Do you continue to save in retirement for high ticket items?

[Deej]

When I say save, I mean for things like car replacement, home upgrades, huge vacation and the like. Like us, I know many have savings buckets for these things before retirement to allocate money toward, but, after retirement, do you still continue to save in these same buckets? Or do you just pull from your Roth, 401K or other for these pricey purchases.

 

[SnowballCamper]

Yes, we’re able to live below pension income and save all the extra in a regular savings account. When it gets too big, we buy something fun.

 

[Drake3287]

Although I have more than enough money to buy pretty much anything I want, I do budget and save for future high-cost purchases such as car's, vacations and such. It's too easy to sock away a hundred bucks here and there for such things and before you know it, you've got a big dent in the purchase of expensive items.

I'm guessing that most of us that have been savers for life do something similar. Once a saver, always a saver. I think many people that live paycheck to paycheck would think I'm crazy not to just spend away but at this point it's hard to suddenly change spending habits.

Admittedly, I'm not afraid to dig into my savings as things come up. I think most of us sleep better knowing we've budgeted for life's expenses.

 

[street]

No budget or money set aside for larger items. If we need it, we we get it, that is how we have done it from the start.

 

[NW-Bound]

I guess it depends on whether one lives off a pension, or off his savings/401k.

When one is on a fixed income and does not have a large enough buffer of cash, he needs to plan for major expenses.

For retirees who live off their savings/IRA/401k, they can just tap their accounts as needed, as long as the average withdrawal rate stays below 4% or whatever they choose to set for themselves.

Of course, drawing a big amount from a tax-deferred account may lead to a larger tax bill the same year. So, most retirees would have a cash buffer or a Roth account they can tap for large non-recurrent expenses. Again, as long as they are below 4% WR in the long term, they are still within their means and large variations from year to year are acceptable.

I myself have the equivalent of several years of expenses in accounts that I can withdraw, and not have to pay outrageous taxes.

 

[RunningBum]

In my original budget I accounted for large capital replacement on things like cars, and major home repair/project expenses, and such. For example, I could include $5000 each year to put toward a $30K purchase every 6 years. So that $5K went into my total yearly budget. That budget is what I wanted to have (at least) 25x in investment assets.

Now that I'm depleting, I use a spreadsheet to track outflows (mainly from my checking acct since almost everything runs through there) and I add notes for any exceptional items like a new car. This gives me a running monthly record of how I'm tracking to budget.

In my withdrawal spreadsheet (where I happen to use VPW), I note how much my VPW formula allows me to spend in a year given the start of the year balance. At the end of the year I record how much I actually spent, and how it compares to what I allocated. So far (6 years of tracking) I've under-spent each year, and I keep a running balance of how much. In a year with more of those exception expenses causing me to go over the yearly allocation, I just eat into that surplus. No surplus? I'd try to cut back the next year to put me back on track, just like I'd do anyway with VPW after a down market year.

So basically it's like I'm funding a slush account for those purchases, but it's all in my spreadsheet, and I don't have to actually keep special accounts.

There's no harm in actually keeping buckets instead. Whatever works for you, as long as you realize that one way or another you have to account for such things.

 

[RobbieB]

I just pull whatever we need from equities on a regular basis. No savings, no budget, no buckets.

 

[DrRoy]

No budget or money set aside for larger items. If we need it, we we get it, that is how we have done it from the start.

+1

 

[Montecfo]

I already saved for everything I need, so no, I do not have some separate piggy bank for large purchases. All of that was contemplated pre-retirement.

 

[mrfeh]

I guess it depends on whether one lives off a pension, or off his savings/401k.

When one is on a fixed income and does not have a large enough buffer of cash, he needs to plan for major expenses.

For retirees who live off their savings/IRA/401k, they can just tap their accounts as needed, as long as the average withdrawal rate stays below 4% or whatever they choose to set for themselves.

+1

We aren't drawing SS yet, and don't have pensions, so there isn't anything to "save".

 

[flintnational]

I already saved for everything I need, so no, I do not have some separate piggy bank for large purchases. All of that was contemplated pre-retirement.

+1

 

[grasshopper]

We don't save anything, we just don't spend it.

 

[donheff]

I set a SWR and add unspent $ to a psuedo account reserved for unusual purchases and/or supplementing income during a huge downturn. I tapped the account for a down payment for DD's house. After 15 years I have concluded that I don't really need to maintain this approach.

 

[ShokWaveRider]

We do not specifically go out to save anything. We spend what we need to when we need to. We also have a new car every 3 years. We have actually ended up saving a little. But for last year and this year that may not be the case.

 

[Golden sunsets]

Yes we save a set amount each month plus surplus cash leftover from the prior month and dump it into a high yield savings account for lumpy items which range from auto replacement accruals, to home improvement/repair, weddings, large cash gifts and other one offs. Last year we paid cash for a new vehicle out of that account. The funds in this account aren't included in our AA. I do include the account in our total assets, but not our investment portfolio. The fund, currently at about $171,000, includes an uncategorized category of about $61,000.

 

[Still Learning]

Before retiring developed income projections out to age 80 that included high ticket items including house updates, vehicles, travel, long term care and surplus cash beyond budgeted living expenses that simply gets spent or goes into savings.

 

[TheWizard]

I'm retired eight years now and never used a bucket approach for anything.
I travel a lot In normal years, so I increased my target checking account balance to $10k, which allows me to pay those expenses on an ongoing basis without having to transfer funds.

Excess retirement income beyond that checking account target goes into stock index funds in my taxable account. I have no savings account and don't want more Ordinary Income.

So when I decide to buy my next Mustang convertible before long, I'll take funds from some combination of my taxable and Roth accounts to manage my AGI...

 

[geeky_grrl]

I don't formally save for big expenses by keeping a separate account or anything. I just pull money into my checking account from my investment accounts as I need to.

But I do intentionally spend less on day to day expenses than what I had budgeting as my SWR. That difference should be enough to fund lumpy expenses like home repairs, vehicle replacements, etc.

 

[gayl]

Yes, we’re able to live below pension income and save all the extra in a regular savings account. When it gets too big, we buy something fun.

+1

 

[Sojourner]

I'm retired eight years now and never used a bucket approach for anything.

I don't formally save for big expenses by keeping a separate account or anything. I just pull money into my checking account from my investment accounts as I need to.

No savings, no budget, no buckets.

+1

The concept of "saving money" for specific, large expenditures doesn't really carry over from one's working years to one's retirement years, IMHO. Once you're retired, there's no longer a steady income from which to fund a savings account. The saving has already all been done, and thus when the time comes to spend a chunk of money on something big (a car, a lavish vacation, etc.), just pull it from your existing savings or investment accounts.

I think the bucket approach is really more suited for people who, during their working years, need a mental accounting hack to help them save up for big purchases and not spend everything they make. Folks like us who've achieved FIRE typically don't need those kinds of hacks, as most of us were (and are) prolific savers and investors by nature.

 

[Golden sunsets]

+1



I think the bucket approach is really more suited for people who, during their working years, need a mental accounting hack to help them save up for big purchases and not spend everything they make. Folks like us who've achieved FIRE typically don't need those kinds of hacks, as most of us were (and are) prolific savers and investors by nature.

Ahh. But many of us do have income in retirement from pensions, SS annuities or real estate, so yes it does make sense to set aside some of that income, if that is the preferred method of accruing for major expenses of that subset of retirees. We don't need to do it that way. We prefer to do it that way, perhaps because we are accustomed to "this kind of hack". I really did have to laugh as that phrase.

 

[jollystomper]

These "large items" were factored into our planned retirement spending, so we do not need to specifically save for them. All I do is look at how overall cash flow is tracking to expectations. Any "surprises" are more than covered by our buffer (ongoing discussion in another thread) and growth from our investments.

 

[brett]

No. We simply pay from our savings.

 

[rk911]

When I say save, I mean for things like car replacement, home upgrades, huge vacation and the like. Like us, I know many have savings buckets for these things before retirement to allocate money toward, but, after retirement, do you still continue to save in these same buckets? Or do you just pull from your Roth, 401K or other for these pricey purchases.

yup. we have a number of sinking funds for new car purchase, vacations, etc. but this is nothing new for us. we've been doing this for years.

 

[audreyh1]

Yeah, because we don’t spend all our income, so we naturally build excess that can be spent on big ticket items, splurges or gifting/charity.