Retirement Expenses - Steady or Declining?

[W2R]

Not counting increases for inflation, are you planning for a steady annual expense throughout retirement (i.e. 45K per year forever), or a declining expense model (i.e. 50K during the first ten Go-Go years, 45K during the second ten Slow-Go years, 40K during the remaining No-Go years)?

If you're already retired, have your expenses gone up, remained steady, or declined over time?

I retired on 11/9/2009, ten years ago, at age 61. The graph below shows my spending record for taxes, medical, everything, including expenses related to buying, re-landscaping, and moving into my Dream Home in 2015.

Overall, I would say that my expenses are slowly increasing by more than inflation, plus I would say that buying a Dream Home in cash can mean a lot more spending that year.

Without the Dream Home, 2015 was very close to the same as 2016.

2019 is just an estimate since we still have two months left.

Growing older is the pits! Lemme tell you. It is, no matter what people tell you. In my opinion, having money to spend on whatever I want helps a lot in dealing with what Father Time does to one's physical self.

 

[Teacher Terry]

While it's not fun getting older I knew a few people that were denied the privilege and I think they would have preferred to stay.

 

[doneat54]

Planned on level expenses. No inflation factored in. 2.5 yrs in, and it has worked pretty well (except for the second home we bought this summer past!). DW started a new job this past summer too, and not sure about annual bonuses that could provide (or not provide) a travel budget, which right now, we do not have....

 

[W2R]

While it's not fun getting older I knew a few people that were denied the privilege and I think they would have preferred to stay.

Oh and just think! Your expenses would be zero.

In other words, I don't think that is what we are talking about in this thread. I think we are talking about planning to fund our later years.

 

[Teacher Terry]

I know W2R, but when you mentioned getting old was the pits that the first thought I had)

 

[donheff]

Our routine spending has been pretty flat so far (15 years in for me, 10 for DW). I anticipate a decline in our 80s as travel tails off but if we just up our game with more luxurious (easy) travel it may keep up for a while. Hopefully our LTC policies will prevent any horrendous increases in our twilight years. Spending has be far enough below my pre-retirement planning assumptions that we have absorbed some big expenses without a hiccup (DS's house down payment, DD's wedding and house down payment).

 

[corn18]

53 now, planning to retire @ 56. All numbers are in 2019 dollars.

56-60 = $115k + $25k travel
61-70 = $113k + $18,750 travel (not sure why this went down)
71-80 = $100k + $18,750 travel
80-dead = $100k

SS+COLA pension = $102k, so any money left over @ 80 can be spent or saved for legacy.

 

[Midpack]

Our spending has increased a little, but our WR is very low if you believe most retirement spending guidance. But we planned to spend conservatively and ramp up spending much later if our portfolio holds up well. If real returns fall in the bottom 5% historical, we’ll not spend more, but we won’t have to cut back severely.

 

[Dtail]

Check out the MarketWatch calculator. It has go-go, slow-go, and no-go periods, which are adjustable, and account for changes in taxes, health care, and other spending categories as one ages.

https://www.marketwatch.com/calculator/retirement/retirement-planning-calculator

One of the calculators I use. One can also alter the expense categories by inflation.

 

[CyclingInvestor]

61, retired 13 years.

Planned on increased inflation-adjusted spending after retirement, as I expected dividends (which provide all my income) to increase in excess of inflation. I figured more vacations, remodeling, etc.

Dividend growth has been better than expected, so my spending is up too, about double (inflation adjusted) from 13 years ago.

 

[jollystomper]

My plan assumes a steady amount (adjusted for inflation). However, my expectation is more of a curved assumption. More per year in the beginning, less in the middle and then a lot in the final years.

This is my plan as well, but something we will look at adjusting every year. If our net cash+equities is up, we may up the spending. If it is down without a clear reason we might try to reduce our spending, but only if without doing that our long term plan would be significantly impacted.

 

[imoldernu]

Our plans began in 1989, and detailed here:
http://www.early-retirement.org/forums/f27/sharing-23-years-of-frugal-retirement-62251.html

More or less, even though there was a master plan we simply adjusted on an annual basis. Now 31 years later, even though we have no market investments, and no pension, our expenses continue to naturally decline. We're both in our 84th year and we have more than we started with @ age 53 when we retired.

Though both of us are healthy, the activity level has gone down considerably since we turned 75. Spending has gone down naturally so we've turned to Amazon to buy toys and whatever peaks our interests.

When we put our expenses down on paper, they come to about $50K, but in real terms, we're spending about $35K. The big expenses just don't seem to happen... health, auto, travel, and even things like income taxes (zero for 25+ years), house taxes and HOA taxes have not increased. Illinois:

There are currently four exemptions that must be applied for or renewed annually: The Homeowner Exemption, Senior Citizen Homestead Exemption, Senior Citizen Assessment Freeze Exemption, and the Home Improvement Exemption. The most popular exemptions increased for Tax Year 2017 (payable in 2018)

Our house taxes have been almost the same for the past 6 years @2500. The full tax without these exemptions would now be about $6K or more.

Part of the plan/budgeting comes from two early actions... An annuity that is now paying off and LTC policies that limit the amount we would have planned for reserves in the late years.

It's not just a matter of estimating inflation costs, but of taking a realistic look at how age affects our interests and activities... The $4500 we used to plan for "eating out" costs, now comes to about $500. Snowbirding costs are now gone completely, and this year we'll sell our beloved "Woodhaven Lake" "man cave."

Truth be told, all of this was not on the table in the beginning, and only clear now in retrospection.

 

[Telly]

Retired 17+ years. Adjusted for inflation, declining expenses so far. In this exercise, I'm leaving out the $ used for FIT on Roth conversions. There have been some notable expense step-declines. The biggest was when youngest child received Bachelors degree, and our college support ended. Second biggest was probably my joining Medicare. I continue to do a multitude of DIY, many of them are things that most people would not do/can't do themselves. It's my life, I always have. Eventually, I know that will change, though I don't want it to. If it were all up to me, we would have done a major downsize to a 55 & over community already, and I might have been seen there pushing an electric lawn mower short distances for many years to come, while living in a new house.
So... without that, I expect a level of increased expenses in the future, when I am unable to do those many things that I do.

 

[DrRoy]

I do not forecast a decline just to be conservative, although it might happen. We will likely not have the energy for all the travel that we do now. Then again, we might do more cruises when we are older, which are easier, and spend as much or more.

 

[marko]

One thing we found to be dramatic and immediate right after RE was the drop in our clothing budget. Without trying, we use and spend about 95% less on clothing than when we were working. After 15 years now, our closets are nearly empty compared to before.

My job required some pretty expensive suits ($5K each) and business casual clothes. Now I find that I wear the same shorts/jeans and shirt for 3 days. I spend about $500 a year on clothing a year now. Between DW and I our clothing expense has dropped about $10K per year.

 

[Dtail]

One thing we found to be dramatic and immediate right after RE was the drop in our clothing budget. Without trying, we use and spend about 95% less on clothing than when we were working. After 15 years now, our closets are nearly empty compared to before.

My job required some pretty expensive suits ($5K each) and business casual clothes. Now I find that I wear the same shorts/jeans and shirt for 3 days. I spend about $500 a year on clothing a year now. Between DW and I our clothing expense has dropped about $10K per year.

Our clothing budget is around 1500 yearly total. This also was a big drop for us.
I can wear the same shorts for many days, but not sure about the same shirt for 3 days.

 

[Midpack]

I do not forecast a decline just to be conservative, although it might happen. We will likely not have the energy for all the travel that we do now. Then again, we might do more cruises when we are older, which are easier, and spend as much or more.

For many there’s a steady decline in spending that ends with a sharp increase for LTC. So planning on level spending might be a smart course.

 

[Bir48die]

I'm looking at fairly flat expenses with the caveat that I'll save $500/mth or more when I hit Medicare in August. However we'll find a way to spend it. My income plan past 70 is all laid out. Deferred comp gone, RMD's start. We have a decent travel budget and until one of us becomes less ambulatory I figure constant spending in that. However, if there is a significant downturn then we'll certainly review and tighten up as needed.

 

[ShokWaveRider]

We do not intentionally budget, but I looked back 5 years and our spending has really been the same give or take $5k. We could spend a lot more but I would rather leave it in qualified accounts until something changes with healthcare or DW gets to Medicare age, which ever comes first, probably the latter.

 

[SecondCor521]

I've only been FIREd about three years. So far my expenses have remained about the same. That is, ignoring the highly variable categories of taxes, college, and child support.

For planning purposes, I just use plain old Firecalc and the level expenses increased by historical inflation, because that's what I want: just let me live at approximately the same lifestyle level that I'm at, and I'll be content. But this planning is only for checking to see if I'll run out of money.

For actual spending, now I just sorta spend whatever I want. Like many here, I'm pretty frugal by both temperament and training, so I naturally don't spend much. Between that, side gig income, conservative college choices by my kids, a small unplanned-for inheritance, the good performance of the market, and the bandwidth to identify even more money-saving options, I'm sitting at a net WR of 0.58%.

 

[marko]

IMO, there is spending per se and then there are withdrawal requirements.

Between the two of us taking SS, getting on Medicare and a few tweeks we see a "personal deflation" (withdrawal needs) of almost 70K post tax without changing anything else.

 

[Moemg]

I have been retired 11 years . This year our travel budget dropped a lot . The excitement of travel has lost it's luster . We will still travel just not as much as we did.

 

[braumeister]

FWIW, we still travel at least as much as before, if not more. We have both always loved visiting other places and still do. This will certainly diminish over time, but 18 years into retirement we're still going strong. In fact, it's the largest portion of our annual spending.

 

[audreyh1]

We are spending more now on travel after 20 years retired. We started paying up for some expert guided travel.

 

[Offgrid Organic Farmer]

... If you're already retired, have your expenses gone up, remained steady, or declined over time?

I retired in 2001.

It seems to me that our overall Cost-of-Living has remained about the same.