How much extra do you need?

For me there are two bare bones. One we stay in our dream house, the other we move. Now our retirement is based on staying here, obviously. However, we could:

Lower/raise the thermostat
git rid of cell phones
basic cable (no cable no tv and no tv not an option)
back to dial up
No eating out
no travel (for us that is not much of a sacrifice)
reduce special occasion spending birthdays/Christmas
some other minor stuff

Now we could move to a one bedroom apartment and greatly reduce our expenses, and that would really be bare bones, however, I can't even come up with the situation that would bring up to that.I guess if you get right down to it, bare bones is a room at the Y or under a bridge and supper at the soup kitchen.
 
Upon re-reading, this sounds preachy even to me, but I am not a good enough writer to get the tone right. I just wanted to get my two cents in about bare-bones: it doesn't have to be penurious.

We are in bare-bones mode now, partly intentional, and partly serendipity. When the crisis struck, we had been vagabonding for more than two years. We were renting a furnished house while the owner was out of the country and had to be out by mid January. The first decision was to quit traveling and settle down. It was driven by concerns about the economy and market, but it wasn't hard because we had been cruising before vagabonding, and were going on 5 years of an unsettled existence. It was time.

The serendipity part came in when a friend's garage apartment became available at the same time. Tiny, but in a great part of town and renting from friends is infinitely more agreeable than dealing with giant apartment corporations. We figured we could hang out for a while and wait for the Austin real-estate market to come back to earth.

I am not bragging and I am not saying that our experience would translate. Many folks would probably be miserable in a 600 sq. ft. apartment, but hey, we used to live on a boat. But in any case, last February, we woke up and realized that our expenses were [-]40%[/-]30% beneath our budget, with no sweat and quite content. We just sort of stumbled into it, sort of unplanned.

As the economy and markets improve, we have the option of moving to larger digs or keeping this Lilliputian apartment and using the extra bucks to do some serious traveling. In the meantime, I sleep very well at night.

I think middle class Americans have more options than they realize, and financially independent folks have even more.
 
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In some of my earlier projected retirement budgets, I had some inflated catch-all categories that I hoped would cover things I didn't think of. Over time, I'm trying to get more specific about expenses, both specific monthly expenses and major expenses that may come every year. I've just taken another pass at it this afternoon.

How this related to the topic is, how much extra you need depends on how well you've budgeted everything in the first place.

I'm resuming the monthly expense tracking I started doing last year, but had quit because with 2 homes and moving, it didn't seem helpful for the future. Now I'm pretty settled into my routine for the foreseeable future. I know some people say that post-retirement expenses are different, but other than medical insurance, they won't be so different for me. I already wear jeans or shorts and t-shirts and stuff like that, so no clothing reduction. And I telecommute, so gas will be the same, or maybe a bit more since I won't be tethered to my desk as much. The good news is that I had plenty of padding, so the more realistic numbers look better.

In the major expenses, I've realized I have to have a large budget item for home maintenance as my house gets older. I hope it's enough, as I watch the siding being torn off my neighbor's house to expose major water damage due to a poor flashing job. I've also settled on a budget for car repairs, vacation, and a capital fund for whenever I need a new car or another major expense I consider outside of home maintenance. I can certainly cut back on the vacation and capital fund if need be, especially since those amounts are high.

Another thing I had to get straight is income tax. I thought I had taxes figured out because when I total up my investments, I subtract what I'll pay in taxes as I liquidate them, including fully reducing my 401K and IRA as they get taxed. But I didn't consider that the dividends and cap gains I'll take in cash from my investments for most of my cash flow will be taxed as well. That one hurt.

Bottom line for me is that I'm close but today's work put me a bit farther away. And the question I have to ask myself is whether there's anything else I've failed to budget for.
 
RunningBum said:
Bottom line for me is that I'm close but today's work put me a bit farther away. And the question I have to ask myself is whether there's anything else I've failed to budget for.
Click to expand...

Ah yes, the unexpected. Earlier this year I thought I was smart to refinance and reduce my mortgage payment by $200. By next month I will have re-couped my refinance expenses but, guess what? Health insurance premium went up $80/mo! Also, property tax went up $20/mo. So there goes half the savings!

I don't know how to take into account these increases except to make sure that I have a very large cushion in my budget.
 
Uh, so long as I'm still working, I don't really track this. I pay all the bills and consider what's left in the work-a-day checking as my "walking around money"(my dear Dad's terminology). I just don't dip into the long-term investments and (God-forbid) the retirement accounts. I keep my head down and pay the mandatory pension, the 457(b), the SS, the Medicare, the taxes, the utilities, the insurances, the union dues, the credit cards, the health club, the gardener, etc, etc. This all comes out of the residue from my decidedly modest earned income. So long as I can do this, I'm in good shape! It is only myself that I have to be concerned about these days.
 
I just went through a year plus of "pseudo bare-bones" spending.
I trimmed almost every frivolous cost (eating out, new clothes, hobby related purchases like garden gadgets and techno-toys, I grew my plants from seed, etc) I could, in order to save up for a dream trip. It was an extremely valuable exercise, but I'm glad it's over.
I'm still putting the same amount away, but the target savings amount for the trip (to be achieved by a certain date) is no longer looming. In plain English, I can have some daily/weekly fun again.
Wooooooooo....;)
I did not stop investing, though, and I never will unless it gets really ugly. :( Other things would go away first.
For me, bare bones would be no trips, no investing, nothing new unless house related and necessary (like replacing a freezer), just the basics.
Rock bottom would be having to move out of my house involuntarily because I couldn't afford to live there anymore. May that day never arrive...:nonono:
 
I am using the "bare bone x 2" methodology myself, although "bare bone" for me is really more like "basic living expenses": food, car and home insurances, utilities, pets, car repairs, home repairs, property taxes = $20K a year. I am adding another $10K for health insurance and co-pays. Basic expenses can be trimmed further if needed, especially food and utilities.
 
Clothes. Now there is an interesting category. I have not spent a dime on clothes in the three years of retirement. DW has spent some, but only about 10% of what we have in the budget. We have sent nothing to the cleaners. This is one category on which we are definitely spending less money.
 
REWahoo said:
How do you define "bare-bones"? Take housing for example. Does bare-bones mean staying in your current house (or motor home) and maintaining upkeep and repairs? Staying in your house and postponing all maintenance until some future date? Downsizing? If so, by how much?

.
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I struggled with this question too. It's easy to think of "bare bones" as simply giving up dining out, fancy vacations, etc. It's more challenging to think of, for example, moving away from cherished grandkids and other extended family to live in a part of the country where we'd live cheaply but strictly "in another world."

CutThroat used to mention moving to a trailer down by the river........ And I'm well aware that we could sell our suburban Chicago home and move south to a retirement community of double-wides and put enough in our pockets to fund expenses for several years. But do we want to consider that as the "bare bones" standard? Tough question.

In the end, we drew the line at the expense level of staying here in our long time home regardless of expenses and that's built into our "bare bones" budget. Everyone has to make their own decision.
 
Wow, a lot happens when you don't check the boards for a couple of days...

The whole thing of "bare-bones" is kind of mute in my situation...that's the whole point in DH's mind...he in no way, shape, or form wants to live bare bones or even anywhere close to it. I think that is why he is concerned. But if our expenses are tallied up and we even padded them a bit and we still have $27,000 in INCOME left over then I don't know why he would be worried. We won't be touching any retirement savings...we would be living off of his retirement income. My retirement income would kick in when I turn 60.

And for whoever asked about DH's health (sorry, can't remember who)...he is fine right now...that is why I want to retire now...so we can do things together and do some traveling together and have some sort of retirement together because it is probable that he won't still be here when I'm 60...unless they come up with a cure in the meantime. Let's face it, there's no guarantee for any of us...but I want some time with him just in case the worst happens.
 
If I crunched the numbers and we had $27,000 a year more than we needed even with a somewhat conservative withdrawal rate, I'd be gone so fast heads would spin...

As for how I calculated what I "needed" in terms of income, I wouldn't set it to "bare bones" but rather the minimum I think we could spend while providing what we consider a minimally acceptable quality of life. That will include a few "wants" as well as all of our "needs."
 
Yes, no one is recommending anyone live "bare bones"! Rather - 2X bare bones needs gives you a nice comfortable margin.

Audrey
 
To me bare bones is survival rate. I would have never retired if I thought I would be at bare bones someday. I would say there is Retirement Rate, how I want to live the rest of my life, and something like Emergency Retirement, a point I am willing to live with for a period of time say a couple of years, but not for the rest of my life, and the bare bones, a place I never want to live.

I looked at the Retirement rate and insured I had it plus some. I looked at everything I could think of that would force me into an Emergency Rate. I then examined that scenario to see if there would be a recovery, short of dying. Personal spreadsheets, with FireCalc gave me enough confidence that I don't believe I will ever see the Emergency Rate.
 
Chaos Abounds said:
Wow, a lot happens when you don't check the boards for a couple of days...

The whole thing of "bare-bones" is kind of mute in my situation...that's the whole point in DH's mind...he in no way, shape, or form wants to live bare bones or even anywhere close to it. I think that is why he is concerned. But if our expenses are tallied up and we even padded them a bit and we still have $27,000 in INCOME left over then I don't know why he would be worried. We won't be touching any retirement savings...we would be living off of his retirement income. My retirement income would kick in when I turn 60.

And for whoever asked about DH's health (sorry, can't remember who)...he is fine right now...that is why I want to retire now...so we can do things together and do some traveling together and have some sort of retirement together because it is probable that he won't still be here when I'm 60...unless they come up with a cure in the meantime. Let's face it, there's no guarantee for any of us...but I want some time with him just in case the worst happens.
Click to expand...

Since you think it's probable that DH won't make it until you turn 60, why don't you analyze whether you alone will have enough at 60 to live comfortably without him and his retirement income which will expire when he does? That seems to be the real issue. Do you alone have enough income to RE given the fact that you are not entitled to any of his retirement income once he passes. I know you mentioned you'll have your own retirement income at 60, but will that be significant years from now when you start collecting it?

I understand why your DH is worried. He doesn't like the idea that if he dies sooner rather than later, you might struggle financially. He no doubt also understands that if he lives a good long time, then your continued working was not required and precious RE time and time that could have been spent together was wasted accumulating funds not required. But since no one knows the future, the answers to these dilemmas as not obvious.

Your frustration is that you are more willing to assume the risk of his early death and your possible financial hardship than he is. Try to make him understand that, for you, the risk of spending time needslessly working and not with him is greater than the risk of financial hardship should his retirement checks stop sooner rather than later.

In your DH's place, I'd feel exactly as he does. He's not worried about you two surviving financially as a couple. He's worried about you surviving alone should his cancer take him (and his retirement checks) out of your life. Do the math with the unpleasant assumption that DH survives only a short time and, hopefully, show him that even in that gloomy scenario, you'd be fine financially. That's what he needs to see IMO. At least that's what I'd need to see.

I hope he lives to be 114.
 
audreyh1 said:
Are you guys retired? It doesn't work that way!

Audrey
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Even Cutthroat was being pretty creative when he said these things. He is quite well off, and his somewhat younger wife has a good professional job and last I heard has no intention of quitting anytime soon.

When people report that for a couple the necessities budget is $20,000 I really don't know how to relate.

I don't know any two people who live on twice that. I'm single, live a very simple life, and still am close to twice that amount, without any sinking fund for car replacement.

Ha
 
haha said:
...When people report that for a couple the necessities budget is $20,000 I really don't know how to relate.

I don't know any two people who live on twice that. I'm single, live a very simple life, and still am close to twice that amount, without any sinking fund for car replacement.

Ha
Click to expand...
I just did a back of the envelope calculation using the "our" money account data. The total yearly amount we contribute to cover all necessities plus property taxes comes up to about $37K. No mortgage.
There is some built in extra coverage for gasoline prices returning to $4/gallon in this annual figure.
Better safe than sorry...
 
I've been tracking our spending for the last few years and we go through $65k-$70k per year. This includes $11k for health insurance, no mortgage or debt. So I have tracked what we actually spend to a budget. But I also believe that we could get by on $30,000 if we had to, that is our bare bones budget. But that is no country club, one car, no vacation, just sit on the deck and watch the grass grow. Hopefully we wont have to test that plan out.

Our spending has dropped about $20k per year since I retired. But that is mainly from my kids getting out of school and being on their own.
 
I just started all this ER business in April, and I started tracking expenses and setting up an itemized budget and how we vary from that budget each month.

Our budget includes a fairly decent amount of discretionary expenses like monthly travel, dining out, entertainment, annual vacations (budgeted monthly), lawn car and maid expenses if we need it so I don't really call it bare bones.

I am keeping the SWR as far under 3% as possible to leave us plenty of wiggle room since we are fairly young (44) and I'm sure we will have unforseen expenses (or portfolio drops) hit us over the next 50 years. For instance, when our portfolio dropped quite a bit early this year we shot over 3% for a few months. Currently the portfolio has recovered somewhat and now we have another 3.5K per month in theoretical wiggle room before we hit 3.5% SWR limit where alarm bells start going off. I'm not spending up to that 3.5%, but just letting it ride for a rainy day.

Oh yeah, wife is working full time now (she wanted to) and contributes $1200 the monthly budget (the rest she spends on, um, shoes I think), so if she decides to quit that reduces our wiggle room by $1200.
 
dm said:
I've been tracking our spending for the last few years and we go through $65k-$70k per year. This includes $11k for health insurance, no mortgage or debt. So I have tracked what we actually spend to a budget. But I also believe that we could get by on $30,000 if we had to, that is our bare bones budget. But that is no country club, one car, no vacation, just sit on the deck and watch the grass grow. Hopefully we wont have to test that plan out...
Click to expand...

We have been retired for 6+ years. Like dm, we "go through" about $70k/yr including all taxes, utilities, health and LTC Ins, etc. We have no mortgage, car payments, or debt. I estimate that it would be difficult, but not impossible, to cut that $70k to $50-55K but it would be a major stretch to go much lower because of the fixed nature of much of the budget items.

I also got curious about what would happen to our spending budget if one of us passed away. I looked at the major budget components; basically, our HC, LTC, and Medicare Pt B Ins would reduce about $5k/yr, one less car would save about $2-3k/yr, groceries would decrease by $3-4k/yr, and out-of-pocket medical costs would decrease by 1k/yr. I searched through the rest of the budget and couldn't pick up any other >$1k items. Therefore, I estimate that if either of us were to pass away, our spending budget would decrease by $13-15k/yr without any other changes in lifestyle.

JohnP
 
youbet said:
Since you think it's probable that DH won't make it until you turn 60, why don't you analyze whether you alone will have enough at 60 to live comfortably without him and his retirement income which will expire when he does? That seems to be the real issue. Do you alone have enough income to RE given the fact that you are not entitled to any of his retirement income once he passes. I know you mentioned you'll have your own retirement income at 60, but will that be significant years from now when you start collecting it?

I understand why your DH is worried. He doesn't like the idea that if he dies sooner rather than later, you might struggle financially. He no doubt also understands that if he lives a good long time, then your continued working was not required and precious RE time and time that could have been spent together was wasted accumulating funds not required. But since no one knows the future, the answers to these dilemmas as not obvious.

Your frustration is that you are more willing to assume the risk of his early death and your possible financial hardship than he is. Try to make him understand that, for you, the risk of spending time needslessly working and not with him is greater than the risk of financial hardship should his retirement checks stop sooner rather than later.

In your DH's place, I'd feel exactly as he does. He's not worried about you two surviving financially as a couple. He's worried about you surviving alone should his cancer take him (and his retirement checks) out of your life. Do the math with the unpleasant assumption that DH survives only a short time and, hopefully, show him that even in that gloomy scenario, you'd be fine financially. That's what he needs to see IMO. At least that's what I'd need to see.

I hope he lives to be 114.
Click to expand...

You hit the nail square on the head! We talked and this is exactly how he feels...but he still is worried about unexpected expenses, ie. a new roof or other big ticket item. He is used to us just writing a check and not worrying about it. But his main concern is me if he isn't here. What I told him was in that case, the worst case scenario is that I have to go back to work...and that's what I'm doing now...so it can't be any worse than it is now. I think that made sense to him. We're going to try the ER experiment beginning Sept. 1st. My checks will go straight to savings and we'll live off of his retirement income. Six months of this should give us a pretty good idea if it's doable.

Ps. I too hope he lives to be 114!
 
kumquat said:
Ding, Ding, Ding. Folks we have a winner. If you know how much you need, then extra isn't necessary
Click to expand...
Close, but not quite my point. My point was that I wouldn't dream of advising someone they need $X extra without knowing the details of their budget. If they didn't do any allocation for say, home maintenance or vacations or replacing cars down the line, I'd say they better have a lot of padding in their budget. If they've thought through things well, they still need a little padding.
 
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