Expense Poll

[cinman2000]

After many hours over the last six weeks doing my first deep dive into retirement planning, my 4 favorite tools (FireCalc, Fidelity RIP, my own excel spreadsheet and our Financial Planners tool) are all converging down to two questions. I'll deal with the most important of those here: "expenses" (big surprise):

I'm 52, DW is 50. Our combined income is 210k and we have been able to max out on all retirement savings options for many years. Our lifestyle is comfortable and we have not been constrained by a budget, but just our common sense of values. We have tracked spending closely and estimated our retirement budget based on that lifestyle (with adjustments for the kids leaving the nest). I believe this to be a very conservative approach and am wondering if we are really going to have the same mental approach to spending in retirement. In other words are we severely overstating expenses? I know that each situation is different, but here is my question.

Those of you that are in the same ballpark as us from an income perspective in your working years, but have retired recently: What is your annual budget amount? I'll go first:

$96,000 + $10,000 in taxes = $106,000

(Other income brackets please join as well, this could be a great help for many of us that are on the bubble)

 

[rodi]

Our proposed budget is $95,000 (taxes included), dropping to $83,000 when the 529's are finished. (about 12 years from now).

That's an all -in... room for travel and perks budget for a family of 4. We have plenty of room to cut back...

It assumes mortgage is paid off... which should happen early next year. We're currently making huge extra principal payments (more than $2k/month extra) to reach this goal.

 

[H2ODude]

About the same. Could spend a lot more but cannot travel as much as would like because of eldercare. Keeps WR around 2% or so (have pension as well, no SS yet).

 

[cinman2000]

Our proposed budget is $95,000 (taxes included), dropping to $83,000 when the 529's are finished. (about 12 years from now).

That's an all -in... room for travel and perks budget for a family of 4. We have plenty of room to cut back...

It assumes mortgage is paid off... which should happen early next year. We're currently making huge extra principal payments (more than $2k/month extra) to reach this goal.

Yes, ours is assuming mortgage paid off also. I take it you are still working?

 

[W2R]

(deleted my original post because it didn't answer the question! Oops.)

We have tracked spending closely and estimated our retirement budget based on that lifestyle (with adjustments for the kids leaving the nest). I believe this to be a very conservative approach

That sounds like a good approach to me.

Retiring felt sort of like (what I imagine) jumping out of an airplane might feel like. You do all you can beforehand to figure these things out, but on retirement day as you walk away you just hope to heavens that your computations were good. My big surprise was a good one, fortunately; taxes as a retiree are surprisingly low.

 

[ERD50]

I do not think you will get much useful information. People's needs/wants are different.

Some people with a high income want to retire and will accept a low expense lifestyle - they like the comfort of a relatively large portfolio, and they don't need much to be happy. Others want to travel, or other things that can be expensive.

On the other side of things, some people may have a had a fairly low income, but have been saving like crazy so they can splurge a bit in retirement.

What do you want?

It might be better to outline your needs/wants with your proposed budget, and maybe people will pick out things that are missing(health care? home maint? car replacements?) or seem like outliers (like - hey, that much travel will cost more unless you really plan and scrounge and search out bargains).

-ERD50

 

[smileydog]

Before Tax Budget 72k
after tax essential budget is at 30k
after tax discretionary budget is 20k (mainly travel budget)
I include big ticket fund contributions in the mix also
My actuals #s so far have always been way under
another consideration - No mortgage

 

[Midpack]

You may have already searched and not found what you were looking for, but FWIW

http://www.early-retirement.org/forums/f28/poll-how-much-do-you-actually-spend-each-year-63780.html

http://www.early-retirement.org/forums/f28/annual-expense-trends-64471.html

IMO the only good way to figure out what you'll really spend in retirement is to cut back to that level of spending for a year or two before you retire. We did, gave us peace of mind to know for sure before pulling the plug.

 

[rodi]

Yes, ours is assuming mortgage paid off also. I take it you are still working?

Yes - still working (until I get a severance package... or hit 55... or my BS bucket overflows.) Plan to retire anytime between now (in the middle of a corporate buyout - so severance possibilities are high) and 4 years from now.

We hit our target number - but I'd like some padding.

Hubby will retire next year when he turns 62, regardless.

My budget numbers were arrived at based on actual spending the last several years... then modified (changes in taxes w/ no SS/medicare taxes, increased health care, reduction in child care/summer camps).

The more I can pad the number, the more extensive our travel can be.

 

[pb4uski]

We were in the ballpark with you income wise prior to retirement and our budget is about $65 without our mortgage, but like ERD suggests I'm not sure if that will be very helpful to you.

 

[bondi688]

As a single person who had never been been extravagant nor attracted by material things, I think I can live a simple and not uncomfortable life with what I will get from Social Security alone, and without cheating by not counting food stamps or other government benefits. I do have other retirement savings, but I can do a good many years on 0% withdrawal in times of bad market downturns.

 

[Brett_Cameron]

.....

$96,000 + $10,000 in taxes = $106,000

Almost exactly (within a few percent) the same as ours.

 

[Meadbh]

Comparing budgets is like comparing apples and oranges. Circumstances differ. For me, there is no relationship between former earnings and retirement budget, because I have been paying myself sufficient to match personal expenses from my professional corporation in the years prior to retirement. That is the benchmark. I think you need to draw up your own budget now, before retirement. You might be surprised to find some economies you can make, too.

 

[Gasdoc]

Hey....We are a little bit younger than you, but will expect to have around the same budget as you proposed (well, adjusted for the 2030s). Hopefully less as the kids should be our of the house, mortgage paid off, no debt, etc....but we plan around 100k. ERD50 makes a good point that none of us are exactly the same and our needs are different, but you seem to lead a modest, contented life and LBYM. That budget should be great! Good luck with the retirement planning!

 

[mickeyd]

We don't do a budget~ just fly by the seat of our pants (well my pants anyway.)

We spend less that our income streams bring to our checking account each month. Between pensions and SS, we generally have a couple of grand monthly left over that I stash into our savings vehicle, awaiting an opportunity to spend it.

Not sure how to spend what RMD will deliver to us in a few years but I'll figure that out eventually.

 

[NotMyFault]

My household income is about 60% of yours and my planned budget is about 60% of yours so proportionally we are the same. I don't know why but I found that to be interesting. I am not retired yet so I guess my budget doesn't mean much. It is difficult to compare 2 peoples spending amounts without seeing the actual budget items. For example I pay about $2000 in property tax you may pay the same or more. As others have said you may be comparing apples to oranges.

 

[LOL!]

Our gross income is more, our taxes are less, our expenses appear to be less, if we ignore: Our biggest expense now is college expenses, but that kid graduates next year. We live in a cheap location and have no mortgage.

We pay no income tax on
(a) 401(k) contributions
(b) HSA contributions
(c) health insurance premiums
and deduct the following
(d) property taxes
(e) sales taxes (no state income tax)
(f) charitable contributions
and get tax credits for
(g) foreign tax on mutual funds
(h) education credits

It turns out if we make another $100 in interest, we pay another $45 in federal income tax, so we are in the 45% marginal income tax bracket, but our federal taxes divided by gross income (not adjusted gross income) is about 9%.

I just don't see how one can pay $10,000 on $96,000 of income. Have you put your numbers into tax software? Or do you have zero qualified dividends and zero long-term cap gains and zero carryover losses which would mean that all your planned $96,000 will come from IRA or 401(k) withdrawals or pensions?

 

[scrinch]

cinman, we're in roughly the same age and income situation. But I am living overseas currently, where my expense structure is completely different from in the US where DW and I will retire in a few years. So I'm having an even more difficult time estimating retirement expenses than you are. A half dozen years ago in the US, with three kids still living at home, our expenses were in the low to mid $80k range, excluding taxes. I'm swag-ing $100k retirement expenses now (including taxes), so you and I are thinking along the same lines. Although I don't know these numbers very well, I'm figuring the top quarter of that budget is pretty flexible/discretionary, so withdrawals can be fairly flexible under bad market conditions. Like everyone else, I'm not sure how health insurance premiums will affect the budget in the years before Medicare.

 

[FIREd]

Gross income is higher. Expenses (ex-taxes) are just a tad higher than yours, but 60% of that goes to rent. I live in a high cost of living area.

 

[MBAustin]

Tax rates can vary considerably due to itemized deductions. DH and I consciously decided not to reduce our charitable contributions after ER so they are now a very significant fraction of our (greatly reduced) income. Add to that property taxes and medical deductions and our taxable income is much lower than our spending.

 

[obgyn65]

I am single, 47 years old, turning 48 this year. My income is higher. My planned expenses during RE are about 80k-100k per year over my 47 year-plan, or 100k-120k with the use of annuities. My personal annual expenses are about 40k, trying to force myself to spend 50k this year, as documented in another recent thread.

Those of you that are in the same ballpark as us from an income perspective in your working years, but have retired recently: What is your annual budget amount? I'll go first:

$96,000 + $10,000 in taxes = $106,000

(Other income brackets please join as well, this could be a great help for many of us that are on the bubble)

 

[Ronstar]

Im 57, DW 58. Our combined income was similar to yours before I went part time. Our planned expenses are around $100k to include taxes beginning this/next year when DW retires. Our taxes will be low initially because I'm using up post-tax $ first. Good luck on keeping your tax burden at $10k.

 

[Fishingmn]

I'm 52, DW is 50. Our combined income is 210k and we have been able to max out on all retirement savings options for many years.

Almost exactly like us (except I'm 51).

My current plan is to retire at 55 and my expense projection (not including mortgage) is $93k/year. That does include $26k of taxes (but $8k of that is property tax).

My biggest challenge has been getting an accurate read on budgeting for medical. Right now I've got $12-14k plugged in.

 

[NanoSour]

Our income situation is similar and we are looking to retire this year if all goes as planned and I can get over my phycological weakness.

Looking back after three years of meticulous expense tracking using Quicken, we are spending $77,550. That includes $20,042 in housing expenses (PITI). That's leave $57,508 for discretionary spending.

We are a family of 5 with 2 grade schoolers and 1 in Jr High. I purchased ESPlanner recently to see if my assets would hold up to this budget and it predicts a $75,566 discretionary spending level, so I'm fairly comfortable that we are financially ready for ER.

This ESP number assumes "cautious" spending with an average portfolio gain of 1/2 the mean for our specific portfolio makeup. Basically the "Lazy" Vanguard portfolio.

I'm very happy to have reached this point in life, but I will say the decision to ER and leave the workforce is not an easy one.

Good luck in your decision.

 

[jerome len]

Make sure you expect the unexpected.

For me the big surprize is kids never leave.....really. My kids had kids, many of them and I've started 529's for all of them the way my parents did for my kids. Then, health care.......I need a lot of dental work.....implants aren't cheap. Back to grandkids, birthday and Christmas presents cost more than I originally budgeted.....who knew that my kids would give me so many grandkids.

Another surprise.....new roof! Just replaced 3 years ago but the material went bad and roofing company, out of State, said sue me....my lawyer told me it would be cheaper to pay 8k for the roof than go through the lawsuit.

Overall, I'm really fine but budgets need some space for unexpected challenges. I have a neighbor with a six year old car, she owned it for 2 years, financed it for 4 years and it just lost the engine......now she has to spend thousands that she didn't expect.....and she doesn't have it to spend.

I set aside a grand a month to cover unexpected expenses.....have about 15k in my fund so I don't worry.....maybe, I'll use part of it to get my fantastic DW something nice for Valentine's day. Good luck to all.....overall, I think we're really lucky!