Minimum Dignity Floor - Spreadsheet?

[GravitySucks]

Shortly after I retired I bought a small delayed annuity that kicked at 62, figuring if I completely screwed up SS and it would keep the wolf from the door.
Now I ve just finished rebuilding a bond ladder out to ten years that will cover expected expenses not just essentials. (Years 4-10 are 80% TIPS) don’t see much reason to plan any further than that, though SS at 70 more than covers the essentials for me.
Lots of ways to skin this cat and oddly it almost always works out to a 60/40 AA for me.

 

[Onda]

Hmm how much is that MDF for couple with payed off house?
3k, 5k, 7k or more?

 

[Fermion]

It is an interesting idea but the definition of the "floor" is murky at best.

You mention housing, insurance, food, transportation, healthcare.

At least two of the items on the list, insurance and healthcare, cost less as you get closer to the floor.

There is very little need for insurance (liability) as your assets dwindle. Especially if you rent your home or are in a state with a homestead exemption. 401K and IRA money are protected in almost all states and so is SS.

Healthcare costs go to zero as you approach the floor. Or one persons floor. If your floor has you above 400% FPL, then healthcare costs are indeed significant.

 

[GravitySucks]

Hmm how much is that MDF for couple with payed off house?
3k, 5k, 7k or more?

That would certainly vary by person/couple.
Some would include Country Club memberships, some would just add the cost of rice & beans

 

[Lewis Clark]

Hmm how much is that MDF for couple with payed off house?
3k, 5k, 7k or more?

This has to vary based on location as well as other factors. Property taxes alone can vary more than this.

 

[Onda]

This has to vary based on location as well as other factors. Property taxes alone can vary more than this.

My guess would be range from 4k–8k per month.

 

[audreyh1]

We just categorized as living expenses plus discretionary. Living expenses certainly could have been trimmed to some minimal level, but I never bothered.

 

[CRLLS]

The Fidelity Retirement planner uses the terms Essential and Discretionary expenses. It has served me well for many years. I really didn't pay attention to their differences as I planned for what I wanted my retirement to be like, not what the minimum dignity floor was. I think that the report from the FRP doesn't treat the different buckets and differently, just one big bucket of "expenses". I might be wrong on that.

 

[FiveDriver]

Back in the day, my HR Dept gave out a 'floppy disc' with a budget planning program. The expenses were divided into Fixed and Flexible. That 2 column approach has served us well over the years.

Fixed Expenses included Mortgage (PITI), Heat & Light, Groceries, Medical Insurance, etc. The old 4 H's....Housing, Heat, Hunger and Healthcare.

The Flexible Expense side had Dining Out, Transportation, Clothing, and General Entertainment -- the 5th H.....Happiness !!

We fine-tuned those categories, making changes when the Mortgage was paid off, or the Insurance amount changed. When we retired we had a pretty good measure of what we needed, and how these amounts had changed over the years.

To Onda's question about 'How much a couple with a paid off house actually needs......the answer is in your Budget.

 

[jazz4cash]

It is an interesting idea but the definition of the "floor" is murky at best.

You mention housing, insurance, food, transportation, healthcare.

At least two of the items on the list, insurance and healthcare, cost less as you get closer to the floor.

There is very little need for insurance (liability) as your assets dwindle. Especially if you rent your home or are in a state with a homestead exemption. 401K and IRA money are protected in almost all states and so is SS.

Healthcare costs go to zero as you approach the floor. Or one persons floor. If your floor has you above 400% FPL, then healthcare costs are indeed significant.

I agree it is beyond murky, it’s a lot of work and 4% is more than adequate for many. If you are unable to live on 4% the MDF might help. The show hosts frequently refer to 3 stages of retirement (go-go, slow go, and no go). If 4% WR is a stretch for your entire retirement maybe you can squeeze out a bit more for your go-go phase. The technique will lead many to purchase an annuity which is ok at current rates but not for most of the last 15 yrs.

 

[audreyh1]

Back in the day, my HR Dept gave out a 'floppy disc' with a budget planning program. The expenses were divided into Fixed and Flexible. That 2 column approach has served us well over the years.

Fixed Expenses included Mortgage (PITI), Heat & Light, Groceries, Medical Insurance, etc. The old 4 H's....Housing, Heat, Hunger and Healthcare.

The Flexible Expense side had Dining Out, Transportation, Clothing, and General Entertainment -- the 5th H.....Happiness !!

We fine-tuned those categories, making changes when the Mortgage was paid off, or the Insurance amount changed. When we retired we had a pretty good measure of what we needed, and how these amounts had changed over the years.

To Onda's question about 'How much a couple with a paid off house actually needs......the answer is in your Budget.

I too thought of it as fixed and flexible.

However there are still murky areas. Is dining out only flexible? - OK. But groceries, lots of flexibility there too. You can spend little, or a lot. But you have to buy some.

Regardless we lumped groceries and eating out in home area in the regular “living expenses” category.

 

[FiveDriver]

I too thought of it as fixed and flexible.

However there are still murky areas. Is dining out only flexible? - OK. But groceries, lots of flexibility there too. You can spend little, or a lot. But you have to buy some.

Regardless we lumped groceries and eating out in home area in the regular “living expenses” category.

We moved things back & forth over time. We ended up moving Groceries & Dining Out into the Flexible Side of the ledger, and lumped it all together because it made things easier to budget that way.

 

[Finance Dave]

We want our "basic" expenses covered by a COLA-adjusted income stream. So we first deducted off our SS income from the basic needs, and then determined an NPV for the remainder that would get us there based on investing in TIPS/i-bonds.

 

[PatrickA5]

We don't really do a budget, but I do keep track of expenses.

I consider our expenses either "normal expenses" or "extraordinary" expenses. The only categories in the extraordinary group are New Cars, Large Gifts, and Large Home Improvements. Everything else is consider normal.

At some point, I'd like to develop an income stream that takes care of all of the normal expenses. Probably a combination of SS and SPIAs.

 

[Shabby]

I just did this with a fixed annuity (SPIA) at 7% to cover my basic needs and handle inflation until SS kicks in. What an amazing feeling going from the 4% rule to this. Now I can aggressively invest the balance in the stock market. It has really made a big difference in my mental health.

 

[Trooper]

PSA: Vanguard 2023 Tax Forms

deleted - wrong thread

 

[LateToFIRE]

I just did this with a fixed annuity (SPIA) at 7% to cover my basic needs and handle inflation until SS kicks in. What an amazing feeling going from the 4% rule to this. Now I can aggressively invest the balance in the stock market. It has really made a big difference in my mental health.

I'm just starting to learn about SPIA's. 7% seems pretty sweet for guarantied income. Did you get any other options, like COLA, guarantied minimum payout, joint survivor, etc?

FYI, I like your checklist:

- Live below your means (check )
- Stay out of debt (uhh, well not quite, does a couple mm of r.e. debt count )
- Save all you can (check )
- Buy used cars (check )
- Focus on your end goal (late but finally )