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Old 09-07-2019, 05:17 AM   #1
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Post FIRE Expenses

Doing a lot of playing around in Excel as I hope to pull the trigger next summer. My expenses are pretty lean -certainly don't live like a pauper but I don't have a lot left that I'm willing to trim either. I have no mortgage so pretty much every expense I have is subject to market forces.



My question, for those of you that have been FIREd for several years, how have your expenses tracked relative to inflation and if they have deviated from inflation, what were the drivers/were they discretionary (decided to buy a boat) or non-discretionary (insurance premiums doubled)? Any surprises?


Thanks!


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Old 09-07-2019, 06:23 AM   #2
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I only have aggregate records for 20112-2018. My budget was prepared in 2006, I retired at the end of 2007.


The average of what I call "core" expenses is about 2% above the nominal budget number. I think the budget number included some amortization of capital type items (not included in the core). If I look at total core+capital for the seven years, the average is 17% over the budget amount. But that isn't a fair comparison inasmuch as the actuals include the capex at 100% and not an amortization. Also, retiring at the end of 2007, we kicked up our spending in 2008-2010 on some remodeling expense and travel so our spending for those years was significantly higher than the average we see now.
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Old 09-07-2019, 07:01 AM   #3
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I haven’t been retired enough to have good data on this subject but I would recommend refinement of your inflation assumptions if you haven’t already done so. I used the tool at Fidelity and it used different rates of inflation for different expense categories. For example, medical inflation was much greater than food inflation.
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Old 09-07-2019, 07:21 AM   #4
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So far my day to day expenses have tracked pretty closely to my spreadsheets. In my opinion I factored in a higher inflation rate than I have needed so far which puts me on the positive a bit.

It's been the unplanned expenses that have put me out of budget. Though I have things like car repairs there's a $1,500 bill on a major fix. Then I just got a $2,000 bill for fixing my camper that was unexpected. Things like that. However none of that put me materially out of my WR and budget so I just keep on keepin' on.
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Old 09-07-2019, 07:36 AM   #5
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I retired in 2013. I planned on my expenses tracking pretty close to my pre retirement numbers minus work expenses, etc. That didn't happen. DS was supposed to graduate from college that year. He is still hanging in there, but will be on his own at the end of this year, hopefully with a diploma. My house was supposed to be paid for out of funds from the sale of my previous house. That didn't happen. The new house grew bigger as the construction plans got finalized just after retirement and I am now paying for it out of current expenses as I build it. The maintenance costs on the Jeep Wrangler I bought at retirement have been way over what I have experienced before. Dental costs will be many thousands this year which I have not experienced before.

The bottom line is I am spending a bit more than double what I planned each year. My estimated living expenses are pretty much on schedule, but the additional expenses above double that number. All is good. My withdrawal rate is below 3%. The only scrimp is I'm holding off buying a new truck until DS is on his own.
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Old 09-07-2019, 08:33 AM   #6
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We started off conservative, spending only about 70% of what FIRECalc and other tools said we could spend at 95% success rate. We've increased that in recent years to about 90%, but that still includes a 30% haircut against future SS. So still somewhat conservative. It helps that the portfolio has gone up sharply since I retired in 2013. Our lifestyle hasn't changed at all compared to pre-ER.

Our overall base, non-discretionary expenses are almost exactly as planned and track inflation fairly close. Two areas that continue to frustrate me are property tax and insurance. They seem to go up 2-3X the rate of inflation and they are a significant part of our base spending. However, other items have been down more than expected, like gasoline, food, cable, cell phone, and home maintenance costs. Even our energy consumption at home is down sharply from prior years.

Around 30-35% of our annual spend is pure discretionary, like travel, home improvements, new car, etc. This is where we've increased a lot in recent years. It's more variable and we spend on different things every year.

We also use this discretionary bucket to fund large one-shot major repairs. This year we went ahead with a major plumbing repair to rid our house of 50-year-old cast iron drain pipes. We also have 4 aging HVAC units. So when the time comes for items like this, we just just defer spending on travel and home improvements. This has worked well for us, especially since we've reduced travel recently in order to care for DMIL. She's 86 and still living on her own but increasingly dependent on us. If we travel, we have to arrange for another relative to fly in and stay with her.
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Old 09-07-2019, 08:48 AM   #7
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Retired in 2013. Inflation has been lower than expected. ($1 then = $1.10 now per online calculators.)
Personally my inflation rate is similar except in health insurance and food and beer. The food and beer increases are from upgrades in quality over the last 4 years. Hotel expenses are also higher than inflation in general. My Utilities have increased lower than general inflation.
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Old 09-07-2019, 09:02 AM   #8
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Appreciate the responses so far, thanks. My starting WDR is projected to be between 3.18 and 3.03% (should be less if I earn some income as I plan to).



I'm running my cashflow projections based off a 15% market drop the day I quit and 5.5% annual return with 3% inflation.


I think I'm being fairly conservative with my expenses. I'm basing my health insurance on the current cost of the plan I intend to buy in the marketplace without subsidy. My expected realized income should qualify me for a pretty generous tax credit under current law. I also have an "off balance sheet HSA" with enough to cover 3 years of max out of pocket expenses. Except for major illnesses, I pay my healthcare costs out of my regular income and don't intend to tap the HSA in retirement unless I have to (and plan to continue contributing to it). I think healthcare is my biggest risk as far as runaway costs -either due to law or a health issue. Fortunately, I'm homesteaded in Florida so property tax increases are capped at or below inflation. Worst case, I can move and either pull my equity out of my home or rent it out for cash flow... it is worth about 25% of my liquid networth today.
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Old 09-07-2019, 11:14 AM   #9
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Appreciate the responses so far, thanks. My starting WDR is projected to be between 3.18 and 3.03% (should be less if I earn some income as I plan to).



I'm running my cashflow projections based off a 15% market drop the day I quit and 5.5% annual return with 3% inflation.


I think I'm being fairly conservative with my expenses. I'm basing my health insurance on the current cost of the plan I intend to buy in the marketplace without subsidy. My expected realized income should qualify me for a pretty generous tax credit under current law. I also have an "off balance sheet HSA" with enough to cover 3 years of max out of pocket expenses. Except for major illnesses, I pay my healthcare costs out of my regular income and don't intend to tap the HSA in retirement unless I have to (and plan to continue contributing to it). I think healthcare is my biggest risk as far as runaway costs -either due to law or a health issue. Fortunately, I'm homesteaded in Florida so property tax increases are capped at or below inflation. Worst case, I can move and either pull my equity out of my home or rent it out for cash flow... it is worth about 25% of my liquid networth today.

I think with a ~3% W/D rate your major risk is behavioral. I retired in December, 2007 and equity dropped about 50-60% in the first year and a half of retirement. Bit I had purposely geared our allocation conservatively to try to prevent behavioral traps since we were looking at 10 years until my pension started.

The challenge is not getting panicky and re-balancing as appropriate. I also had all of our equity in our taxable account so I was madly harvesting tax losses - the numbers were impressive. It wasn't until a couple of years ago that we used up all the book losses.
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Old 09-07-2019, 11:23 AM   #10
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Originally Posted by FLSUnFIRE View Post
My question, for those of you that have been FIREd for several years, how have your expenses tracked relative to inflation and if they have deviated from inflation, what were the drivers/were they discretionary (decided to buy a boat) or non-discretionary (insurance premiums doubled)? Any surprises?
We always developed our plans based on needing $100k/year in retirement. So far, we've spent between $60-80k. No sports cars, no boats. No major medical expenses so far. Nothing unexpected yet. A nice wedding gift for my son and a bit of travel.

We haven't skimped on anything we wanted, but our planning was clearly conservative. While we were working, we always spent less.

Maybe some day we'll choose to spend more. Maybe not. Right now we are enjoying ourselves on less.
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Old 09-07-2019, 11:33 AM   #11
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I was madly harvesting tax losses - the numbers were impressive. It wasn't until a couple of years ago that we used up all the book losses.

I did the same thing! Of course soon I'll start paying on the lower basis!
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Old 09-07-2019, 11:43 AM   #12
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Originally Posted by FLSUnFIRE View Post
Doing a lot of playing around in Excel as I hope to pull the trigger next summer. My expenses are pretty lean -certainly don't live like a pauper but I don't have a lot left that I'm willing to trim either. I have no mortgage so pretty much every expense I have is subject to market forces.



My question, for those of you that have been FIREd for several years, how have your expenses tracked relative to inflation and if they have deviated from inflation, what were the drivers/were they discretionary (decided to buy a boat) or non-discretionary (insurance premiums doubled)? Any surprises?


Thanks!


FLSUnFIRE

I have been retired for 10 years and my experience is that essentials have outpaced inflation and in some cases far outpaced inflation.

Utilities have increased at around double inflation. Medical insurance has increased about 4 times inflation. Property tax at slightly above inflation. Food about equal to inflation. Transportation at about inflation.

It varies with respect to non-essential spending. Dinning out has increased above inflation while recreation like golf have increased less than inflation.
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Old 09-07-2019, 11:53 AM   #13
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Our HI has went up a lot. We also had huge dental expenses.
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Old 09-07-2019, 12:05 PM   #14
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Originally Posted by Jerry1 View Post
I havenít been retired enough to have good data on this subject but I would recommend refinement of your inflation assumptions if you havenít already done so. I used the tool at Fidelity and it used different rates of inflation for different expense categories. For example, medical inflation was much greater than food inflation.
Current medical inflation is 4.9% in Fidelity. I think the only other expense that is different than the standard 2.5% inflation rate is if one has a mortgage expense, they run it out over time vs. renting.
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Old 09-07-2019, 12:06 PM   #15
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Well, actually my expenses went down what we had budgeted for. The reason for less expenses was due to going with ACA. I t was huge savings so we are down but even though of that, we are right on track with planned/budgeted expense being retired for 3 years.
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Old 09-07-2019, 12:12 PM   #16
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I did the same thing! Of course soon I'll start paying on the lower basis!
Yes; normally, I would be too but I have started my pension and now switching gears and letting equity ride on the upside; probably will never sell.
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Old 09-07-2019, 12:17 PM   #17
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Originally Posted by FLSUnFIRE View Post
Appreciate the responses so far, thanks. My starting WDR is projected to be between 3.18 and 3.03% (should be less if I earn some income as I plan to).



I'm running my cashflow projections based off a 15% market drop the day I quit and 5.5% annual return with 3% inflation.


I think I'm being fairly conservative with my expenses. I'm basing my health insurance on the current cost of the plan I intend to buy in the marketplace without subsidy. My expected realized income should qualify me for a pretty generous tax credit under current law. I also have an "off balance sheet HSA" with enough to cover 3 years of max out of pocket expenses. Except for major illnesses, I pay my healthcare costs out of my regular income and don't intend to tap the HSA in retirement unless I have to (and plan to continue contributing to it). I think healthcare is my biggest risk as far as runaway costs -either due to law or a health issue. Fortunately, I'm homesteaded in Florida so property tax increases are capped at or below inflation. Worst case, I can move and either pull my equity out of my home or rent it out for cash flow... it is worth about 25% of my liquid networth today.
Bolded by me - aren't the homesteaded property tax increases in FLA capped at 3%, which could still be above inflation?
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