Supplementing Nicolette's question: How much do retirees live on a year?

[ERD50]

When I respond to post like the above I first ask if they track their current expenses and do they have a detailed budget for before and after retiring. How they answer tells me if their budget estimate for retiring is reasonable.

I'll respectfully disagree. I have never had the discipline/motivation to do a detailed budget/expense report. But I *know* how much I spend each year, maybe better than some who do the detail thing.

Money only flows out of a couple of our accounts. I add up the outflows, adjust for the ones that were really 'transfers' (ROTH contributions, etc) or were reimbursed, and that is my yearly 'spend'. Then I add in an estimate to amortize known large routine expenses (2 new cars every 10 years or so), any known upcoming large maintenance items (roof, furnace, etc), and that's it.

And if someone does that calculation pre-retirement, that does not mean that is what they need post-retirement. Health ins, or maybe an increase or decrease in spending is in order ( increased travel, decreases in other areas).

It depends.

Assuming (single or married) no debt an no children; spending $100K a year and growing it by the 4% guideline is a very difficult spend rate to maintain. (Yes, I know it can easily be done - if you want to do it to prove a point)

Why would that be? In one year my health ins alone went up by 4% of my spending. It may happen again.

We are close to that ballpark, no travel, no cable, dine out infrequently or cheap, 10 year old cars, etc, etc. No ' keeping up with the Jones's ' I guess cost of living is just higher in some places. We do have high property tax, fairly high med insurance, etc.

-ERD50

 

[Ed_The_Gypsy]

Disclosure: ain't retired yet.

If I retire at 66, my total annual INCOME BEFORE TAXES will be about $45,000.

I won't spend what I don't have. (Disaster!)

Current options:
A) Keep working
B) Mexico
C) Further south.
D) Rob a bank in Canada. Worst case: I get away with it.

Hasta luego.

Gypsy

 

[Rich_by_the_Bay]

Disclosure: ain't retired yet.

If I retire at 66, my total annual INCOME BEFORE TAXES will be about $45,000.

I won't spend what I don't have. (Disaster!)

If your $45k estimate assumes the 4 or 4.5% SWR rule, you could take a substantial bump up by annuitizing a chunk of your savings, or the equivalent such as Vg Managed Payout 7% flavor. That plus ss - makes a big difference, if you don't have heirs to consider.

 

[W2R]

Disclosure: ain't retired yet.

If I retire at 66, my total annual INCOME BEFORE TAXES will be about $45,000.

I won't spend what I don't have. (Disaster!)

Current options:
A) Keep working
B) Mexico
C) Further south.
D) Rob a bank in Canada. Worst case: I get away with it.

Hasta luego.

Gypsy

According to the U.S. Census, real median household (not individual) income in the United States was $48,200 in 2006.
http://www.census.gov/Press-Release/www/releases/archives/income_wealth/010583.html
$45K probably is not a disaster unless you let yourself think it is.

 

[limpid lizard]

I'll most likely end this year at 24K taxes included. Somewhere close to 3.5K went to charity, and I have a mortgage, but no car payment or bills except insurance and utilities.

 

[CyclingInvestor]

When I respond to post like the above I first ask if they track their current expenses and do they have a detailed budget for before and after retiring. How they answer tells me if their budget estimate for retiring is reasonable.

I also respectfully disagree with this part - some people need a budget, some can do it instinctively. I am now 50, retired 2 years, and have not had a budget for decades. I just spend less than is available.

When I first started bicycle touring in the early 80s, I would draw out exact maps, where the rest stops / bike shops / motels were, measure out my food and water, and have everything planned out to the n'th degree. Nowadays I might make a reservation if I am riding up the coast on a weekend, otherwise I just start pedalling. I feel my finances are on the same level - I have been doing everything so long I hardly need to plan my budget in advance.

 

[haha]

Second, if I use post-tax savings to live on first, that mean no taxes on that part, but when that runs dry, I have to gross everything up by 20% or whatever (ouch).

People say this all the time, but I can't understand. Unless the money has been in a mattress, or you saved most of it only last year, at least half of it will be gains on which taxes have to be paid.

Incidentally, this may not be typical but I have paid more taxes by far after I retired than before, but maybe not if I transformed the amounts by an inflation factor.

Ha

 

[shiny]

Unless the money has been in a mattress, or you saved most of it only last year, at least half of it will be gains on which taxes have to be paid.

Ha

Mattress $/SPY purchased in 1999, same tax rate if I spend it this year!

 

[haha]

Mattress $/SPY purchased in 1999, same tax rate if I spend it this year!

My Dear, I am so sorry!

Ha

 

[lazygood4nothinbum]

with all the studies saying married people are happier, how is it that so far the poll results show 90% of singles satisfied with less than $70k yet 64% of the married require more than $70k? twice as much food? medical insurance? expensive toys for scheduled sex?

 

[Notmuchlonger]

with all the studies saying married people are happier, how is it that so far the poll results show 90% of singles satisfied with less than $70k yet 64% of the married require more than $70k? twice as much food? medical insurance? expensive toys for scheduled sex?

Sample is too small to make any kind of conclusion. Ive heard that 1 person =1x while 2 people =1.5x

Dont know how accurate that is

 

[chinaco]

My vote was before tax.

It is what needs to be earned (Before taxes) to support our current lifestyle.

 

[uncledrz]

I answered excluding taxes. Just the funds spent on our living expenses, etc. Roth conversions would skew the answer if taxes included.

Big variable, y-t-y is travel.

 

[UncleHoney]

If your $45k estimate assumes the 4 or 4.5% SWR rule, you could take a substantial bump up by annuitizing a chunk of your savings, or the equivalent such as Vg Managed Payout 7% flavor. That plus ss - makes a big difference, if you don't have heirs to consider.

Annuitizing the nest egg (dyi) is one scenario I have been playing with just to see what the maximum limits of spending could be. It gets scary, spending would have to double, taxes would go through the roof and then in twenty five years it would be "game over".

I prefer to stick with the plan and meter out the funds on an as needed basis later in life.

Just how much [-]money[/-] fun you can really enjoy is something I'll let others explore. However, the idle mind does tend to crave more money.

 

[haha]

Mattress $/SPY purchased in 1999, same tax rate if I spend it this year!

I re-read this and I don't think you are saying that this is your situation. So I am still confused. Wouldn't the asset allocation and rebalancing principle direct you to add to this position, and sell from some appreciated position? Thereby still exposing you to taxes?

Ha

 

[Walt34]

We spent just under $60k last year for two, no kids, no payments of any kind, all income from a COLA'ed pension. This year that will almost double because I started working again. The plan is that half of the additional after-tax income will go to savings and spend the other half. After six months the company will match 50% of 401k contributions up to 6% of gross so that's a no-brainer to do. In reality I doubt we'll spend all of the other half of new income after the first six month's "rush" is over, for stuff like a new stereo system, computer, downstairs freezer, etc. I wanna travel trailer and a motorcycle, DW is less than enthused about either.

It's a contract job where I can be dismissed for being ugly, so we'll not put ourselves in a position that we "need" the job. And the company's plan is to hire enough people so that a normal work week is 32 hours, which is just about perfect for me. DW will finish her BA degree next May and plans to get a job after that, however jobs that pay enough to make a commute worthwhile are very hard to find around here.

Neither one of us buys clothes until the ones we're wearing have holes in them, two vehicles are fairly new (6 years) and we don't travel much. We do like to keep the house very warm in the winter (natural gas to go up 42% this year - yikes!) and sometimes have a penchant for filet mignon but otherwise we're fairly frugal.

 

[mountaintosea]

Oops Sorry didn't include taxes. I voted just under $30,000. I can't deal with taxes right now.

 

[Meadbh]

Poll suggestion

While there are >100 replies, the poll is difficult to interpret because there are 20 possible categories. It might be helpful to limit the number to 7 or 8 so we can see whether the distribution is "normal" (statistically).

 

[haha]

While there are >100 replies, the poll is difficult to interpret because there are 20 possible categories. It might be helpful to limit the number to 7 or 8 so we can see whether the distribution is "normal" (statistically).

I believe too much granularity would be lost. Build a stem and leaf chart. You could do more aggregation if you want, but the data would still be there.

Ha

 

[rickier55]

perhaps I oversimplified my vote.

I know what my annual pension is, and I know how much I'm drawing down my retirement investment. Adding those two together tells me what I spent. (including what I spent on taxes).

Some of what I spent really went into a couple of savings buckets I maintain for emergencies or big purchases.

Rick

 

[cute fuzzy bunny]

Eh, it seems pretty straightforward to me. Singles are broadly skewed but seem to spend less than 70k a year. Marrieds are broadly skewed but to a higher level.

So there isnt much of a 'settling' at primarily one or two income levels. Its all over the map. Nor is there any settling at a 'frugal' level or 'big spender' level.

Going back to Marthas original question, the 'three to four thousand a year' people are well in evidence, especially the singles. But among the married camp there are some bigger spenders.

I'm thinking either a lot of people who arent retired voted, or I'd have to be surprised that we have ten retired couples spending over 150k a year which means they've either got >$4M or a possibly unsustainable withdrawal rate...?

The other option is that we've got up to ten comedians. I've unfortunately had that problem with polls before. I ran a bunch of them a few years back to try to establish some demographics but after the 5th or 6th I found the results were conflicting and didnt jibe. What I ended up with was a pretty clear indication that as many as a third of the poll votes were people goofing around.

 

[Leonidas]

Well, I will self-identify and admit to being one of the ten. I don't want to go into detail about all of my expenses, but there were three categories that added significantly to my expenses last year. Last year I started the process of adjusting my AA, and the first step was some sales that created some hefty capital gains and upped the tax bill. Plus, I have a kid in a top 100 national university that is a private school and I paid both the Fall and Spring semester tuitions before year end. Finally, we took some very nice vacations. Not quite extravagant, but darn close. Add all of those up and the total is about $80K.

I'll also admit that I was feeling pretty flush last year and spent more than I planned on is some areas. But, it works for me, and I stayed under my SWR.

 

[cute fuzzy bunny]

Ah, so we had a lot of one-time expenses incorporated. That'll certainly skew the results to make them not be very reliable to determine regular annual expenses. A good number of the 'frugal folks' Martha feels are missing might have had a one time $30-50k expense last year that made them look like big spenders when they're typically not.

I spent an extra $75k last year, all one-time. I didnt include that.

 

[Leonidas]

I spent an extra $75k last year, all one-time. I didnt include that.

I could have winnowed down some of the one time expenses in the other categories, but my sons are both sophomores so I know the education expenses aren't going away until 2015. They might fluctuate (lower, I hope) but I'm stuck with them for a while.

This year I've been delaying the re-balancing act in my taxable account and trying to do it all in the tax-deferred, but I've got issues in the taxable account that I am going to have to deal with by making some more sales this year and most likely next year as well. And the vacations, well, two of those trips were just phenomenal and pretty much fit the bill of the kind of stuff I want to be doing at this stage of my life. At least one of the trips I plan on duplicating this winter.

As of today (just wrote a tuition check Friday) we're on track to hit at least $150K.

 

[haha]

I'm thinking either a lot of people who arent retired voted, or I'd have to be surprised that we have ten retired couples spending over 150k a year which means they've either got >$4M

First, why not? That would be a very middle success for someone who cashed good options and didn't pee it away. And second, have you checked how big governement pensions often are? All you need is teachers, or a double dipper and a very modest portfolio.

I have no problem imagining >10 couples on this board who spend that. What is hard is imagining the very low end.

Ha