Annual living expenses range

[Joylush]

I’m trying to get an idea as to general annual living expenses. I know it varies a lot based on individual circumstances.

Assumptions:

2 person household
No mortgage
(Property taxes $1500 annually)
No debt
Health insurance currently free with minimal out of pocket costs/eventually need to include Medicare premiums)

What amount is needed monthly to have a trouble free retirement? Just looking for a general range.

 

[LRDave]

$4-6K/month.

 

[REWahoo]

I’m trying to get an idea as to general annual living expenses. I know it varies a lot based on individual circumstances.

Yes, that's why a "general range" isn't meaningful.

The most accurate way to do this is to take your current general annual living expenses (you do track those, don't you ) and go through each category to estimate how it will change once you are retired. That should get you a number that is definitely within the ball park.

 

[aaronc879]

$1K-15K/mo. Is that general enough? If I didn't have a mortgage $1K/mo would be plenty for me. There are others on this forum that would say it's "impossible" to live on less than $5K/mo and others who would rather keep working than live on less than $10K/mo. There is no "general" amount that is enough. It varies greatly from person to person.

 

[38Chevy454]

Depends on your budget. As all previous posts to mine stated.

 

[W2R]

This is one of our favorite topics. Here's a thread where we shared our spending for 2019:

https://www.early-retirement.org/fo...-summary-and-analysis-101451.html#post2346811

Hope that helps.

As for YOUR spending, I'd first record every cent you spend right now, and use that as a starting point. Subtract expenses you will no longer have in retirement (work clothes? More gasoline for a long commute? etc), and add new expenses that you might have like travel, entertainment and so on. Then you may have more of an idea of what you will need in retirement for the lifestyle you envision.

 

[ShokWaveRider]

The Property Taxes are a little unrealistic, we are in NEFLA and our Taxes are >$6k a year. There is $500 pm right away.

I would say ours are about $5k pm on average for any give year including home maintenance etc.

 

[Dtail]

IIRC, there was a past poll which indicated ~20% of folks spend more than 120k yearly.
So the range is quite wide.

 

[Sunset]

OP - How much do you spend now ?

Best thing I have done to ease my mind on spending is track my expenses everytime I spend a penny.
I use an phone app: Spending Tracker (free) so it's easy and quick, I use about 30 categories (ex groceries, takeout, in restaurant, travel, booze, etc)
Each month I transfer it to a spreadsheet so I have records going back few years and can see changes or graph it, etc.

 

[REWahoo]

This poll is about retirement income, not expenses, but assuming the two are closely related it does illustrate there is a wide range: 80% fall between $36,000 and $120,000 (after taxes). And as was mentioned previously, that leaves 20% with an annual number of more than $120K.

https://www.early-retirement.org/forums/f28/poll-target-monthly-retirement-income-89328.html

 

[Joylush]

OP - How much do you spend now ?

Best thing I have done to ease my mind on spending is track my expenses everytime I spend a penny.
I use an phone app: Spending Tracker (free) so it's easy and quick, I use about 30 categories (ex groceries, takeout, in restaurant, travel, booze, etc)
Each month I transfer it to a spreadsheet so I have records going back few years and can see changes or graph it, etc.

That’s a good idea. I just listed out all the expenses I could think of and then just doubled it to be safe. It didn’t include travel/entertainment before I doubled it. That came to around $6000.
I have been retired for several years. My income is rental property income, so my job, is landlord. I’m growing tired of it and have started selling as folks move.
Haven’t had to track anything in detail because I spend far less than I make. Eventually the monthly income will decline as I sell but then again I will also be able to access the proceeds. Half my net worth is in real estate. One quarter is in cash, the other investments 75/25. I believe the cash savings will be enough to live off of forever so the rest is just a bonus but I don’t want to be overly confident- then again I keep hearing once you have enough why risk it. It is just hard to stop being an investor when you’ve been one your entire adult life.

 

[mountainsoft]

I’m trying to get an idea as to general annual living expenses. I know it varies a lot based on individual circumstances.

Assumptions:

2 person household
No mortgage
(Property taxes $1500 annually)
No debt
Health insurance currently free with minimal out of pocket costs/eventually need to include Medicare premiums)

What amount is needed monthly to have a trouble free retirement? Just looking for a general range.

A quick answer someone else told me on this forum a while back is to take your current take home pay, subtract the amount you save, the rest is your living expenses. It's crude, but it's a decent approximation.

Personally, I download my checking and credit card transactions from my banks web sites each year and categorize where we spend money each year. I use a program called Alzex Finance (https://www.alzex.com/) to make this easier, but have done it manually too before that.

For what it's worth, our spending over the last six years has varied from 38K to 55K per year, with the average being right around 44K annually. We're both still working so some costs will likely go down after retiring (gas, clothing, work expenses), while others will likely go up (health insurance, travel, etc.).

Oh, and $1500 property taxes are great if true. Ours are $5000 per year here in Washington state, for a small 1456 sq/ft house.

 

[Stormy Kromer]

After health insurance and income tax we live comfortably on $4k per month, including a couple nice trips. 2 people, no mortgage or car payment. Similar property taxes.


Add in health insurance $1,300 per month and income tax $500 month we do fine on under $6k per month. Income is about $9k per month, not counting investment gains. Doin just fine.

 

[The Cosmic Avenger]

I used the Fidelity retirement planner to plan out a detailed retirement budget based on our current spending. When I found that our necessary expenses would easily be covered, I started adding things that would make us comfortable based on what our projections predicted we could successfully spend. When the bull market was running up, I upped our travel and dining expenses a few times and still had a comfortable margin at $10K/month total budget. Now that our score is down to 102 (from 111) I could reduce or remove some of those optional expenses, but I'd like to aim for frequent 3-4 star travel, or maybe 5-star travel once every year or two, so I'll keep the budget as-is for now and see if we can improve our score.

tl;dr version: working out a detailed budget is a good starting point, it can help you set a retirement target range.

 

[Offgrid Organic Farmer]

My Navy pension gives us around $1580/month.

After 19 years of being retired, we find living expenses run about 2/3s of my pension income.

Family of 2, we own our house and land with no mortgage.

We live in a 2400 sq ft house, on 150-acres of land. Our property taxes run $850/year.

I do not pay into income taxation, I have not paid into that since 1984.

 

[Joylush]

My Navy pension gives us around $1580/month.

After 19 years of being retired, we find this is about 2/3 of our living expenses.

Family of 2, we own our house and land with no mortgage.

We live in a 2400 sq ft house, on 150-acres of land. Our property taxes run $850/year.

I do not pay into income taxation, I have not paid into that since 1984.

I admire that! Sounds like great peace of mind!

 

[aaronc879]

My Navy pension gives us around $1580/month.

After 19 years of being retired, we find this is about 2/3 of our living expenses.

Family of 2, we own our house and land with no mortgage.

We live in a 2400 sq ft house, on 150-acres of land. Our property taxes run $850/year.

I do not pay into income taxation, I have not paid into that since 1984.

How do you not pay income tax on a Federal Pension or on the savings that you use to fund the other 1/3 of your living costs?

 

[daylatedollarshort]

For reference, you can check out: https://www.bls.gov/cex/

The Consumer Expenditure Surveys (CE) program provides data on expenditures, income, and demographic characteristics of consumers in the United States. The CE program provides these data in tables, LABSTAT database, news releases, reports, and public use microdata files.

Many here advocate tracking every penny before retirement. We actually didn't do that. We just decided we were tired of working and had enough income compared to most households in the CES. We took a close look at the CES tables and decided we'd be fine.

 

[Offgrid Organic Farmer]

How do you not pay income tax on a Federal Pension or on the savings that you use to fund the other 1/3 of your living costs?

Most years of my career, my pay was tax-exempt because I was in combat. At each duty station where I was located, we bought an additional apartment complex. My wife is an accountant, she was able to show that our rental real estate properties were write-offs that provided sheltering over my salary income.

Now as a military retiree, my pension is not large enough to require paying income taxes.

I support us on 2/3 of my pension, and the other third we spend on improvements here on our farm. Or for the last few years, we have been remodeling a commercial rental real estate.

I just got our Certificate-of-occupancy a week ago, I am rather excited about filling this new property with tenants.

 

[RobbieB]

Fifteen thousand a month.

 

[scrabbler1]

Two thousand a month (one person household). My annual expenses have been around $24k a year, some years a little more, some less. Last year, however, it spiked upward because an income spike sent the taxes upward (so I automatically had the money to pay them). This year, it will drop back to normal, even a little lower than most years (due to getting a bigger ACA premium subsidy).


When I was putting together my ER plan back in 2007-08, I analyzed my expenses to get an idea what they would be once I retired. What I figured out was that my commutation expenses and FICA taxes would disappear, and my health insurance (pre-ACA) would rise, by roughly the amount of the disappearing FICA taxes and commutation expenses. My other expenses would either rise a little or drop a little.

 

[rodi]

It all depends on lifestyle. Some people are super frugal (hence the jokes about cutting dryer sheets in half, etc.) Others like to live well and "blow that dough". I guess the latter would be considered "Fat FIRE", and the former would be "Skinny FIRE".

We've got a wide spectrum of members here. Some very skinny fire folks. Some pretty darn fat fire folks. Lots of folks in the middle.

You need to figure out how much you're currently spending, and what would be different once you retire. Two approaches to that: 1) itemize and estimate everything and add it all up. Remember to include taxes, health insurance, etc. 2) take your gross income and subtract out things that go away when you retire (401k contributions, payroll taxes like SSA and Medicare tax). Personally, I wasn't satisfied I had a good number till I got method 1 and method 2 to agree. If method 1 came up with a lower number than what I actually was spending... I was missing something and would dig in some more.

 

[Toddtheformeraccountant]

About $14,000 per month/$168,000 per year. That includes some larger amounts based upon location/conservative budgeting; $1,800/$21,000 for property taxes, $2,100/25,000 health insurance, assuming we max out all the deductibles.....plus $1,750/$21,000 travel....and $2,000/$24,000 of just "other"...so YMMV.

 

[Perryinva]

So there you go. Two posts up was $2k/mo total and then $4k/mo for JUST property taxes and HI two posts later. YMMV is an understatement.

 

[mitchjav]

Property Taxes - $1500/year/? Not in NJ !!!! We pay $14-$15K/Year