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

This thread once again reminds me how broad spending desires are with comparatively similar "happiness" levels.

My numbers are roughly (monthly)
4300 mortgage
500 food
300 bills
300 random stuff
300 travel
400 aggregated home maintenance

All said and done it runs about 80K/yr. I'm not retired yet and have 2 young kids so I'd add 1K for medical at least, which brings it to 92K.

I could move 50 miles east and use home equity to buy a better house and lower taxes to 300/mo knocking about 48K from the budget... so there ya go... 40K-90K just by having a house 50 miles west :)

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AboutThere said:
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?
Click to expand...

Well, if it was just my wife and me, we could make it easily on $40,000/year. But with the stepdaughter (who has 2 kids and no real education, no spouse not much of a job) needing pretty much constant support from us, it's become clear that we need a bit more than that. Thankfully, we have more, so we're okay, but this is just one example of things that can happen in life to complicate your best attempts at retirement financial planning.
 
We live in a high cost of living area so living on 40K/year would be extremely difficult if not impossible for us and we have no mortgage and no debt. We need 60K to cover what we consider essential expenses and we substantially exceeded this figure last year with a very high dental spending. Then you add entertainment, liquor, fine dining, tennis club, swim club, travel etc...

We can afford this level of spending and we see no need to trim expenses or to deviate from the plan but if the need arises in the future with a protracted bear market we would have to possibly reduce expenses but never under 70K.

We also contribute both of our kids' annual Roth contribution in case we spend all of our money and leave them with no inheritance.:)
 
$14K for child support and $28K for everything else puts me at about $42K per year. Taxes are a little unclear - lots of moving parts - but I believe will be near zero.

Paid off house and car, three kids here about half the time. ACA silver with CSR87 for ~$200/mo. A few small trips and maybe one big trip per year. Kids' college is a separate bucket.

@Major Tom - hey, housing *and* transportation! :) (note the wheels)
 
I have no firm number on how much DW spends but I approximate it at 20K/yr.
I am trying to get her to track it, just so we know.

Prior to retirement I was spending about $10,500/yr , but I noticed it crept up to 20K/yr. Probably due to restaurants and travel.
Last year for me I spent $56,000 but that included paying cash for a new vehicle.

We need a trip to Europe to spend some of our children's inheritance. :D
 
Well, are you single?

And lucky you to have zero health care costs. Most of us aren't that lucky. We spend ten grand a year out of pocket, above and beyond our premiums.

As a married couple, I wouldn't even want to retire on only $40,000 per year. We plan to spend double that. We spend more than twice that now, but we are still supporting kids and paying off a house.
 
FUEGO is my hero here :). Detailed tracking of low spending with family and awesome life.

I have much to learn from you guys.

Sent from my HTC One_M8 using Early Retirement Forum mobile app
 
One thing to keep in mind as we toss numbers around is that some of us are talking about living off a single annual number as an individual, others as a couple, and others as a family. It's not really apples to apples.

I'm heading toward the two-year mark, and I've also been shocked at how little I've spent, even though I live in an expensive city and don't feel I've deprived myself of anything. Of course, I do live simply, and it helps that the mortgage is paid off. The great thing is that it's eliminated any doubts I had about whether it was the right time to pull the trigger.

Going forward, I plan to loosen up a bit by supporting local coffee shops and restaurants more, and perhaps adding some travel. However, I remain wary of major one-time expenses (be they auto, medical or house related) that could throw everything out of whack.
 
I am under 15k for base expenses in a HCOL. Paid off car and condo is the key to keeping it low. Low income maximizes the ACA benefit and minimizes taxes.
 
I live in a high cost area but everything is paid off with no debt. My approximate retirement budget for one is:

$25K for essentials (home, food, utilities, medical, transportation, etc.)
$12.5K for routine discretionary spending (entertainment, hobbies, gifts, travel, etc.)
$12.5k for non routine spending (new purchases, replacement, etc.)

$50k total

If I were to add one person (later this year)

$12k for essentials (food, medical, transportation)
$12k for routine spending (two people can spend about twice as much here)
$6k for non routine spending (lower than one, no need to replace the roof twice)

Add $30k to bring the total to $80k.

I feel that this is a modest budget but has plenty of room to cut back if needed.
 
Focus said:
One thing to keep in mind as we toss numbers around is that some of us are talking about living off a single annual number as an individual, others as a couple, and others as a family. It's not really apples to apples...
Click to expand...

Recently, I ran across the following on a billboard, then again on the Web. Apparently, it is popular but was new to me.

"Two can live as cheaply as one,
for half as long" -- Anon.
​

But a couple really does not spend 2x. Many of the costs are shared and not doubled, such as housing and operating expenses. I let my wife come along for free on my RV treks, for example (but why does she keep thinking that she is doing me a favor by keeping my company?).
 
OP here, responding to a variety of posts:

First, THANKS everyone for replying.

We are a "we" - DW and me. One adult child out of the house and far away (alas).

We will have more than 40,000 in income, but I was focusing on the expense side.

In my first calculation I included all the items that various posters have raised, except I'm planning on keeping my money in the market rather than a sinking fund for cars.

All home repairs (roof, siding, carpet) will be done in the last 2 years of work, and if I finish those early I might be able to cut a year off of working. We will likely downsize before that repair cycle hits again.

I'm learning that our health care cost savings are incredibly significant. Dental is less well-covered so I need to add to the budget for that.

If we sold the house and downsized we could probably quit 2 years earlier.

Sheesh, we might be able to do this.
 
I guess when push comes to shove, it all depends on your lifestyle and what you are used to spending.

Personally I do just fine in retirement spending less than $40K on average, but I am single and it is probably harder for a couple to do that.

For me it hasn't been much of an adjustment since I spent less than $40K before I retired.
 
we could also retire now if we only wanted a $40k income lifestyle. No offense at all, if that's what floats your boat, then go for it. We like to travel far too much to restrict ourselves to that level of spending. Our ten year anniversary trip was a 2 week cruise for a family of four and all expenses included it exceeded 1/3 your annual spending. We take many vacations each year and don't plan to stop. Part of the reason is that our family is farflung, from Hawaii to the midwest to the deep south. So lots of travel at major holidays (christmas, Spring break, etc) to see folks. Once the kids are out of school we can travel any time but our youngest just started kindergarten so that's 12 years away.

We feel like we live modestly with a very inexpensive house, cars that aren't fancy, etc., but we still spent almost $45,000 in the last six months alone. Hard to see where it all goes... $200 for cable/internet/phone/security... $200 for storage (the cost of having a very small house, this may change)... various insurances add up to a few thousand a year... The kids have many activities that add up to over $500 per month. We pay for summer camps. We like to eat out quite a bit and live in a great food city and that addds up to $1000 per month or so. So I guess the money just goes, and we like our lifestyle for it.

If we eliminated half our expenses we'd be retiring now with an SWR below 2%. But that would be more like surviving than living...
 
brainsqueeze said:
we could also retire now if we only wanted a $40k income lifestyle. No offense at all, if that's what floats your boat, then go for it. We like to travel far too much to restrict ourselves to that level of spending. Our ten year anniversary trip was a 2 week cruise for a family of four and all expenses included it exceeded 1/3 your annual spending. We take many vacations each year and don't plan to stop. Part of the reason is that our family is farflung, from Hawaii to the midwest to the deep south. So lots of travel at major holidays (christmas, Spring break, etc) to see folks. Once the kids are out of school we can travel any time but our youngest just started kindergarten so that's 12 years away.

We feel like we live modestly with a very inexpensive house, cars that aren't fancy, etc., but we still spent almost $45,000 in the last six months alone. Hard to see where it all goes... $200 for cable/internet/phone/security... $200 for storage (the cost of having a very small house, this may change)... various insurances add up to a few thousand a year... The kids have many activities that add up to over $500 per month. We pay for summer camps. We like to eat out quite a bit and live in a great food city and that addds up to $1000 per month or so. So I guess the money just goes, and we like our lifestyle for it.

If we eliminated half our expenses we'd be retiring now with an SWR below 2%. But that would be more like surviving than living...
Click to expand...


NVM
 
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MasterBlaster said:
That's a good data point worthy of discussion. However US retirees may need more than Canadians due to healthcare costs.
Click to expand...

I'll also preface this with no offense intended, but I don't think any discussion of retirement needs based on working income is worthy of discussion. How much you need in retirement is based on your budget needs. Period.

How much you made is largely irrelevant because it doesn't consider how much you were saving in retirement (a huge factor) , how much your life changes, and so on. Some people may have had long commutes (but can now cut down to 1 car), requirements to wear expensive clothes, and so on which drop their expenses a lot; others may have to pay their own medical insurance, want to take big vacations, pursue expensive hobbies, all of which could mean they actually spend more in retirement.

Any notion or guideline to base your needs on a % of working income is misguided.
 
RunningBum said:
I'll also preface this with no offense intended, but I don't think any discussion of retirement needs based on working income is worthy of discussion. How much you need in retirement is based on your budget needs. Period.

How much you made is largely irrelevant because it doesn't consider how much you were saving in retirement (a huge factor) , how much your life changes, and so on. Some people may have had long commutes (but can now cut down to 1 car), requirements to wear expensive clothes, and so on which drop their expenses a lot; others may have to pay their own medical insurance, want to take big vacations, pursue expensive hobbies, all of which could mean they actually spend more in retirement.

Any notion or guideline to base your needs on a % of working income is misguided.
Click to expand...

I agree with you and I don't at the same time. Expenses determine needed nest-egg I agree.

But what you have (perhaps) not considered is that lifestyle, and it's associated expenses are highly correlated with income.

Therefore the 62% of income Canadian data point is indeed worthy of discussion.
 
RunningBum said:
I'll also preface this with no offense intended, but I don't think any discussion of retirement needs based on working income is worthy of discussion. How much you need in retirement is based on your budget needs. Period.

How much you made is largely irrelevant because it doesn't consider how much you were saving in retirement (a huge factor) , how much your life changes, and so on. Some people may have had long commutes (but can now cut down to 1 car), requirements to wear expensive clothes, and so on which drop their expenses a lot; others may have to pay their own medical insurance, want to take big vacations, pursue expensive hobbies, all of which could mean they actually spend more in retirement.

Any notion or guideline to base your needs on a % of working income is misguided.
Click to expand...

I always thought that intuitively but it seemed like the industry has the news media eating out of its hand on the "must have 70-80% of current income" trope - thanks for making those points.
 
One thing we have realized since retiring is that lifestyle does not necessarily equal spending. If we can live the same lifestyle for $50K a year less than our neighbors spend, over a 50 year retirement that adds up to $2.5M less in total retirement funding needed.

I budget for some outing every day like seeing a play, visiting a museum or going out to eat, but I use coupons and have a lot of memberships with discounts and freebies so it doesn't cost much out of pocket. I also have a lot of little odds and ends income streams, like credit card reward points, that cover the cost of the membership fees, so that reduces how much we need to spend from our portfolio income.
 
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Focus said:
One thing to keep in mind as we toss numbers around is that some of us are talking about living off a single annual number as an individual, others as a couple, and others as a family. It's not really apples to apples.

I'm heading toward the two-year mark, and I've also been shocked at how little I've spent, even though I live in an expensive city and don't feel I've deprived myself of anything. Of course, I do live simply, and it helps that the mortgage is paid off. The great thing is that it's eliminated any doubts I had about whether it was the right time to pull the trigger.

Going forward, I plan to loosen up a bit by supporting local coffee shops and restaurants more, and perhaps adding some travel. However, I remain wary of major one-time expenses (be they auto, medical or house related) that could throw everything out of whack.
Click to expand...

I'm heading toward the three year mark and have been surprised at how much I have been spending! I have recorded my expenses using Quicken for 20 years or so. I thought I knew exactly how much I would spend. It was right at $40k. Sometimes things don't work out the way you might expect.

My retirement was to coincide with DS's graduation. That didn't happen, so tuition and living expenses for him for two more years. I also moved back to Virginia for the first winter to maintain Virginia residency while he remained in school. That meant rent for 6 months. He is on his own this year. This year DD will get married in the fall. (I kind of figured that would happen some time. :) ) I'm hoping $15k or so on the wedding. My home building project is over budget. I had a cash bucket set aside for construction. I am adding to that bucket from annual spending/income. I also estimated medical lower than it was for the first two years. That was mostly the cost of insurance after retirement.

My available annual spending/income is much greater than $40k, so all is well, but it certainly has cut into my ability to buy more toys!
 
Yep, one would have to develop expensive hobbies or some high cost living to spend $70K a year. Outside of my mortgage (which I am on track to pay off before retirement). I spend around $20K on living and this includes yearly expenses like taxes and insurance. (My employer health insurance is cheap and does continue into retirement...) Maybe an expensive vacation year would be another $5000 - $6000 for 2 big trips and some weekend splurges.

My cars are paid off and maintained well enough that car repairs are only minor expenses.

I couldn't see spending that much money ever. I might be considered a tightwad though. I was just looking at the USDA Thrifty food chart and figured up about $520 for our sized family. My budgeted spending is actually $300 or less. The other $200 is for eating out - though some weeks we don't spend our $50 allotted and some weeks we spend more on a splurge.

I think I eat well and live well. My hobbies are skiing and doing crafts like sewing or scrapbooking. I love going to yard sales/flea markets/estate auctions too but am pretty picky about what I actually buy.

As far as skiing, since I am a local I buy a season pass and it is pretty cheap ($300 - $700 per year depending on which one I chose). I own a fully paid for mountain condo that pays for itself in rental income and I use it at least 2-3 times a month year round. (I take my "weekend" during the week in the winter so I don't cut into rentals in order to use the place. I hate skiing on Sat anyway because it is too crowded and the traffic is horrid on Sunday, so I may as well work on Sat/Sun.) My family's ski gear is all bought or sale or even picked up used - I spend $250 on new skis a couple of winters ago and will probably use them for 8 or 10 years more - you can't even rent skis for $25 a day anymore - yet that is my yearly cost averaged out.
 
petershk said:
FUEGO is my hero here :). Detailed tracking of low spending with family and awesome life.

I have much to learn from you guys.
Click to expand...
Thanks, glad I have at least one fan. :D


brainsqueeze said:
we could also retire now if we only wanted a $40k income lifestyle. No offense at all, if that's what floats your boat, then go for it. We like to travel far too much to restrict ourselves to that level of spending. Our ten year anniversary trip was a 2 week cruise for a family of four and all expenses included it exceeded 1/3 your annual spending. We take many vacations each year and don't plan to stop.
Click to expand...

No offense taken. :)

We spent two weeks cruising the Caribbean most years. Sometimes we cruise with 4, sometimes with 5 (difference is whether we leave the youngest with Grandma or take Grandma with us). It's usually off season so we save massive amounts on cruise fares (and shop for the cheapest fares).

7.5 weeks in Mexico last summer at about $4500 total (travel hacking cut the cost in half).

All on well under $40,000 total household spending per year.
 
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