How much extra do you need?

[Chaos Abounds]

I think I finally have convinced DH that me quitting w*rk wouldn't be the end of the world but he is still hesitant. We've looked at the numbers and it looks like we could live off of his retirement income and after all expenses are paid still have about $27,000 a year for the unexpected. As I said, he is still hesitant. How much extra above-and-beyond expenses does one need? Seems to me that $27,000 is plenty...am I letting the chance to FIRE cloud my judgment?

Beginning in October we are going to do an experiment. We are going to put my entire salary away and try living off of his income (not any of our savings). I say that in 4 months if all is well I quit my j*b. He would rather I wait 18 months. Important facts to consider: DH is a cancer patient who has already lived beyond expectations. I just want time with him now since future time is not guaranteed...but that doesn't seem to sway his opinion. He is more worried that we take the time to put more in savings so I'll be taken care of in the future. I tell him that I can always go back to w*rk but still he would rather wait...the one more year syndrome?

 

[LOL!]

Why not start now? Why wait until October?

 

[bbbamI]

I'm happy with my extra $10k a year and I'm a bit of a worrier...

If something happens to your DH, will you still receive his retirement income? Will it be the same amount?

 

[Moemg]

That sounds like plenty but does your job carry the health insurance . Also do you have a nice cushion of savings ? Do you have retirement income on your own ? He is probably worried about you since if anything happens to him you will lose one SS payment and maybe a portion of his pension . Now on the emotional side my husband had a heart attack and spent two months in ICU . I quit my job to spend every day with him .The one thing I've learned in life is people are more precious than money . Maybe you can compromise and go part time that will at least give you more time to spend together and you will still be contributing to savings .

 

[Chaos Abounds]

In Oct. he will be covered by other medical insurance - right now it comes out of my check. That's just a date we agreed on.

No, he chose life only when he retired from the military - never expected to get cancer...but who does. He does have a decent life insurance policy though.

 

[Chaos Abounds]

That sounds like plenty but does your job carry the health insurance . Also do you have a nice cushion of savings ? Do you have retirement income on your own ? He is probably worried about you since if anything happens to him you will lose one SS payment and maybe a portion of his pension . Now on the emotional side my husband had a heart attack and spent two months in ICU . I quit my job to spend every day with him .The one thing I've learned in life is people are more precious than money . Maybe you can compromise and go part time that will at least give you more time to spend together and you will still be contributing to savings .

Our savings isn't that great especially since taking a hit...but it's a lot better than some. I will get a pension at age 60. He will have Medicare and Tricare (military), I will just have Tricare once I quit. No mortgage and no car payments.

 

[Rustic23]

I think most folks on this board would say the $27,000 a year surplus income is more than enough. However, most would also ask for more informIation. Like what are you expenses, how do you cover medical, how much slop in in your figures. What percentage is the $27,000 of you total income>

How you plan on handling major unexpected expenses is also important. If you can cover it from savings in year one, no problem. I can not think of an expense outside of medical that would cost $27,000. That is not to say there are not anythings that cost more than that, but most are covered by insurance. Even medical, in our case, would not generate that kind of expense.

So do you have enough? That is a question only you can answer, but, my guess is it is more than enough. For us, in year one we spent 22% less than budget, year two 11% less, year three 16% more. The increase spending in year three has come more from the realization that we can than any sort of necessary. i.e. two vacations this year, and several new toys.

Did not see above post when I made mine. Is it possible to buy into survivors benefits? I too picked life only, but there was an opportunity to buy back into survivors enefits later and we did.

 

[kaneohe]

How long will you live? Is your pension fixed or will it increase w/ time? What
will the situation look like in X yrs after inflation is factored in? Have you analyzed
all situations....w/ both of you and also only one? I really like the part-time suggestion
that was given earlier so you ease into the situation .........kind of a compromise solution w/ the best of both worlds.

 

[modhatter]

The one thing you don't want to do, being a person living with cancer, is give him stress. If he is worried about finances if you quit, then maybe you could consider meeting him halfway, and agree to a year. That would be a more realistic time to test your one income change anyway, as it would allow for those always persistant, one time expenses to occur.

 

[CuppaJoe]

If I were in your position, I would wonder if the money excuse is just a way of putting it off? I negotiate time apart, less than we had apart when we were both working but still significant. I get sick sometimes, I don’t want SO hovering around me! I probably would make it clear that retirement would make me very happy. From your intro:

I’m 46 and in a job that pays okay for this area…but a job that I dislike greatly.... It’s just a job that I HAVE to endure. The people in the office don’t get along so it is an unpleasant environment to be in for 1/3rd of my daily life (or more). I am finally vested in our retirement plan so at age 60...

You are caregiver at home and in a j*b you hate? Does he absorb your stress? What was the question, again?--How many weeks notice to give so you can be out when the health insurance kick in? Others suggest halfway measures, maybe look for another j*b?

 

[Rambler]

Thanks Chaos for posting this thread, as I had been thinking of starting one like it. We have a budget that includes hobby money and pocket money, his and hers, plus home maintenance, travel, and a variety of other variable expenses. I had been wondering how much is "enough" to have for the "out of the blue whack upside the head" type of situations, which should be budgeted on an annual basis. I'm thinking somewhere between 12 - 24k for us. But I know there are lots of folks who only have 24k per year and are quite satisfied with it. We are young though and want to do a bit of travel...so just wondering.

R

 

[Coach]

Chaos, I included a $6000 annual contingency line in my retirement budget (for one person), and budgeted on the generous side for regular expenses. The contingency line needs to cover car purchases and major house repairs. I'm only four months into retirement but so far I'm underspending my budget significantly, even disregarding the contingency line.

Coach

 

[DayDreaming]

I think some people here live on $27,000/year or less. To have that much extra sounds like a very nice cushion to me!

 

[dm]

Extra? Who needs extra? If $27,000 is not enough, you'll just always be working that one more year.

 

[dm]

I just checked my spreadsheet and if I assume a 4% withdrawl rate I should have an extra $15,000 per year cushion. But if I had to it wouldn't be that hard to cut back on some things.

I guess I should just spend more money, but all those years of LBYM are hard to break. And the wife just loves to clip coupons and tell me how much she saves on groceries.

 

[bizlady]

Could you take a family medical leave to care for you husband in Oct? That might legally preserve your position-just in case, and give you time with him... might also give both of you an added cushion of comfort

 

[W2R]

I just checked my spreadsheet and if I assume a 4% withdrawl rate I should have an extra $15,000 per year cushion. But if I had to it wouldn't be that hard to cut back on some things.

I guess I should just spend more money, but all those years of LBYM are hard to break. And the wife just loves to clip coupons and tell me how much she saves on groceries.

I just checked mine, and if I assume a 4% withdrawal rate then I will have an extra $14,000 per year cushion compared with my actual expenditures in 2008. I would have an extra $24,000 compared with my projected 2009 expenses, though, since I am not spending as much this year. Also I could easily cut back another $6,000 less than I am spending in 2009, though.

Actually I am thinking of withdrawing about 3.3%, which would give me a cushion of $10,000 compared with 2008. I agree that it wouldn't be hard to cut back on some things. However, unless there is reason to do so, I am going to try to spend more than ever before. That will take some adjusting to, but you can't take it with you.

 

[audreyh1]

Cut-throat - a previous poster here - was of the opinion that you take your absolute bare-bones expenses, no frills - just what you needed to survive - food, housing, insurance, etc., and double it. Then that would be enough "padding" to retire. How does your expected income stack against that?

Audrey

 

[REWahoo]

- a previous poster here - was of the opinion that you take your absolute bare-bones expenses, no frills - just what you needed to survive - food, housing, insurance, etc., and double it.

Audrey, I could never get my head around what bare-bones actually is, at least for me. As a result, I've always had a problem with that theory.

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?

Using actual expenses for the three years prior to retiring, I choose to go with a 95% success rating on FIREcalc plus add in a smidgen for a fudge factor. I suppose that's the same as saying "bare-bones" is whatever I have left to spend if things really go sour for me financially.

 

[W2R]

I do think each of us has a different idea of bare bones. I was thinking about that, myself. I have lived on much less than what I now consider to be bare bones. For me, bare bones now is what I can live on and be perfectly happy and not feel like "the little match girl". It is very subjective.

For me it would not include gym fees or eating out, but I would be able to buy cut up chicken breasts rather than buying the whole chicken and eating the dark meat too, for example. It wouldn't include both cell phone and landline, but it would include one of them. It would still include bare bones basic cable and internet and staying in my current house, but it wouldn't include much electricity for A/C in the summers and some but not all maintenance on my house would be postponed, depending on what it is. A broken hot water heater would be repaired. A broken fence gate might not.

An easy definition of bare bones existence for me is, "Would I live like that rather than work for my old (mean, abusive, rotten) supervisor if I could?" If I would work for her rather than forego something, then I need it for my bare bones existence. Luckily she was promoted a few years ago and I have a really wonderful supervisor now, but you get the idea.

 

[bbbamI]

In my budget I have essential, discretionary and sin categories.

Essential is my bare bones. I'm sure the figures in each category will change over time. I can only work with what I know now...which isn't very much.

 

[Gotadimple]

You know, I never looked at my nest egg this way. I looked at the total number I needed to have when I started retirement, and if I had more than that, there was a cushion.

Firecalc and ORP provided me with the numbers. So whether I was taking 4% or 3%, wasn't the issue.

-- Rita

 

[audreyh1]

Audrey, I could never get my head around what bare-bones actually is, at least for me. As a result, I've always had a problem with that theory.

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?

Using actual expenses for the three years prior to retiring, I choose to go with a 95% success rating on FIREcalc plus add in a smidgen for a fudge factor. I suppose that's the same as saying "bare-bones" is whatever I have left to spend if things really go sour for me financially.

Well, you can't postpone maintenance and upkeep until some future date for too long, so that ultimately has to be included, even if it can be put off for a couple of years now and then. So, basically it has to be included.

Staying in current house - that completely depends whether downsizing is part of your current retirement plans and therefore included in your projected retirement expenses. But all costs associated with where you plan to live in retirement has to be included in "bare-bones". You have to have a place to live.

You have to have a place to live, you have to eat, you probably have at least one vehicle to maintain, you have pay for certain types of insurance, you have to maintain the essentials. That, IMO, is bare bones. Everything else - travel, eating out, hobbies, subscriptions and club dues, more "stuff", more toys, nicer food, etc. - those are the non-essentials.

This was just an attempt by Cut-throat to get people to look hard at these expenses and projected budgets and not under-finance their retirement NOR overdo it on the "padding.

It's just one way of looking at things.

And, IMO, you have to be very careful about basing retirement expenses to pre-retirement expenses. Comb through you current expenses carefully to see what really would apply after retirement. A lot of actual expenses go down. Some go up - but those are usually the "non-essential" expenses (with the exception of health insurance which can be a big added essential expense for some folks).

Audrey

 

[audreyh1]

I think Cut-throat intended for the "bare-bones" to be perhaps even giving up chicken breasts for the dark meat! LOL!

He didn't intend that someone get to that point! That was the whole point - to have enough padding that even under very tough market conditions where you had to pull way back on your spending, with luck you would still be above that almost punitive "bare-bones" scenario. And that would perhaps give some folks confidence about the sufficiency of their retirement nest egg.

It would also alert those folks trying to cut it too close that maybe they are cutting it too close!

Just another test. Caveat emptor - you have to decide what applies to you.

Audrey

 

[REWahoo]

And, IMO, you have to be very careful about basing retirement expenses to pre-retirement expenses. Comb through you current expenses carefully to see what really would apply after retirement. A lot of actual expenses go down. Some go up - but those are usually the "non-essential" expenses (with the exception of health insurance which can be a big added essential expense for some folks).

Good point.

I failed to mention in my case we essentially lived on our retirement budget for the three years prior to retirement. DW retired at the beginning of those three years and since we planned a RIP (retirement in place - no relocation) and we looked very closely at what would change when I retired. For us, the health insurance nut was the one major difference we had to include in our retirement expense plan.

While doing something like this might not be feasible for many, our situation allowed us to have a very high confidence level regarding our expenses once I stepped off the treadmill.