In that 1st Year of Retirement?

[DawgSavr]

Good afternoon. Just a little background, I'm 58 in early October and better half is 57. I am planning to exit and retire at the end of the year 12/31. My better half is already retired. Based on Personal Capital, FireCalc and Wealth Advisor our Financial Plan is solid and is forecasted out until both of us are 100/99 respectively with non-discretionary (base living), estimated taxes and discretionary spend (fun) expenses as best as we can estimate w/inflation adjustments throughout our plan and will still have a surplus, not counting our home equity. Again, our plan is fluid and will be adjusted year to year based on events but for now we have done everything we can to look as far into the crystal ball as possible. My question, in that 1st year of retirement ... how did you approach it? Conservatively...meaning don't take on any large expenses, use the 1st year to confirm your base living expense plan is solid, enjoy it, relax, get acclimated, do a few hobbies, travel a little, get to know each other again or do what you normally would do. I'm a DIYer and my better half would like her kitchen updated. I have ~$50K in the budget to do so...should I jump right into a project or let it soak a year? Appreciate the insight and experiences!

 

[Marita40]

I'm half way into year 1 of retirement. In spring I did some major work on the house but that was part of a multi-year project that had to unfold over several years. So it had been planned for awhile. I did a lot of financial planning before hand, so I knew what my budget would be for this year, and I'm simply spending within it. I have enjoyed relaxing, a bit of travel and planning for more travel, hobbies and exercise, all with the great joy of not being compelled to do anything. Things like figuring out Medicare took me surprisingly long. I've started volunteering at a couple places, but on a small basis in order to ease into it. Good luck with the upcoming retirement! I would just ease into it if I were you. My last day was Jan. 2, 2021 (to get a full month's benefits!)

 

[Montecfo]

I retired in n 2019. I had already validated expenses over the prior few years. So did not need to do that.

It is tricky with Covid lurking but in my opinion, you want to get going on your travel and discretionary expenses while you can enjoy them fully. Time is a-wasting is how I view it.

The stock market has been very strong. Assuming your plan is solid, I would not intentionally wait.

We have under-run our conservative spending plan (Covid a factor though we did travel last year). Now we are catching up on some home projects, as we have decided we have no plans to move at this point.

No time like the present.

But #1 retirement activity is: relax and take life as it comes.

 

[SecondCor521]

I think it really boils down to personal preference. I decompressed for about six months, but others will probably say they dove right into projects. It's probably personality more than anything - I enjoy a moderate level of activity while others like to keep busier.

If you have the money already budgeted, I'd say sooner rather than later is more likely to keep your better half happy, if I'm reading between the lines correctly.

The only thing that might make me hesitate is the availability / supply of materials and labor for a project like that - if they're in short supply your budget will be adversely impacted. But it sounds like you have plenty of wiggle room in your finances, so it's more just something to consider rather than a red flag.

 

[PaunchyPirate]

I retired on December 14th of 2018. I visited family over the holidays and then took a cruise during the first week of January. Then I mostly just relaxed and unwound myself for the next 3 months (winter in PA). I had tracked spending for a couple years prior to retirement, so I wasn’t worried about my spending. But I hadn’t fully decided on which income sources to use to fund those expenses. So I worked on the details of that over the first few months.

By April, I was ready to travel, so I did a trip to New Mexico and Arizona followed by a summer road trip from PA to Oregon and back.

So, my first year went mostly as I had planned. But I really did (and still do) a lot of “I’m gonna wing it” living. I do what I want, when I want. Covid limitations have guided that a lot, but I just keep figuring it out as I go along.

No regrets.

 

[Palmtree]

In the first year of retirement we went WAY over budget. Built a new garage / workshop for yours truly. Dropped 15K on paving the driveway. Went to Belize, Grand Cayman and sking out west. Did a lot of home improvements too.

It was the second year of retirement that we got back on budget. It's year six and we are still way under-spending what we could.

 

[38Chevy454]

I had budgeted for large expenses in first year. Such as building new house, big detached garage, in ground pool. Plus all the expenses associated with moving 1500 miles away. That first year budget was an outlier for sure. Now after 4 years general budget numbers have been pretty consistent last few years.

 

[brett]

No large expenses. The opposite.

Sold our home, downsized into an 8X8X16 container that we put in storage for a year.

Placed our home equity monies in the equity market.

Travelled internationally. Then came home and rented for four years. Traveled internationally for at least four months during each of those four years.

Financially it was a huge win. Homes went down in value, equities went up. My guess is that all of our travel (and more) was covered by having no housing expenses for a year and by the five year gains in equities vs. a flat/declining real estate market.

Dumb luck but it worked for us.

 

[RobbieB]

I've been spending 5-7% for the last 7 years. New cars, travel (first class), home improvements, funding the kids (step kids), funding a new venture for my BIL and eating very well.

Got more dough than I started with. Plunge right in, the water's fine!

 

[Crewer]

We didn't fully retired but eased into it since DH consults. We didn't hold back on expenses, though, and did alot of national and international travel. Our budget had been well verified and we downsized several years ago to a place that doesn't need much/any work. We also have quite a bit more than when we started but that won't last forever.

 

[Austin704]

Apart from trading out a car and paying cash for it about a month into retirement, I deliberately minimized big expenses in year 1 of retirement to see how closely my estimate of baseline expenses would come to reality.

I had tracked expenses for two years prior to retirement so I had a high degree of confidence that if my lifestyle didn't change much neither would my expenses... This turned out to be correct.

I'm now in year two of retirement and finding that my expenses are very stable. I've had a few outlier expenses like Roth conversion taxes, an AC system replacement, flooring upgrade, and a bit of travel, but pretty much getting the result I expected.

If I had it to do over again I probably would follow the same "slow and go" approach until I was sure reality aligns with projections.

 

[DrRoy]

My question, in that 1st year of retirement ... how did you approach it? Conservatively...meaning don't take on any large expenses, use the 1st year to confirm your base living expense plan is solid, enjoy it, relax, get acclimated, do a few hobbies, travel a little, get to know each other again or do what you normally would do. I'm a DIYer and my better half would like her kitchen updated. I have ~$50K in the budget to do so...should I jump right into a project or let it soak a year? Appreciate the insight and experiences!

We did exactly what you describe above, even down to the remodel. Moving to year 4, in part due to the good market, we are just doing rather more of it and our spending is up 50-75%.

 

[old medic]

I'll make you a deal..... I myself am a 58 YO DYIer retiring the end of December. Wife will still be working a few more years... We are rebuilding a whole house... actually going to play with kitchen cabinets set up today... I'll offer to run up 81 with some tools and camper and help you, Then y'all can return the favor, got a spot for a camper and enjoy WNC for a few weeks.
This past year, I took my projected monthly retirement check, and put the rest of my paycheck into my 401K. We have managed well on the reduced income.

 

[pacergal]

Retire and relax a bit before you jump in to something such as remodel, which may be stress inducing and have a few hiccups!

 

[Koolau]

I'd suggest doing some fun stuff. Hopefully you have at least a mental list of stuff you put off (travel probably high on the list) while you were still w*rking. Remods are a pain, so save that until 2nd year - or 3rd. That's what we did. Of course, our Remod was in a new state, so YMMV.

 

[RetiredHappy]

We sucked at budget vs. actual for retirement and blew through our 10-year cash reserve which we had set aside in about 5 years. Sold our 3-year old car, bought a new car and hated it, sold it the following year and bought another new car. Made a $200K investment with friends who needed cash infusion into their struggling business and that was the end of that money. Spent a bit of money on international high-end cruises for first few years after retirement because we had to be in the same timezone all year around when we had our business. This year we just "Upsized" our home, sold and bought another home and just completed a very expensive remodel. We do think this is the last of our unexpected spendy period. We still do alot of travel but it is in our budget. All in all, we did some stupid stuff but we are still in great shape financially.

If you can keep to your budget or if you are using first year to establish your retirement budget is great.

 

[Midpack]

As you can see above, there’s no universal answer, you’ll do what you’re comfortable with - and should. Undoubtedly your spending varied from others of similar means while you were working/earning, and that doesn’t change when you retire. We confirmed our planned budget by starting it 2-3 years before I actually retired. In the first year I retired our spending was unusually low, but it just happened subconsciously more than anything, we’ve both been pretty frugal all our lives. We did a full kitchen reno and bought a new, more expensive house after retiring but not in year 1.

 

[Koolau]

We sucked at budget vs. actual for retirement and blew through our 10-year cash reserve which we had set aside in about 5 years. Sold our 3-year old car, bought a new car and hated it, sold it the following year and bought another new car. Made a $200K investment with friends who needed cash infusion into their struggling business and that was the end of that money. Spent a bit of money on international high-end cruises for first few years after retirement because we had to be in the same timezone all year around when we had our business. This year we just "Upsized" our home, sold and bought another home and just completed a very expensive remodel. We do think this is the last of our unexpected spendy period. We still do alot of travel but it is in our budget. All in all, we did some stupid stuff but we are still in great shape financially.

If you can keep to your budget or if you are using first year to establish your retirement budget is great.

We did well for a couple of years post retirement. Then when we moved, we did a major remod/rehab. 2 years later, we moved again and did another major remod/rehab. I think we got a fair amount of our "investment" back when we sold the first place. BUT, cash stash was basically gone before we expected it to be. More than anything this situation caused us to pay more taxes than we had planned as we had to get into our qualified accounts (tIRA/401(k)). It made Roth conversions more problematic as well. It has all worked out, but it's difficult to fully plan for such events. You do need to be flexible. It doesn't hurt to have an excess of stash, but you can adapt to most any situation if you are both on board. YMMV

 

[corn18]

Retired this past March. The first chart was our plan. Budget is running hot by $30k / year and we spent $72k on a patio and landscaping. If we maintain this pace, we will be out of money @ 65. Life is good.

 

[novaman]

I’ve been “retired” now for 3 years and haven’t bothered with a budget. We spend as freely as we want to. I have checked from time to time to see what percent withdrawal rate we are spending at and the good news is that we are within the safe range.

I did carefully track our spending prior to retiring so I already knew what my spend rate was before I pulled the plug, and have remained consistent.

One thing to note is that many retirement gurus will tell you that when you retire your spending will typically drop up to 20%. I have found that to not be true. My spending has remained the same- it has just switched within different categories.

 

[Koolau]

One thing to note is that many retirement gurus will tell you that when you retire your spending will typically drop up to 20%. I have found that to not be true. My spending has remained the same- it has just switched within different categories.

Yeah, our spending went UP at least 20% - but that was pretty much planned for.

Our "problem" was that we went through our cash too fast. It wasn't so much that we exceeded our "4%" (or whatever FIRECalc said we could). It was more in the mix of assets we had to draw on. Our experience may flash at least a potential warning to folks saving for FIRE now. Be careful you don't end up with too much in qualified funds at the expense of taxable accounts (and cash). You lose tax flexibility that way. "Unexpected" spending in one category (remods in our case) forced us to take 401(k) money earlier than we had planned - triggering more taxes than planned.

IOW in addition to planning how much you will spend in retirement, plan how you will take that money from your stash. Cash and taxable accounts give you much more flexibility than qualified accounts. YMMV as always.

 

[DawgSavr]

Appreciate Everyone's Experience...

Based on the feedback of this being more of an individual circumstance and preference ... I will likely keep with my conservative ways in that first year. We have tracked our expenses since 1988 in Quicken so we have a very good idea on our spending history. Being in the investment business there is always the disclaimer,"past performance does not predict future results" ... however it gives me a good foundation to base our plan on. I think we are going to take it slow that first year ... travel a bit (if we can, depending on where we are with the variants of the virus and impact on society), do some needed maintenance around the house, no big remodels, work on our hobbies, woodworking, fishing, hiking. Help my brother with his cabinet business as he is looking for an extra hand as his one person business expands. Have a lot of no to little cost things that we want to do so I think we will focus on just enjoying and taking it day by day and see where life takes us. Isn't that the reason we are retiring is to take the foot off the gas a bit and enjoy the scenery.

Appreciate everyone's great input! I wish you all the best! Thank you.

 

[Ole Red 29]

I retired 3 years ago at age 57 unexpectedly. I often say I didn't choose to leave my job, but I did choose to not look for another one. My plan was to retire at 62. I thought I had 5 more years to plan for how I would live off of my portfolio. In hindsight, I should have been better prepared. My first year of retirement I was very conservative and on a steep learning curve of how to set up my financial portfolio to support us (this forum was a big help). Each year since we have been a little less conservative in our spending. I suspect this will continue as long as the market is good. After 3 years, I feel more confident in managing our retirement portfolio and our spending.

 

[jollystomper]

We spent that 1st year living to test our "extravagant" plan. My reasoning was, if I miscalculated, I would rather find out as soon as possible and start adjusting. We did a lot of travel, bought another car, etc. We stopped budgeting and focused on cash flow. Pushing to the limits of our plan did not cause any issues, and that has made us much more comfortable about our ongoing retirement spending.

 

[street]

If it were me I would get planning the project and start. I will say for my personality, I like to get things done, so waiting wouldn't fit me.
It would keep you busy, starting into a time with plenty of time.