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01-01-2016, 12:27 PM
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#1
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Dryer sheet wannabe
Join Date: Dec 2015
Location: Lawrenceville
Posts: 16
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Retirement Budget
I'm starting to put together a retirement budget and wondered what you all thought:
Current expenses $38,096
Current expense - lunches $36,451
Current expense + Medicare cost(1250/yr) $37,701
- Social Security ($15,744/yr @62) $21,957
- FICA (7.75%- $4739) $17,218
The current expenses number I got by subtracting my yearly retirement savings from my gross salary so it covers everything from taxes to tooth paste.
I don't see a lot of change in expense when I retire but I've deducted the moderate expense of daily lunches while at work.
I've probably underestimated medical expenses. I read the average Joe pays around $104/month for Medicare but I know Medicare does not cover everything.
I subtract my estimated SS at age 62.
I subtract FICA tax as I will not be paying that after I retire.
Am I on the right track with this?
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01-01-2016, 12:42 PM
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#2
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,212
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That was one (of the many) approaches I used to test my retirement budget. Like you I took my gross income, subtracted out ss and Medicare taxes as well as subtracting out the retirement savings. This was a conservative estimate of what I needed since it was what I'd been living on. I added in health insurance since I'm still many years away from Medicare.
__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 6%, rental income 20%
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01-01-2016, 12:46 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,305
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Only you can determine if you're on the right track. Budgeting for health care is a must, so you're on the right track there.
Many retirees drive less and spend less on clothes. Some retirees spend more on travel, entertainment, hobbies, charities or other pursuits - but you're the only one who might predict that. Go through every current expenditure and make a judgement, and then think through what you will do every day in retirement and what if any new costs might be associated with those changes in activities. Some retirees relocate which can change living expenses significantly, lower or higher.
Best advice we got, and took to heart, was to reduce our spending to exactly what we expected to spend in retirement during the last few years working. Just to make sure our plans were realistic, fortunately we found we could live on what we planned before we actually needed to.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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01-01-2016, 01:22 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,077
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i agree with Midpack, about spending. We LBOM, but spent $14K on travel last year. I also now fly for Angel Flight, and my aircraft rental last year costs were almost $8K.
However, between SS and small pensions our income was about $60K, so it did not have much of an impact on our budget.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
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01-01-2016, 01:40 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,376
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Quote:
Originally Posted by Red Corvette
I'm starting to put together a retirement budget and wondered what you all thought:
Current expenses $38,096
Current expense - lunches $36,451
Current expense + Medicare cost(1250/yr) $37,701
- Social Security ($15,744/yr @62) $21,957
- FICA (7.75%- $4739) $17,218
The current expenses number I got by subtracting my yearly retirement savings from my gross salary so it covers everything from taxes to tooth paste.
I don't see a lot of change in expense when I retire but I've deducted the moderate expense of daily lunches while at work.
I've probably underestimated medical expenses. I read the average Joe pays around $104/month for Medicare but I know Medicare does not cover everything.
I subtract my estimated SS at age 62.
I subtract FICA tax as I will not be paying that after I retire.
Am I on the right track with this?
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A couple tweaks to consider.
Taxes might be too high. You can get a good idea by taking your 2014 or 2015 tax return and stripping out the earnings since you'll no longer be working and making any other appropriate adjustments. Taxcaster is a good tool for doing this... or TurboTax if you want to be more precise.
Medicare part D? Medigap? or deductibles and copays?
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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01-01-2016, 03:35 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 1,495
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This is exactly what I did. I tracked my real spending (minus taxes) for about a couple decades before retirement. Post-retirement, I budgeted for everything from healthcare (Cobra currently) to vacations (which I didn't dare take the last few years before retirement because I was too afraid I wouldn't come back) to emergencies.
Some things I didn't count on: Slightly increased home energy costs because I'm home more, car insurance dropping about 40% because no more commuting. I also found I had overestimated taxes in retirement and underestimated SS, though I'm not complaining.
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01-01-2016, 03:51 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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That is one of the ways, among many, I backed into my numbers. I used TurboTax and deleted my W2 income to come up with my tax savings, assuming all other income/deductions stay the same.
If you recently paid off a mortgage in the past few years, factor that in too. You were at one time living fine paying the mortgage. I can purchase a week of vacation, so i deduct that.
My Roth/tIRA comes out of my after tax account, so I really do not count that.
My work commuting costs ($1200), lunches ($500), clothes ($4), are going to be less.
Description | Amount | Salary | $117,820 | -FICA | ($8,476) | -Health Care Sav | ($3,950) | Less Purch Vac | ($1,876) | Less 401K | ($24,000) | Less Roth IRA | | Tax Savings | ($25,000) | Sub Total | $54,518 | Mortgage Pmt | ($16,836) | | | | | Annual Total | $37,682 | Monthly Total | $3,140 | Salary Equiv % | 31.98% |
As you can see, it doesn't take all that much to like decently after you leave a job. In my case, only 31.98% of my gross, not anywhere close to 85% that some recommend. You may have to add back in some healthcare, other income taxes, etc.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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01-02-2016, 10:11 AM
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#8
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Dryer sheet wannabe
Join Date: Dec 2015
Location: Lawrenceville
Posts: 16
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OK so I take that expense number and run it in FIRECalc with my current $630k nest egg and I get a 100% success rate. Then I use the Bankrate calculator http://www.bankrate.com/calculators/retirement/retirement-calculator.aspx
assuming 4% inflation and 5% return and it tells me only $451,160 is required which leaves me a $178,840 pad.
Am I still on the mark?
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01-02-2016, 10:24 AM
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#9
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,501
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Quote:
Originally Posted by Red Corvette
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I think it is a valuable exercise to run one's numbers though a number of calculators instead of relying on any one calculator (even our beloved FIRECalc). If all of them say you are doing OK, then that is helpful information. If any of them do not, to me that would be a red flag.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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01-02-2016, 01:25 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,305
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Quote:
Originally Posted by Red Corvette
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As long as history repeats itself - always the $64K question each of us has to decide for ourselves.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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01-02-2016, 01:57 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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It looks like you're retiring at 62. You'll need some medical insurance before Medicare starts at 65. ACA makes that easier. Your income will be under 4x the poverty level, so you should get a subsidy (assuming your assets are in tax-deferred accounts).
You can find premiums for Medicare Supplement insurance online, I'd look at those.
Don't forget long term care expenses. It appears you are single, so you may just be planning to fund LTC with normal cash flow plus proceeds from a house sale. That's fine, just be sure you have a plan.
This is a nice checklist of things to consider: http://www.early-retirement.org/foru...ire-69999.html
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01-02-2016, 07:26 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 1,495
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Quote:
Originally Posted by Red Corvette
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For another data point, try running it through this (which many use) for a more conservative estimate, remembering it uses MC simulations (versus FIRECalc's historical data):
https://www.fidelity.com/calculators...uidance-center
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01-04-2016, 04:53 AM
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#13
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Dryer sheet wannabe
Join Date: Dec 2015
Location: Lawrenceville
Posts: 16
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Quote:
Originally Posted by Independent
It looks like you're retiring at 62. You'll need some medical insurance before Medicare starts at 65. ACA makes that easier. Your income will be under 4x the poverty level, so you should get a subsidy (assuming your assets are in tax-deferred accounts).
You can find premiums for Medicare Supplement insurance online, I'd look at those.
Don't forget long term care expenses. It appears you are single, so you may just be planning to fund LTC with normal cash flow plus proceeds from a house sale. That's fine, just be sure you have a plan.
This is a nice checklist of things to consider: http://www.early-retirement.org/foru...ire-69999.html
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I must admit I have not adequately considered medical issues so I thank you for bringing it up. I was looking into the supplemental insurance and turned up this article that suggests it might not be a good deal: Medicare Supplemental Policies: Do You Need One?Â*|Â*David Belk
On the other hand my mother has it and would not be without it.
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01-04-2016, 08:51 AM
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#14
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Full time employment: Posting here.
Join Date: Apr 2006
Posts: 880
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Retirement Budget
I tracked expenses in Quicken for several years to get an idea of our budget requirements. I'm retired and DH retires this May and we hope to sell our primary home that will eliminate all debts (no mortgage on retirement home).
I have a spreadsheet with our core expenses with a column that adds in the extras (travel, dining, recreation, maintenance, etc.).
I have the "bag lady syndrome" and tend to be more cautious about spending. DH has been cautious as well, but is leaning towards living a grander lifestyle after he retires.
We will see how it plays out :-0
Sent from my iPhone using Early Retirement Forum
__________________
"Tell me, what is it you plan to do with your one wild and precious life?" - Mary Oliver
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01-05-2016, 11:53 AM
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#15
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Confused about dryer sheets
Join Date: Jan 2016
Posts: 1
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Quote:
Originally Posted by Red Corvette
I must admit I have not adequately considered medical issues so I thank you for bringing it up. I was looking into the supplemental insurance and turned up this article that suggests it might not be a good deal: Medicare Supplemental Policies: Do You Need One?Â*|Â*David Belk
On the other hand my mother has it and would not be without it.
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The medicare supplement insurance policies are usually in the $130-$200 "range", the $200/month that the article references is on the high end. It might be tough to add that to your budget but the thing is the "what if." You want something in place to cover the 20% co-insurance that you are responsible for if you end up having a big medical expense.
Another thing that in my opinion is really more important to consider is that when you first apply for a medicare supplement policy you have an "Open Enrollment" window where you cannot be denied approval for any reason. The window is 6 months starting on the first day of the first month that you are both 65 years old and enrolled in Medicare Part B. If you wait until you are outside of that window then the companies can require medical underwriting questions as part of your application and can deny you coverage or charge a higher monthly premium based on your health. Another option is a Medicare Advantage plan which is usually cheaper than a Supplement Plan but Advantage plans have limitations of in-network doctors and approved services. I am in medicare insurance so work with this info. daily.
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01-05-2016, 07:21 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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I forgot to mention -- don't forget to include that trip to Bowling Green in your plans.
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