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

[bongo2]

We're definitely attracting a "better" class of retirees. In the 2004 thread "How much is needed to retire" the highest reported spending was $90k.

 

[OAG]

Inflation!

 

[aenlighten]

I daresay those spending $150k a year are more concerned with spending their principal than sustaining it. Too much money and not enough time.

 

[megacorp-firee]

Having way too much discretionary time on my hands now
I did keep good track of what we spent. I RE'ed in July 07. For the 1 year from 7/07 to 7/08, we spent $108k.

However, here is the outlayer that bumped this up a bunch:
$44k in fed and state income taxes due to exercising some stock options from megacorp. ... and this (the $108k) still includes FICA which I believe I will no longer have to pay.

I estimate that 2008 fed and state taxes should be around $9k (and no FICA). So my yearly expenses probably around the $70k mark.

This includes a pot load of traveling (in the 1st year of RE we were gone 8 months from homebase). We have figured out how to do it 'on the cheap'. It also includes a mortgage payment of around $15k/year that run for another 5 years or so. I could pay that off, but at 4.8% why bother, since I have the cash flow to keep it.

p.s. almost forgot, it also includes 1/2 year of medical insurance @ $695/mth. I believe that this goes up to around $900/mth in 2009, so the $70k could be more like $75k. ... oh well ... you can't take it with you

 

[kumquat]

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

I voted well below the max. Then I read the thread and saw taxes were included. That changes things a bit since as ha suggested, I [-]dumped[/-] exercised some options that put my tax bill above the max last year.

 

[JustCurious]

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).

Rich, I'm not retired yet either, but I have given a lot of thought lately to withdrawal strategies in retirement for future planning purposes. My advice would be to first withdraw from your tax deferred accounts to fill up your lower tax brackets (0%, 10%, 15%), only then should you withdraw from your post-tax savings or Roth IRA accounts. I think it would be a mistake to withdraw only post tax savings for any given year and give up the opportunity to fill up your lower tax brackets with withdrawals from tax deferred accounts.

 

[CuppaJoe]

My impression when I first joined the board was that there were many people who were retired or going to retire on three to four thousand a month. I remember once we had a poster who said he needed $100,000 to $120,000 a year and we kind of gave him a hard time. Now it seems like a regular occurrence for people to want/need that much and it seems quite rare to see people who claim to live on less than $50,000 a year.

Is my impression right? How have things changed? Is it just because more people are on the forum? ....

Yes, I got the same impression, joined three years after you. One of the reasons I post here is to balance the ticket, so to speak. You can get to FI on a relatively modest salary.

I didn't vote because I wasn't retired last year but I plan to live on $40,000/year including taxes and health insurance premiums.

Edit to add: single category.

 

[MovedToFl]

We bought a new home here in Florida,so my over $150,000 doesn't count.

 

[audreyh1]

I didn't include taxes. It just screws things up too much. Taxes are related to what my investments do a given year, not what I spend.

My annual expenses tend to stay within a certain range +/- 10K each year. The taxes, however are all over the map and difficult to predict.

Audrey

 

[chinaco]

My impression when I first joined the board was that there were many people who were retired or going to retire on three to four thousand a month. I remember once we had a poster who said he needed $100,000 to $120,000 a year and we kind of gave him a hard time. Now it seems like a regular occurrence for people to want/need that much and it seems quite rare to see people who claim to live on less than $50,000 a year.

It is interesting. Perhaps many of us over estimate our needs.


I am targeting about 40% more than we currently spend while w*rking. The main reason for that is that we believe we will spend more due to travel. Of course, if inflation moves higher than planned, that discretionary spending could be reduced and shifted to fund normal lifestyle (at home).

I think that extra money either reflects future desired spending or a buffer to cover the unknown. For some it could just represent their current spending habits that are much higher than will be needed when they retire (i.e., includes mortgages, car payments, kids in college, etc).

 

[Finance Dave]

We're not yet FIRE'd (another 5-6 years I think), but here's how I do our planning.

Start with what we make today (these are not real numbers since I don't want to tell everyone my salary....but we'll use them for mathematical purposes).

$100,000 Gross

Then we adjust for things that will decrease. For example, say we save $22,000 per year and we'd stop saving at retirement. Then our house will be paid off the year we retire...so that's $18,000/year less. Then work expenses such as dressy clothes/shoes, briefcases, gifts at the office, expensive lunches out each day, etc....so we'll deduct $2,000/year for that. Auto costs will decrease...we have 4 cars today (hobby of mine), but we'll be going to 3 cars, plus reduced gas driving to work - we'll say $1k here. Also taxes will decrease since our income wil go down...so I did detailed analysis of tax reduction...say $4,000/year for this purpose.

$100k Minus
-$22k
-$18k
-$ 2k
-$ 1k
-$ 4k
______
$53k

Then we add on for things that will increase, such as health insurance (we will rehire before medicare kicks in), so add $6k/year. Utilities will be higher since we're home more, add $1k/year. Groceries increase due to eating lunch at home, add $1k/year. Travel costs will increase...we plan to take one additional vacation/year at $5k. Then we added in a few other things like increased hobby spending, higher home repairs (house is aging), and more trips to visit family nearby (driving trips...only 100 miles) , so let's add $2k for these items. Lastly we'll buy LTC as soon as we rehire at $5k/year.

$53k (start point)
+$ 6k
+$ 1k
+$ 5k
+$ 2k
+$ 5k
_____
$72k Total spending estimated

Each year we refine these as we learn more. Doing this we've found a silver lining. Although the above numbers are "made up", in real life we save 30% of our gross. So we can live on about 30% less with no other changes in lifestyle. So much for the "you need about 80% of your pre-retirement income" rule. Couple that with paying off a mortgage and so on, and we have some breathing room.

 

[landover]

Not exactly last year but July07 - June08

We moved to a third world country April-07 so my expenses are not directly comparable and I am not yet retired, I am sure that I will live very close to this even if I am retired.

My expenses are around $15000 including rent, kids education and car for 4 people. I bought a new car and some other stuff since I did not have any household stuff, 15k does not include those, add around $20k one time expense for that. My company pays for medical insurance with around $12000 max. I guess premium for that would be around $400/yr. It only covers only hospital stay and things done there. My taxes were around $10k.

 

[explanade]

Lot of people who retire to central and South America also come back to the US for medical care.

 

[dex]

We're not yet FIRE'd (another 5-6 years I think), but here's how I do our planning.

Start with what we make today (these are not real numbers since I don't want to tell everyone my salary....but we'll use them for mathematical purposes).

$100,000 Gross

FD,
Good work - Sounds as if you are in the ballpark for what you will need.
I would suggest you do a line item budget of what you currently spend and adjust it for after retirement.

 

[Finance Dave]

FD,
Good work - Sounds as if you are in the ballpark for what you will need.
I would suggest you do a line item budget of what you currently spend and adjust it for after retirement.

Thanks dex...have already done that. Just didn't want to show the details.