I can't figure out how I'll spend $40,000/year in retirement

[AboutThere]

I'm doing a workup of my monthly expenses for retirement (shooting for 6-7 years).
I'm trying to ER when our house is paid-off, major upkeep items (roof, etc) done, and cars paid-off.

I wouldn't say that I'm frugal but I ran my current numbers and we're spending about 2,500/month in monthly expense.

To that I'd add annual expenses (vacations or durable goods purchases of 6,000-12,000) - but those varies widely year to year. The bulk of our current income goes to the house, cars, and retirement savings - so, about 40,000/year once we're retired and those items are paid-off, and when we're not contributing to retirement.

When I see monthly ER budgets here they all seem to be 70,000/year and up, and folks make a point to say they're frugal and don't take vacations, etc.
Under my numbers (and I don't consider myself particularly frugal) I'm finding it hard to spend over $40,000/year in retirement - is there anyone else here who is making it on that amount?

Couple items: I do live in a low-cost area (200,000 house is "expensive" here) and our health care costs are fully covered (indeed, double-covered) under vested, independent university plans.

I can't figure out why I'm nervous, possibly because I'm a product of the "you have to replace 80% of your current earnings to retire" articles from the newspapers. We won't be close to replacing 80% but I can't see that we need it once the house is paid off and college expenses are gone, etc.

 

[RobbieB]

My largest fixed expense is health insurance at $540 / mo.

Lunch costs me more than that.

 

[Ronstar]

After you develop hobbies, you'll be well over $40k spending a year


Sent from my iPhone .using Early Retirement .//82339)

 

[braumeister]

One change I saw, especially after I set up a donor-advised fund at Fidelity, is that our charitable donations are twice what they used to be during the w*rking years. Since we can afford it, why not put it to good use?

 

[Major Tom]

People's needs/wants/desires seem to vary widely. There are folk in this forum who spend anything between ~13K and several hundred thousand a year. I'm at the low end, with an annual spend in retirement of ~17K but I have cheap rent, don't own a car, and don't travel much or have expensive hobbies.

I think a person or couple could pick any annual income and find a way to thrive on it. There is most likely a lower limit, but human beings can be remarkably resourceful at enjoying themselves on very little when needs dictate.

Likewise, folk who love to grouch and grump find ways to do that on a wide range of incomes too

 

[Senator]

I am thinking I will have the same issue. I should have $150K+ per year, and only spend $40K max. In 2016, it's so far less than $2K a month...

I plan on traveling more. Buying a new truck. Tipping more at the gentlemen's clubs, as I try to get in touch with my left-brain, artsy self. I've always been told that supporting the arts is a great thing.

 

[Katiek]

I agree that people's budgets vary widely, and it's definitely helpful to live in a low cost area, but don't forget to budget for the unexpected "big repairs", dental/medical costs and insurance, deductibles for unexpected medical treatments, a refund to replace/repair aging cars and appliances etc.

 

[NYEXPAT]

I solved the problem by having a couple more kid's who are experts on finding way's to spend more money.

 

[Major Tom]

I solved the problem by having a couple more kid's who are experts on finding way's to spend more money.

LOL!

 

[Walt34]

When I see monthly ER budgets here they all seem to be 70,000/year and up, and folks make a point to say they're frugal and don't take vacations, etc.
Under my numbers (and I don't consider myself particularly frugal) I'm finding it hard to spend over $40,000/year in retirement - is there anyone else here who is making it on that amount?

Sure, we are, and there are a bunch of others who have said their spend rates were anywhere from $1,500 to $2,500/month like you. The ones with the $70k+/year spending seem to either travel a lot or live in high COL places like southern CA, NYC, and the like, or both.

I can't figure out why I'm nervous, possibly because I'm a product of the "you have to replace 80% of your current earnings to retire" articles from the newspapers. We won't be close to replacing 80% but I can't see that we need it once the house is paid off and college expenses are gone, etc.

I think that "80% rule" came from someone's rough estimate of what it would take for most people. But individuals vary widely and clearly that doesn't apply to you. It doesn't to us either.

 

[Sojourner]

[D]on't forget to budget for the unexpected "big repairs", dental/medical costs and insurance, deductibles for unexpected medical treatments, a refund to replace/repair aging cars and appliances etc.

+1

If after accounting for those big, occasional expenses you still find yourself wondering how to spend extra retirement money, well there are always things like fine wines, gourmet foods/restaurants, and other little indulgences that you could partake in more frequently. If I were you and enjoyed good vino, for example, I'd probably up my budget from, say, $10/bottle to $15/bottle. After all, life's too short to drink cheap wine... or so the saying goes.

 

[pb4uski]

It is what it is... and one person's frugal lifestyle would be inadequate for some and extravagant for others. It sounds like you have a bottoms up budget... one sense check would be to compare the total to your annual take-home pay less and savings you do from that money... presumably the rest is spent for your living expenses... and then adjust for changes you expect from now to retirement.

We live in a relatively high COL area (property taxes are ~$7k for a ~2,500 sf lakefront home) and our basic expenses (excluding income taxes, charitable contributions and travel/golf/hobbies) are about $50k.... add in charitable contributions and hobbies and we are ~$60k.

But our $50k includes ~$8k of health insurance and deductibles so that and I suspect that your property taxes are less than the $7k that we pay would be close to your $40k.

 

[AboutThere]

After you develop hobbies, you'll be well over $40k spending a year


Sent from my iPhone .using Early Retirement .//82339)

Avid fly fisherman, amateur astronomer, stereo aficianado,and sometimes golfer. I've worked those hobbies into the annualized, variable expenses (examples: in the last 12 months I've purchased telescope equipment at $700, fishing equipment at $500, and $0 in golf equipment. I have enough LPs and CDs to last me a lifetime of listening, and haven't bought new stereo equipment in years). The telescope will last me forever, and the new fly rod has a 25-year guarantee.

 

[FIREd]

I am budgeting about $2,500 per month in fixed expenses too in a low cost of living area (generous food allowance, health insurance premiums*, gas, home/car insurance, property taxes, utilities).

Then I have another $1,250 per month going into a sinking fund to cover medical deductibles and co-pays, a new car purchase every 10 years (because even your paid off car will eventually need to be changed), car repairs, home repairs (because things go wrong sometimes, even with a fully renovated house), etc....

So we are at $45K per year, and then there is discretionary spending on top of that.

I think that $40K would be doable (including discretionary spending) if, like is your case, healthcare costs ($15K per year budgeted for us) were fully covered and we kept our discretionary spending under $10K per year.


* We may be eligible for some ACA subsidies next year which might lower our health insurance premiums a bit.

 

[Nemo2]

Sure, we are, and there are a bunch of others who have said their spend rates were anywhere from $1,500 to $2,500/month like you. The ones with the $70k+/year spending seem to either travel a lot or live in high COL places like southern CA, NYC, and the like, or both.

The most we've spent in the last few years is $43,500 Canadian (just under $34K US at current rates), and that involved at least a couple European trips.

We don't spend much...either on travel or on a day to day basis....not 'economizing', just nothing we want or need.

 

[2017ish]

+1 to both Walt34 and Sojourner. The discretionary expenses (and healthcare/insurance) are what ratchet spending up.

We haven't pulled the cord yet, but if we were to exclude 1) travel; 2) healthcare; and 3) "good" wine/food/restaurants, our spending would be far less than we plan. In your case, having healthcare covered makes a huge difference and makes your spending a lot lower than would otherwise be the case.

P.S. IMO, the 80% figure is not a rule of thumb. It is a rule of the broadside of a barn.

 

[W2R]

I'm doing a workup of my monthly expenses for retirement (shooting for 6-7 years).
I'm trying to ER when our house is paid-off, major upkeep items (roof, etc) done, and cars paid-off.

I wouldn't say that I'm frugal but I ran my current numbers and we're spending about 2,500/month in monthly expense.

To that I'd add annual expenses (vacations or durable goods purchases of 6,000-12,000) - but those varies widely year to year. The bulk of our current income goes to the house, cars, and retirement savings - so, about 40,000/year once we're retired and those items are paid-off, and when we're not contributing to retirement.

When I see monthly ER budgets here they all seem to be 70,000/year and up, and folks make a point to say they're frugal and don't take vacations, etc.
Under my numbers (and I don't consider myself particularly frugal) I'm finding it hard to spend over $40,000/year in retirement - is there anyone else here who is making it on that amount?

Couple items: I do live in a low-cost area (200,000 house is "expensive" here) and our health care costs are fully covered (indeed, double-covered) under vested, independent university plans.

I can't figure out why I'm nervous, possibly because I'm a product of the "you have to replace 80% of your current earnings to retire" articles from the newspapers. We won't be close to replacing 80% but I can't see that we need it once the house is paid off and college expenses are gone, etc.

Don't forget income tax and property taxes. But yes, I do think that some of us are pleasantly surprised with low expenditures when we retire. The 80% number is just ridiculous, or at least it is for many of us, because we aren't spending that much even while working.

 

[AboutThere]

+1

If after accounting for those big, occasional expenses you still find yourself wondering how to spend extra retirement money, well there are always things like fine wines, gourmet foods/restaurants, and other little indulgences that you could partake in more frequently. If I were you and enjoyed good vino, for example, I'd probably up my budget from, say, $10/bottle to $15/bottle. After all, life's too short to drink cheap wine... or so the saying goes.

Alas, I love good wine but cannot drink much of it - migraine trigger.

I've worked an additional 2,400 into the annual food budget as I am a bit of a foodie. Frankly, one of the fun things I'm looking forward to in retirement is to have the time to really make some strides in my cooking. I simply don't have much energy to make complex meals during the work week.

 

[AboutThere]

Don't forget income tax and property taxes. But yes, I do think that some of us are pleasantly surprised with low expenditures when we retire. The 80% number is just ridiculous, or at least it is for many of us, because we aren't spending that much even while working.

Property taxes are the only outlier where I live: about 5,000/year on a 250,000 house, and I've included those.

You all are making me feel a lot better - all those years of reading about the "need" to have 80% of your income replaced had me depressed.

 

[Walt34]

The most we've spent in the last few years is $43,500 Canadian (just under $34K US at current rates), and that involved at least a couple European trips.

We don't spend much...either on travel or on a day to day basis....not 'economizing', just nothing we want or need.

Oh, I wasn't suggesting that everyone who travels is a big spender, as you know that is not the case. But generally, travel seems expensive when I price things out. But maybe I'm too picky or a lousy travel shopper.

And I left out toys like airplanes and larger boats. There's probably no upper limit on what one can spend on those. They're great for those who have the income to support them but it's simply not in most people's budget.

 

[islander]

"I can't figure out how I'll spend $40,000/year in retirement..."

Get a boat

 

[daylatedollarshort]

When I see monthly ER budgets here they all seem to be 70,000/year and up, and folks make a point to say they're frugal and don't take vacations, etc.
Under my numbers (and I don't consider myself particularly frugal) I'm finding it hard to spend over $40,000/year in retirement - is there anyone else here who is making it on that amount?

Couple items: I do live in a low-cost area (200,000 house is "expensive" here) and our health care costs are fully covered (indeed, double-covered) under vested, independent university plans.

I don't think you numbers are too far different than the Consumer Expenditure Survey, if you factor in lower expenses such as a mortgage free home, live in a low cost of living area and do not have significant out of pocket medical expenses:

http://www.bls.gov/cex/22015/midyear/age.pdf

I actually do not have any problem spending over $40K a year in the Bay Area. But even in a higher COL area the CES was a good wake up call for us that we had been over-paying for many goods and services and could live well for a lot less than we had been spending.

One expense some of us have to plan for and include in our budgets is income tax on RMDs.

 

[NW-Bound]

Once you have a paid-for home, do not care to exchange for new cars every couple of years, have no expensive toys to maintain, no dependents to support, nor expensive medical bills, it really does not take much. How much does one need for food, electricity, water, phone and internet? Even travel does not add that much, if you do it frugally. If you travel luxuriously, the sky is the limit.

I spend a lot more than $40K, but that includes a lot of fluff, and also charity and gifts. I can give up a lot of those, and my quality of life barely changes.

 

[AboutThere]

"I can't figure out how I'll spend $40,000/year in retirement..."

Get a boat

Ha!

Strictly a wading fisherman for that very reason.

However, I'm smart enough to have a friend with a boat.

 

[Nemo2]

Oh, I wasn't suggesting that everyone who travels is a big spender, as you know that is not the case.

No..didn't think you were....I was just indicating to the OP that, even if one does some traveling, it doesn't have to cost an outrageous amount.