Retirement "dry run".

[nun]

For the past 18 months I've been very carefully monitoring my spending and living off my retirement budget. I've had to make adjustments for commuting costs that will be less in retirement and medical insurance premiums that I'll have to pay myself in ER. But I know both of those costs and I'm now confident that I can live on the $36k/year that I've set as my ER budget......because I've been doing it for the past year and a half.

I'd recommend that prior to ER you live for at least a year on your anticipated post ER income as it will give you a lot of confidence.

 

[Meadbh]

I agree. I have been doing this for several years. Having a professional corporation makes this easy to do since you must decide how much to pay yourself.

 

[rbmrtn]

Always good to take a trial run before making the final plunge. I did this as well, even dropped down to the survival budget to see how it work.

 

[W2R]

IMO this was a wise thing to try, nun. I did this too, in my case for many years before retiring*.

If someone spends more while working than they plan to spend after retirement, they will get used to a higher lifestyle. I think that cutting back on one's lifestyle can be hard to do, so often it is preferable to avoid the necessity to cut back.



*(In fact, while working I spent much less than I planned to spend in retirement because I started saving for retirement relatively late in life.)

 

[nun]

IMO this was a wise thing to try, nun. I did this too, in my case for many years before retiring*.

If someone spends more while working than they plan to spend after retirement, they will get used to a higher lifestyle. I think that cutting back on one's lifestyle can be hard to do, so often it is preferable to avoid the necessity to cut back.



*(In fact, while working I spent much less than I planned to spend in retirement because I started saving for retirement relatively late in life.)

I've always spent far less than I earned, but as ER has approached and I've paid off things like the mortgage I've been able to make a good estimate of what I'll be spending in ER. Its basically what I'm spending now, but it's good to track everything and get an idea of the fluctuations in monthly spending as insurance or heating bills come in. Consciously limiting yourself to your ER budget for a year or so gives you the confidence that you won't need the extra income that comes with a regular pay check.

 

[Midpack]

We started our dry run 3 years before retirement to be sure. It's been discussed here several times before, and I think it would be a big mistake to do otherwise, at least for a year before retiring. YMMV

 

[mh]

We started our dry run 3 years before retirement to be sure. It's been discussed here several times before, and I think it would be a big mistake to do otherwise, at least for a year before retiring. YMMV

I did a two year dry run. Gave me much more peace of mind than just trying to calculate it. A one year dry run would be one of the first things I'd suggest to someone considering ER.

 

[bo_knows]

Trial runs seem like a pretty impossible task to calculate if you're planning on ER'ing to a lower cost of living area though.

 

[JoeWras]

Trial runs seem like a pretty impossible task to calculate if you're planning on ER'ing to a lower cost of living area though.

I'm also having a hard time with the tax math in figuring out expenses post ER.

Might give that another try.

 

[rodi]

I guess we've been trial running.
We've been tracking expenses closely for a few years.
I based my retirement budget estimates on current spending, less payroll deductions and retirement saving contributions, then added in extra to cover health care.

The extra money we're putting into house projects (new windows being done over time, new kitchen last year) are still included- since we hope to travel in retirement. Hoping to get the big ticket house stuff out of the way now, so we can spend the equivalent money on fun stuff in retirement.

Quicken makes it very easy to check how you're doing on your budget.

 

[WM]

I guess we've been trial running.
We've been tracking expenses closely for a few years.
I based my retirement budget estimates on current spending, less payroll deductions and retirement saving contributions, then added in extra to cover health care.

The extra money we're putting into house projects (new windows being done over time, new kitchen last year) are still included- since we hope to travel in retirement. Hoping to get the big ticket house stuff out of the way now, so we can spend the equivalent money on fun stuff in retirement.

This is similar to what we're doing, tracking and estimating. I've got decent data for the past 4-5 years, and as we get closer and the numbers don't change that much it's reassuring. We expect to spend about the same amount, or maybe a little more, in retirement as we do now.

 

[traineeinvestor]

No dry run here.

We've been tracking expenses for several years and our expectation is that post-retirement expenses will be more or less the same (although subject to an inflationary increase) with reductions in some areas being offset by increases in other areas.

 

[Midpack]

I'm also having a hard time with the tax math in figuring out expenses post ER.

Might give that another try.

The tendency is to overestimate taxes, I know I did (posted a few days ago). However, I also expect taxes to increase on all of us in the decades ahead, just my POV.

 

[NW-Bound]

No dry run here.

We've been tracking expenses for several years and our expectation is that post-retirement expenses will be more or less the same (although subject to an inflationary increase) with reductions in some areas being offset by increases in other areas.

No dry run here either, other than I have been tracking expenses for the last 2 years. As we have been segueing into ER, with my wife being off work for 5 years now, and myself working part-time the last 7 years, the lifestyle should be about the same, hence the expenses should remain somewhat constant.

By the way, I cannot see how one can spend exactly the same amount each year. Some years you spend on your home. Some others, you take some extra travels. As long as the expenses zig-zag around a predetermined WR, what's the worry?

 

[HighRoller]

No dry run here.

We've been tracking expenses for several years and our expectation is that post-retirement expenses will be more or less the same (although subject to an inflationary increase) with reductions in some areas being offset by increases in other areas.

+1... That's was pretty much my thinking too. Although, I guess you could say we were on a dry run for 10+ years before we retired by tracking (and understanding) our expenses.

 

[obgyn65]

I agree. I have been monitoring my expenses since joining this FIRE website a couple of years ago. Before this, I had no idea what I was spending per year.

I'd recommend that prior to ER you live for at least a year on your anticipated post ER income as it will give you a lot of confidence.

 

[LeavingOhio]

For the past 18 months I've been very carefully monitoring my spending and living off my retirement budget. I've had to make adjustments for commuting costs that will be less in retirement and medical insurance premiums that I'll have to pay myself in ER. But I know both of those costs and I'm now confident that I can live on the $36k/year that I've set as my ER budget......because I've been doing it for the past year and a half.

I'd recommend that prior to ER you live for at least a year on your anticipated post ER income as it will give you a lot of confidence.

This sounds like a very good idea. In my case, assuming two things...that I do get to retire at age 60 and that my household income doesn't greatly increase in the next 13+ years I have to work, when I retire at age 60, I will be living on less than I make, but 2 years later if my wife and I decide to take Social Security, that will bump us up to MORE than we make now and perhaps even more than we will be making at the end of our careers.

Of course Social Security could be less than I expect now, or I might delay SS payments (I don't think so though), or the market might not do even as modestly as I need it to.

 

[Mulligan]

I also tracked expenses for a couple years prior to retirement to make sure I could live on what I projected my retirement income to be. I took a half step though in retirement, by working a part time job. After 3 years of this I am about to wind that down, and do nothing. I wanted to make doubly sure I was correct before I quit altogether. The fear of insurance costs exploding on me worried me some, but after 3 years and only $4 a month increase, I feel that it will be ok. Increasing my savings stash through this job, has not been a bad thing either for me.

 

[rothlev]

I tracked also, but there are so many variables that it really did not work. An increase in travel, and medical expenses were a biggie for us. Both of us had major dental work after retirement. Aging can be expensive.

 

[palomalou]

Doesn't work the same way if you plan to move to a higher cost of living location. But we've ALWAYS tracked everything, so we have 20+ years. We'll do another 6 weeks in NY this summer and see whether our NY data from a couple of years ago (the % greater that we will spend) still holds true.

 

[NW-Bound]

I tracked also, but there are so many variables that it really did not work. An increase in travel, and medical expenses were a biggie for us. Both of us had major dental work after retirement. Aging can be expensive.

I fear the same, hence try to keep WR as low as I can, then use future SS and Medicare coverage as safety margins.