Retirement Expenses - Critique & Abuse Me!

[youbet]

There was a pretty good thread here several years ago that brought some government data onto this question. I think typically it is considered that a couple needs 167% of what a single needs to live. Clearly a lot of assumptions will matter. Can the couple get by with one car? In the city, sure, in the suburbs or country likely not. How social are they? Typically singles go out more than couples, but some couples go out a lot, and it costs them about 200% of what a single costs to have a meal out.

Another issue just comes from probability. Extreme frugality and self denial is a rare trait in society, if not on ER.org. What are the chances that both spouses will be as hawkish on expenses as the most frugal one?

Married people will spend some money just to avoid divorce. How many guys in their expensive opera boxes alongside their wives might be happier at home watching basketball?

I have never understood how a group that will not accept that any active money managers can have long time superior records will easily accept essentially unbelievably low living expenses. I remember one guy who claimed to live on about $10,000 per year. Then it came out that his roomate paid a lot of his expenses. Yeah, I guess that would work wouldn't it? Or believe assertions that spending more money does not improve the experience of life. Give me a break! Spending it unwisely is a mistake, but in my market I can guarantee that I would be happier living in an apartment that rents for $2000 than a $1000 apartment.

That said, I have improved my spending since logging on here for the first time. Attention to spending matters, even though it may not be as dramatic as what is sometimes reported. I spend about the same as before, but that means that I have defeated 5+ years of inflation.

Ha

Excellent comments. And I agree there is room for a lot of variability. My DW wants all the things for herself as a married partner she'd have as a single. Her own car, space in the house, personal activities, etc. I feel pretty much the same. So my guesstimate is that our expenses are darn close to double what they would be for either of us as a single. But I can see where the 167% gov't number comes from and am sure it is correct for many. In fact, I'll wager that 167% average probably has a range stretching from 110% to 250%!

 

[aaronc879]

After maxing out my retirement accounts, my spendable income is probably between $30K and $35K, and I'd sure like not to be on quite such a short leash, spending wise.

After maxing my retirement accounts, my spendable after-tax income is $17K/yr. I get by just fine even with a small mortgage. I'm single.

Midpack: If you have the money, don't feel bad for spending it. If I recall correctly, you already have over 25X expenses saved so there's no need for you to reduce expenses.

 

[fritz]

I don't have to, but would like to reduce outlay. Thought it might be helpful to see how folks at $36K/yr do it.

I see it as a lot less discretionary spending (it's all about lifestyle adjustments). My expenditures: $45-50k (BTW - live in Chgo area; much higher taxes + HOA; utilities also higher; square footage pretty equal with new energy star single family home). You have interestingly placed your discretionary expenses (itemized to the max) ahead of the base expenditures. Looks like a little tug of war will take place if/when you make those reductions

 

[RunningBum]

The list is ordered alphabetically, so I don't think there's any notion of putting discretionary over base expenses.

 

[52andout]

I am glad someone posted this - I read a lot about expenses reducing in retirement but ours are close to what the OP said. Our taxes are a little higher, travel is higher, but car expenses,food budget, entertainment and personal care like hair and nails lower. We travel abroad once a year for a few weeks and also do several domestic trips, on top of going to see the kids.

My car is 11 years old, DH car is 9 years old and we have no intention of replacing them until we have to. New car will be bought with cash, probably a few years old model. I can see your biggest savings in this category. Unless it makes you very happy to be riding in a new car, then if you have the money good for you.

 

[fritz]

The list is ordered alphabetically, so I don't think there's any notion of putting discretionary over base expenses.

Just the way it came out.....

 

[bbbamI]

A couple of years before DH retired, I put together three annual budgets. All of the budgets below include fed tax (no state tax in TX). We have no children.

bare bones $35k

regular $45k

maximum $55k


All of the above assumes we'll live in our mortgage free house and retain 3 vehicles.

For me, it is important I know how low/high we can go.

 

[tinlizzy]

Depending on how much your gross salary is/was, you might have actually more earned more than $803,000 since only a certain amount of your salary is subject to SS (~approximately 106k today but has been indexed for inflation).

I wish, but that figure was total gross salary from those years.
For me, there is no way that I could save enough for retirement to provide 60k/yr or spend 60k/yr now and save for retirement but if a person can then great. I'm assuming OP has enough to safely draw down the $60,000.

 

[Gumby]

Only $53 a month for booze What kind of teetotalling freaks are you?? I need a moment to grasp the enormity of such a thing. In 2009, the young wife and I went through $283 per month just for wine at home.

 

[plex]

One of things you'll have to watch out for as you get older is medical costs. At 62 yo I'm realatively healthy yet spent about $8k in 2009 for my employer subsidized health insurance, deductibles and out of pocket expenses and some relatively minor dental bills. That's just me. DW's medical expenses were on top of those. Nothing unusual. A check-up, a few preventative tests typical for my age, some common prescriptions, etc. It adds up quickly and would eat up your $9k in a hurry.

Of course, if your income were only $9k, you'd likely qualify for a lot of welfare benefits but that's another thing altogether.

Right, that is why I said in the next paragraph

That all said, I could probably stay around $9-12k/year in costs for most of my life. Mortgage/rent costs will go down as insuring my health costs would go up, but only because I classify paying down a mortgage as savings.

Health costs for me, now, including all dental, health, and insurance costs, are $600/year. This will certainly go up (at least under the current system, which may be quite different by the end of the year), until they reach something like $8-10K right before I reach Medicare, averaged out, this means I will have about 3.5K-4K/year (but only while I am self-insuring, which isn't the case when I am working). However, as I mentioned, my rental/mortgage costs will go also go down, at a pace that offsets health insurance increases for the most part, at least for the purposes of very long term planning.

 

[freebird5825]

I can't compare costs with you because you are near civilization and I exist way outside it.
All joking aside...here's something you might want to consider for yourselves if that is your goal.
Repeating something I posted elsewhere and cannot find...Last year dh2b and I were able to take a 12 day Grand Mediterranean cruise. We could do that ONLY because we cut out all eating out except maybe once a month, and did some drastic cost cutting on our grocery bills. It was an easily achieved cost/benefit tradeoff for us.
I am still practicing the same cost cutting habits, but not quite as tightly. We haven't had to do any last minute panic money transfers to our joint account in ages. We have adapted to the lower spending habits AND both lost weight in the bargain.

Conclusion: Pick any discretionary category of your own, agree to cut spending in that area for a few months, and then see if you really miss it.

PS I'll take a raincheck on the "Abuse Me" part.

 

[Ronstar]

Your 60k also looks good to me for the Chicago suburbs. I have almost the same total expenses as you. My condo and real estate taxes combined about equal your medical and real estate taxes combined. Other than that, we have almost identical line item spending.

The only thing I can point out is as others have mentioned - accrual for a car for each of you at every 10 years instead of 5. It is possible for vehicles to last 10 years in Chicagoland - I have a 2000 Jeep with 150k miles that I just replaced and DW has 2001 Acura with 120k miles that will last a few more years. But maintenance costs tend to creep up in years 7-10

 

[W2R]

I live alone, so some of your expenses will be double mine. I found four areas that you might be able to trim back.

1. I have edited your list below, to illustrate something about what I think of as miscellaneous spending money:

Category	Monthly
Allowance (pocket money DW & DH)	$272 (divided by 2 = $136)
DH Clothes/Personal	$71
DH Haircuts	$25
Entertain Dining	$318 (divided by 2 = $159)
Entertain Internet	$50 (divided by 2 = $25)
Entertain Movies/Plays	$67 (divided by 2 = $33)
Home Lawncare	$41
Home Misc/Repairs	$59
Misc Off Supplies	$8 (divided by 2 = $4)
Misc Postage	$18 (divided by 2 = $9)
Vacation	$100 (divided by 2 = $50)
Accrual*	$260 (divided by 2 = $130)

* travel (every 2-3 yrs) $1565, (divided by 36 months = $260)

What I would like to point out is that the above, hopefully corrected to the equivalent were you single by dividing relevant quantities in two, comes to around $742/month for you as a "single". It comes to $400/month for me so far in ER ($500/month before ER), including my half of our dining out, entertaining, and vacation costs, and my lawn guy who costs more than your lawn care costs. Yet, I feel I live a very pleasant, even self-indulgent lifestyle, so I am thinking that perhaps you could push yourself to cut back just a wee little bit in one or two of these areas.

2. Also I think your budget suffers due to house size (I would bet it is quite a bit larger than the 1500 square feet or less that many couples find to be sufficient). House size leads to lifestyle creep, as well as higher energy use, property tax, homeowners' association, and maintenance costs.

3. Your budget suffers due to location. Parking? I haven't paid for parking in a very long time, mostly because I live where I live and because I always seem to have the option of choosing not to use valet parking. Also your sewage/water/trash are very high in your location - - you pay $129/month for those three together, but here they add up to $20/month, assuming twice my present water usage. Frank says a men's haircut costs $12 around here (he goes to conventional men's barbers, and I spend $12 every 2-3 months at Supercuts).

4. Some of us choose not to drink and not to have a pet. For me the effect on my budget is pleasant, saving me $114/month in comparison, but not the reason for these choices.

 

[Amethyst]

Midpack,

You have helped me with my schoolwork and I would not dream of abusing you. I don't like to abuse people anyway although I will pull their chains on occasion and accept a certain amount of chain-pulling in return.

I saw 2 ways that, if I were your DW, I could save you $$. I do a lot of our yard work. As a result, we don't pay someone else for the work, and I don't have nails worth doing! Any kind of nail-decoration would be destroyed instantly.

Amethyst

 

[simple girl]

Only $53 a month for booze What kind of teetotalling freaks are you?? I need a moment to grasp the enormity of such a thing. In 2009, the young wife and I went through $283 per month just for wine at home.

I thought the same thing. We lump food and beer together, since we buy it all at the local grocery. I've been really only tracking our spending in detail this year. It's crazy how much we spend on grocery/alcohol. Yet, still, I sit here and drink my beer.

 

[FANOFJESUS]

Midpack I think moving is the answer. A big city is nice when you are working but when you retire it is an anchor around your neck. Try moving to a smaller town in MO, KS, OK or AK. We live in Missouri for under 20k for two people. Cars are killing you to try keeping them 10 years or more. The car we have is fifteen years old. I tried to take your list and add our budget to it.

Category Annual
Allowance $500
Auto Gas $1200
Auto Insur $400
Auto Maint/Repairs $400
Boat (no boat)
DH Clothes/Personal $200
DH Haircuts $0 family cuts
Dog Food/Vet $0 no pets
DW Clothes/Personal $300
DW Hair/Nails $0 family cuts
Entertain Dining $1050
Entertain Internet $120
Entertain Movies/Plays $6 ( two dollar movie house)
Entertain Chicago Parking $0 (not a problem in a smaller town)
Entertain Dish TV $0 (no cable)
Food Grocery $4800)
Food Wine/Liq $20 ( very little drinking)
Gifts $200
Home Insur $400
Home Lawncare $21
Home Misc/Repairs $100
Home Assoc Fee $0
Home Prop Taxes $2000
Med Insur Prem (Hi Ded) $700
Med Out-of-Pocket $500
Misc Off Supplies $0
Misc Postage $10
Util Elec/Gas $1200
Util Phone $324
Util Sewer $210
Util Trash $180
Util Water $210
Vacation $400


I realize the accrual is large, but we can't expect everything we own to last 30-40 years and many are big ticket items. These things have to be accounted for somehow no?
One car that is fifteen years old. $500
travel (every 2-3 yrs) $300
Home Repairs (roof 20 yrs, paint 5 yrs, etc.) $300
furniture (once) $0
PC (every 5 yrs) $500
bed (every 15 yrs) $0
appliances (furnace, AC unit, stove, dishwasher, washer, dryer, fridge, etc.) $30
TV (every 15 yrs) $0 (have some old ones)

Total $17075

 

[Katsmeow]

I, too, have looked with marvel at some of the very low budgets. Some of things that impact those with higher budgets are: number of people being supported (couple v. single, with kids adding still more), where you live (affecting all kinds of expenses), and discretionary expenses.

For us, in comparing our soon to be retirement expenses I think that ours are higher than many because of (1) we still have teenagers at home (2) living near large metro area, (3) insurance -- many people here have much less insurance than I would be comfortable with, and (4) discretionary spending.

Everyone's discretionary spending is different. For example, while I may like the occasional nice vacation, I really don't desire to do a lot of traveling. On the other hand, my computer budget is way, way, way higher than most people (I like high end gaming computers -- will keep longer than an average computer but still a total indulgence). But we don't drink so no alcohol expenditures and we don't spend huge amounts on going out. But that's us. Others will have other priorities.

Many people who have really low budget don't spend nearly as much on discretionary spending. I know that I have several versions of our budget and what mostly varies is the level of discretionary spending.

 

[Midpack]

Only $53 a month for booze What kind of teetotalling freaks are you?? I need a moment to grasp the enormity of such a thing. In 2009, the young wife and I went through $283 per month just for wine at home.

LOL
I knew someone would say this. We used to spend a lot more, buying much better wine, but now we have really good wines much less frequently. It was helpful for us to make wine/liq a separate category, we did not realize how much our wine (quality not quantity) purchases were costing us.

 

[Midpack]

I hope there are even more replies, but I could not be more grateful for those who have posted so far. I will spend today continuing to assimilate it all and the 'you're spending too much on X' remarks are exactly what I was looking for. I realize it's our choice, but being challenged on our specific spending habits is the best way to improve IMO.

• I would be happy if we could get down to $50K/yr, I just thought it might be helpful to ask about folks who make $24-36K/yr work in comparison.
• We're at 38X the expenses shown, but I believe in plenty of safety factor (the next 30-40 years could see drastic changes, health care & taxes, etc.) and we are perfectly happy living LBYM, always have been.
• The key trick for us all along has been to reduce the frequency of spending on discretionary categories, not the quality. And that will most likely be how we ratchet down spending further.
  • We'd rather go out for dinner less often, than go to a lesser restaurant. Rather have wine less often, than drink cheap wine. Travel less than often, than more to lesser locations. Just our preference, no right or wrong.
• In actuality, we have kept most of our cars for 6-7 years and did keep one for 10 years. And we buy them on a staggered replacement schedule. I've just never wanted to put DW in a car that might break down on her, so I've never let her regularly drive our older car. But we might stretch this out more in retirement.
• We live about an hour away from downtown Chicago, so our prop taxes etc. are much lower than a close in suburb. We have learned our lesson on neighborhoods with homeowners associations, the fees and sewer have become outrageous.
  • We may move, but we would not want to be more than an hour from a major metro area somewhere.
  • We're considering Bloomington, IN; Asheville, NC; Raleigh/Durham, NC & several locations in VA. Austin, TX would be our first choice if it was not so hot (we've lived in Dallas & San Antonio, so we know first hand it's just not for us).
• Our home is 2270 sqft, our next and hopefully last home will probably be in the 1100-1500 sqft range. But it will take us awhile to pick a next location, we'd like to avoid (the expense of) having to move twice due to a bad pick the first time.

Again I can't thank you all enough, you gotta love this forum.

 

[FANOFJESUS]

[/QUOTE][*]Our home is 2270 sqft, our next and hopefully last home will probably be in the 1100-1500 sqft range. But it will take us awhile to pick a next location, we'd like to avoid (the expense of) having to move twice due to a bad pick the first time.
[/QUOTE]

You bring up a key point I forgot to mention. We live in a home around 1300 square feet. It is one of the biggest homes we have ever lived in. Smaller houses are one key to keeping the bills down. Smaller houses have smaller utilities,taxes,insurance and maintenance.

 

[audreyh1]

Austin TX is great if you like urban living (lived there for 30 years). And it's only hot in the summer, but the mild winters more than make up for it. That is the true tradeoff wherever you might want to live - enjoyable winter or enjoyable summer? Besides, summer is a great time to travel. The only reason we left was because we really didn't want urban/suburban living and there are better parts of the country if your main focus is wildlife photography.

There are some nice hill country cities west of Austin yet close for enjoying Austin urban stuff like Marble Falls, TX - if you are in to water sports especially. If I wanted to have a house close to Austin but not right in town, that is where I would probably move.

[OK - have to add the qualifiers about chiggers, scorpions and rattlesnakes and secession minded politics. Maybe my suggestions are buried far down enough in your thread not to bring down the wrath of my fellow TXns]

I really couldn't contribute any input about budget, because frankly we're not trying to be that lean on ours, and we spend a lot on dining out and groceries. We do own one car and I hardly ever buy clothes and visit salons rarely. But our spending on some of the other categories more than makes up the difference!!!!! Plus we gift quite a bit.

Audrey

 

[LOL!]

One sure way to reduce expenses is to look at the cost of your investments. The difference between 1% overall expense ratio and 0.25% is substantial for a multi-million dollar portfolio.

Here's an odd fer-instance: My spouse has a 401(k) with fees of about 2% added on top of the expense ratios. It turns out it is cheaper to borrow from the 401(k) and put the money into the exact same fund in a 529 plan just because of the extra 2% return. Or put it into a taxable account where the LT cap gains would be taxed less than in a 401(k) or IRA.

 

[REWahoo]

Maybe my suggestions are buried far down enough in your thread not to bring down the wrath of my fellow TXns

Nope, not far enough...

 

[Moemg]

Just by eating out half as much and slashing the seeing plays in half you save over $2200 . Your food budget can also be trimmed slightly to $100 that would save another $1300 . Just do not cut out the hair & nails for your wife or you'll be facing a big expense as in DIVORCE !

 

[FANOFJESUS]

Midpack, I hope you don't think this is to noisy but do you have a pension and SS?