives: work, love, children, etc. Highest success in living and deepest emotional satisfaction comes from bujilding and using your signature strengths. So, for example, you derive deep satisfaction from raising a family or working in your church.

Meaningful life is beyond the good life, involves an attachment to something larger than your own life, more meaningful. Think about simple living folks, for example.

The pleasurable life dominates current advertising and popular ideas about retirement - golf, hobbies, travel, beach house, etc. Why? Because it involves spending money. While the good life and meaningful life do not involve spending as much or very little. Also it's harder to portray the good life and meaningful life in 30 second screen shots.

so depending on what you truly believe is important to you now and in retirement, you may spend more than now for the pleasurable life, about the same or less for the good life and possibly significantly less for the meaningful life.

I hope I didn't mangle his intent too much. Food for thought, anyway.

 

[Gone4Good]

First studies have shown that spending declines as retirees age.  From one study:

Expenditures at age 45-54 = $48,748
Expenditures at age 55-64 = $44,330
Expenditures at age 65-74 = $32,243
Expenditures at age 75+ = $23,759
all this with some increases in medical costs.

Any indication as to whether this decline in spending is by choice or necessity?

You can certainly see expenditures being forced lower as people move from middle-class paying jobs to social security.

 

[REWahoo]

Any indication as to whether this decline in spending is by choice or necessity?

You can certainly see expenditures being forced lower as people move from middle-class paying jobs to social security.

There is a rather lengthy discussion of spending decline vs. age on this thread:

http://early-retirement.org/forums/index.php?topic=3509.0

 

[txdakini]

If you read the entire article from which I quoted the numbers, it actually addresses a lot of the typical questions such as the one you mentioned. The decline in spending actually holds true according to the study:

reductions are voluntary (overall assets for all groups actually increased while spending declined)

they accounted for generational differences by comparing same study results from 1984 and 2002. Both declined in a similar way

Read the entire study at www.fpanet.org/journal/articles/2005_issues/jfp0605-art7.cfm

 

[cute fuzzy bunny]

Way less.

I stopped paying people to cut my lawn, clean my house, fix my cars and do work on my house. I stopped buying thousands of dollars worth of clothes every year and paying a bundle to dry clean them. I stopped taking expensive vacations to de-stress myself from my job because I wasnt stressed. I moved to an area where I can drive to dozens of vacation hot spots anytime I want to. I started shopping for and cooking my own food instead of eating out 60-70% of the time.

Basically converting my own time and energy into cost savings.

Also was able to slash my tax bill from "oh my god, did I just pay for a B1 Bomber?" to "ha ha, you get nothing from me this year you $#^%'s!". Thats a bit of a savings right there...

 

[Martha]

I have no question we will spend more. Already we are spending more with me part time. (On another trip with that gas hogging MH).

CFB, weren't you spending about $750,000 a year at about the time you retired? I hope you're spending a lot less.

 

[Alan]

I expect we will spend about the same in retirement as we do now. I have closely tracked spend over the last 4 years and estimated what we expect to spend and it is about the same. ie increased travel and health costs will consume money currently spent on children at college (only 6 months to go we hope )
We also expect to sell one of our 2 cars as we live in a small quiet community with great biking paths etc to get us anywhere we need on a regular basis.

These expenses are about 30% of current AGI. I have never subscribed to the idea of 70% of income since we have always been able to live very happily well below our income. While DW was working our spend was only 25% of AGI. (She ER'ed 2 years ago)

 

[Rich_by_the_Bay]

I have no question we will spend more. Already we are spending more with me part time.

On what, for example? Is travel the difference, or are your other recreational expenses risking, too?

I'm wondering if I shouldn't plan more for play??

 

[wabmester]

I'm wondering if I shouldn't plan more for play??

How do you plan to spend your time in retirement?   Any expensive hobbies that will move to the front burner?

I know guys who bought race cars and airplanes after retirement.   Their expenses obviously went WAY up vs their days as wage slaves.   For me, home improvement projects have been a major new expense.   But I consider them to be capital improvement projects, so they don't count.   Right?

 

[Rich_by_the_Bay]

Good question.

I figure travel will be the bulk of the additional expense, both family visits and recreational. I have a big touring motorcycle which I love, but probably wil sell shortly due to an increasingly unfavorable riskleasure ratio in the Florida road environment. Golf, maybe once a week at $75 bucks a pop. DW not quite ready to sell our overpriced home, but I do like the place so am not pressuring her at this point. Rest of it is almost free: reading, gardening, exercising, beach, touring, hiking, hanging around the pool, volunteering. I'll do something medical, too, whether volunteer/charity or part-time practice but no weekends or call.

Pardon me while I wipe up the pool of drool I just generated.

All in all, I figure an extra $5-10k in wish list expenses, offset by whatever savings there are from no more (or part-time) work.

 

[Scrooge]

I spend $15-20K/year, which includes $5-10K spent on the house: $5K if nothing goes majorly wrong and all I have to worry about is taxes, insurance, basic maintenance, etc; up to $10K if repairs are needed.

If I were to retire in the next 1-3 years, I would have to sell my $350K+ house and move to a less expensive area, which would likely lower my expenses to around $13K/y plus health insurance.

If I were to retire in 3+ years, which appears likely, then I'll have more options and may be spending a few more K per year. Overall, not that much of a difference vis a vis my current spending levels. As the man said, it helps to be a really cheap bastard 

One important caveat is that I did so much travel (domestic and international) in my teens, 20s and 30s that I am sick and tired of it for now. If 10 years from now I discover that the wanderlust is back, then things may be dofferent.

 

[cute fuzzy bunny]

CFB, weren't you spending about $750,000 a year at about the time you retired? I hope you're spending a lot less.

Actually a bit more than that. After taxes, paying off a few mortgages and cars there wasnt that much leftover. You eat out almost every lunch and dinner, pay the gardener, the two housekeepers that came on alternate weeks, buy a BMW convertible to play with while you're on sabbatical...its pretty much out the window.

Yeah, i'm spending a little less than that now

 

[Martha]

On what, for example? Is travel the difference, or are your other recreational expenses risking, too?

I'm wondering if I shouldn't plan more for play??

Much more on travel. We hardly traveled at all before I went parttime. We bought the MH and a trailer to haul the motorcycles. Now we travel a lot. But who knows how long that will last.

Much more on family due to several emergencies in the last couple of years.

When I fully retire I will have to pick up the cost of health insurance, which for the two of us will be $1000 to $1100 a month.

 

[2B]

I was surprised to calculate that I'm living on about 55% of my gross income. I thought it was lower. When I finally stop trading my time for money, I'll have to add health insurance and additional traveling money to that. That could push me up another 20-30%!!!!

 

[Scrooge]

I was surprised to calculate that I'm living on about 55% of my gross income.  I thought it was lower.   

Congratulations on doing the math before pulling the plug!  I used to know two people who "retired early" in their early 40s only to find out within 5-10 years that they had underestimated their expenses and had to go back to work. In one case the problem was (IMO) overspending, although the person in question didn't consider it overspending -- "I absolutely have to have this beautiful and highly collectible item!". In the other case the problem was the would-be retiree's failure to set aside enough money for his children's college bills.

It's hard to estimate what certain expenses will be like two or three decades from now, especially medical expenses, but basic living expenses is one area that we should all be able to extrapolate reasonably well. Unfortunately, a lot of people don't even know how much they are spending now, much less what they will be spending 10 years from now... 

 

[Milton]

I know guys who bought race cars and airplanes after retirement.

Here's a link for you: http://philip.greenspun.com/materialism/early-retirement/aviation

 

[W2R]

Oh. Right.

So, how much did your expenses drop post-FIRE. Are you seeing what I see -- that they will drop little if at all?

I am planning on my expenses rising post-FIRE.

(1) Right now, I'm knocking myself out trying to LBYM to the extreme, so that I can retire in 2009-2010. My expenses right now are minimal. But, all the things that I'm not replacing now, probably will need replacing in 2011.

(2) After I retire, I'll have more free time on my hands. It would be fun to spend a little more $, engage in more activities (which cost $), and such. Just because I don't want to travel, doesn't mean that I won't find ways to spend money.

(3) I think it's somebody's law that when you don't have a job, problems with the roof or car or extra health expenses will come up that didn't come up earlier when plenty of income was available.

 

[haha]

(3) I think it's somebody's law that when you don't have a job, problems with the roof or car or extra health expenses will come up that didn't come up earlier when plenty of income was available.

Looks true to me. After years of little dental expense, already in 2007 I've had 3 crowns, a filling and a routine cleaning.

How much? $3100!

And you guys who still have young kids - wait till you hear what the orthodontist will want.

Ha