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View Poll Results: As a retiree, how do you plan for big ticket expenses?
Don't buy them. 10 11.36%
Buy only when my portfolio is booming 8 9.09%
Save up for them by setting aside a portion of my withdrawals 71 80.68%
Multiple Choice Poll. Voters: 88. You may not vote on this poll

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Old 08-03-2019, 02:20 AM   #21
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I just buy the stuff as needed
Me, too. The choice is missing from the poll.
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Old 08-03-2019, 04:04 AM   #22
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Just like during my accumulation phase I have continued to set aside funds so I can pay cash for any expense I need/want. My wife just bought a new car she wanted with cash so no monthly payment and no interest to pay. Actually the interest isn't much of an issue as is the annoyance of keeping track of those monthly payments. The cash accounts continue to grow with RMD so any future purchases will be covered as well.


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Old 08-03-2019, 04:37 AM   #23
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D. Include this extra spending in the pre-retirement finances calculation.
I call the spending category accruals (from my P/L days) and it’s about 20% of our overall budget. Items that hit (much) less often than annual but are predictable, I include appliances, boats, cars (scheduled every 5 years), furniture, major home repairs/remodeling (roof, HVAC, HW, etc.), PC-TV-electronic, other and travel. It’s not hard to predict how much they’ll be and conservatively assume frequencies as well.

A good spending plan includes everything one can think of IMO, even the expenses that occur infrequently.

There’s absolutely no reason to accept “retirement living a constant struggle to stay within budget and say no to anything that doesn't fit.” You retired too early financially if that’s your plan.

As for the beating (or losing) the market, we reevaluate our WR and therefore spending every 5 years. Hopefully that’s often enough to avoid getting too far off track with the best egg balance.

And our overall budget is about 2/3rds essential and 1/3rd things we could easily cut back on should it become necessary.
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Old 08-03-2019, 04:57 AM   #24
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D. Include this extra spending in the pre-retirement finances calculation.
Quote:
I just buy the stuff as needed
+1
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Old 08-03-2019, 05:08 AM   #25
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A good spending plan includes everything one can think of IMO, even the expenses that occur infrequently.

There’s absolutely no reason to accept “retirement living a constant struggle to stay within budget and say no to anything that doesn't fit.
Examples in the OP were >$50K expenses like a new car, home improvement or RV. Many choose or are forced to retire on a budget that can't afford things like that. If you were forced out due to health reasons and unable to find other work, you may have to accept that. Hopefully they can afford to make necessary home repairs and replace an old car with a reliable newer pre-owned one, but that wasn't in the OP, nor are those >$50K.
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Old 08-03-2019, 06:46 AM   #26
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I live in an apartment which is part of a large co-op complex, so my share of any large home improvement project (and we have had some over the years) is little or nothing (if they use their reserve fund).


The only big personal expense I have had over the years has been the new car I bought 12 years ago. I do expect my aging car, which has been running fine, to last me several more years. If I do need to replace it, I have a slush fund I would tap into to pay for it, more like a third-tier emergency fund which has been around since before I ERed 11 years ago. Therefore, I couldn't answer the poll with any of is choices. "I just buy the stuff as needed" would be the best option, as others have agreed with.
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Old 08-03-2019, 06:48 AM   #27
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Need another option: buy them when necessary (regardless of what the market is doing).
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Old 08-03-2019, 07:09 AM   #28
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I just buy the stuff as needed
This! Need other options on poll
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Old 08-03-2019, 10:27 AM   #29
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I have not had any big expenses in the last 2 years. That's a factor for my WR to become so low at 2.7% for the last 12 months. And I still had some expenses that would not recur next year, bringing the WR down to 2% potentially, unless something comes up unexpectedly.

With a WR that low, and with no SS yet, I don't think I need to worry too much when wanting to splurge on something. Just have not had any desire yet.
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Old 08-03-2019, 10:35 AM   #30
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We have one lumpy 'big' payment (income) each year. I have a big capital purchase that I will time with the arrival of that payment. Other things we will just buy out of the checkbook, and if the funds are short, we will replenish by taking some RMD payment or HSA money out. Eventually, we will tap tax deferred funds if we need more. Otherwise the tax deferred will get ROTH converted over time.
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Old 08-03-2019, 10:38 AM   #31
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How about an option E:
I update my financial forecast to include the major expense and see if I can still live to 100!

That is what we did when we decided to increase our lifestyle expense by the $350k purchase of a new snowbird condo last year.

Partly this is made possible by the above forecast returns since 2009. But the future forecast does not count on it continuing.
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Old 08-03-2019, 10:46 AM   #32
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I think it is all about whether a person thinks he can afford something or not, and there are many different ways he can use to be sure he can.

People who manage to retire early are usually knowledgeable enough about finance and their own situation. There is more than one way to skin the proverbial cat.
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Old 08-03-2019, 11:33 AM   #33
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We don't necessarily "plan" for large expenses but are in position that unless I needed a very, VERY high powered lawyer for something, then there are no worries. I don't keep a lot of liquid available but enough for larger expenses that might pop up (like a total HVAC replacement). We have recently purchased a vacant lot behind us and that did require selling off some of my VTI, but it isn't a big hit to my portfolio and the tax implication will be slight.

I have debated doing a HELOC as senator has mentioned if the rates are decent. That would keep me from selling off any equities that I may not want to sell. We had a HELOC on our last house, but never tapped into it. I *might* get around to doing that eventually. Or not.
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Old 08-03-2019, 11:40 AM   #34
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Buy what I need when I need it.
Not listed was waiting for a major market down turn to buy toys.
Vacation condos, RVs and Classic Cars have a beta greater than 1. 1959 DeSotos and Packard Caribbeans have sky rocketed during this bull but fell fast back in the great recession. Ditto with ocean front condos.
Putting a little extra into treasuries so when the inevitable happens I might be able to pick up a toy or two.
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Old 08-03-2019, 11:48 AM   #35
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We have a fund for those type of things.
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Old 08-03-2019, 11:48 AM   #36
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I sure hope we don't have too many other 50k expenses.

That has been how our retirement has been working out. We had one big medical expense year before the ACA, but I don't see that happening often again now between being on an ACA plan and Medicare on the horizon. We usually do one big home improvement project each year like new counter tops or replace the roof, which is in the annual budget. For cars, at our ages, living near a commuter train station and with stores and restaurants close by, I don't think we will need too many more cars so that expenses when it occurs will just come out of savings. When we do buy cars it is usually along the lines of buy a 2 year old Camry and trade in or sell a 10 year old Camry, so the difference will be more like $20K or less.
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Old 08-03-2019, 03:09 PM   #37
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First, we typically only spend 80-90% of what FIRECalc says we can at 95%, which provides a lot of flexibility when big-ticket items pop up.

Second, our spending plan includes a budget category for large non-recurring expenses. It's based on a 10-year rolling average of actual spending on such items. We know that some years will be much higher than that and others much lower. But the long-term average should fall in line with that figure. Plus, the 10-year average has been trending down, as some of that spending included cars for the kids when they were in high school and college.

So for us, we don't really "set aside" any funds for these infrequent big-ticket items. Nor do we wait for a booming market. When the time comes we just do it. It's all part of the plan.

If something really big pops up, we could also trade-off with the travel budget, which is also pretty large. We more-or-less did that this year. We bought our first new car since 2001 plus had some long overdue plumbing repairs (replaced 50 year-old cast iron drain pipes throughout the house with PVC). We're also doing some fairly major home improvements but we decided not to plan any big travel this year to keep our total spend on track. Instead, we're doing a lot more camping with the bikes and the new SUV. Life is good.
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Old 08-03-2019, 03:13 PM   #38
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None of the above. When the time comes to make the spend, I sell something and spend it. I don't withdraw until it is time to spend.
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Old 08-03-2019, 03:18 PM   #39
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just follow the budget? If you don't have a budget, just buy it anyway.
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Old 08-03-2019, 03:20 PM   #40
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D. Include this extra spending in the pre-retirement finances calculation.
Exactly. You put a swag into your budget of average annual expenses to include stuff like this, including things like a new roof, or large medical bill - things that also come up as Big Tickets but you can't plan always plan for.

That way, you get what you need/want, when you need/want, without depriving yourself or delaying a need. You also then get to enjoy the want earlier and possibly for longer.
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