Budget/expenses after retirement

[doneat54]

I'm 4 years FIRE'ed, DW is working 1.5 more years. We are now (barely) living off her salary and not touching the portfolio.


Today, after a Zoom call with a Fidelity guy, we revisited out budget and took a stab at a "retirement" budget. We made guesses about where we would live (we have some idea) and went through our 2018 budget as a reference. Pulled all sorts of utilities averages out and checked those in.



We boosted the food and beverage budgets a bit (we love fine wines and spirits, and I love to cook) and boosted the dining out budget by 20%. Auto costs we kept the same probably could decrease it, we have 3 cars plus 3 antique ones. Kept cable and cell phones the same and added $1800/mo for healthcare (for until we get to Medicare).


Travel, I'm leaving out of the month by month stuff. We want to do a bunch of it, but I will pull annual lump sums out and it will be a "use it until it is gone type of account".


Anyway, curious about those who have already fully transitioned to a retirement budget, what did you find that increased and what decreased? What did you anticipate and what did you not?

 

[SecondCor521]

FIREd about 5 years now. Single. 51. I lead a boring life in a LCOL area.

Increases:

My auto expenses went up as I had drove around a bit more and as the car I was driving aged a bit. I didn't anticipate this but it wasn't a big deal.

I self insure for dental now. I get a modest "cash payer" discount, but that cost is more than my employer provided dental insurance I used to have. I knew this would happen but I didn't really think about it much as it wasn't that much total - I have good teeth for now, so just cleanings/xrays/dentist onceover every so often.

I'm starting to ramp up gifting to my kids, which I didn't think about specifically ahead of time but fits in with my overall financial scenario.

Decreases:

My income taxes went from my single highest expense to essentially zero. I anticipated this but it was still shockingly amazing to see it happen.

I hardly spend anything on clothing now. This was logical but I didn't really think about it ahead of time.

...

Your question seems to be focused on expenses, which I understand. But there were two other things I didn't anticipate; both accrued to my benefit:

1. In my plan, to be conservative, I assumed I would never have any more income. I ignored dividends and interest, because I knew FIREcalc would include those in it's model as part of the portfolio return. I assumed my salary would stop, and sure enough it did. But there are a lot of little bits of income here and there that aren't much individually but add up in my case to about half of my annual spending. So my actual needed withdrawal is about half of what I thought.

2. As a broader version of item #1, I assumed the worst might happen in terms of market returns, expenses, etc. When you make five or twenty different conservative assumptions, then it sometimes happens that life turns out not to be as bad as one predicted it might have been. The worst historical returns only happen rarely; the vast majority of time things range from only moderately bad to fantastically great. So I had more non-portfolio income, I've been able to optimize my taxes, my portfolio has gone up, I've been able to further reduce expenses in some cases, and tax laws have changed in my favor several times already. So sure, plan for the worst, but don't be surprised if things are mediocre or even good.

 

[Ronstar]

Down: Auto fuel, clothing, income tax

Up: Travel, hobbies

Not much else has changed since retiring 6.75 years ago.

 

[Dtail]

Down: Income tax, parking/transportation, food including eating out, clothes, housing
Up: Gifts

All of these changes we pretty much expected. I keep a detailed budget with tracking of spending.

 

[mystang52]

We increased our travel budget, but of course haven't spent anything of late.
Give more to the grandkids' 529 accounts. We also plan, whenever COVID danger is gone, a lot more local and short term trips, such as flying to different states so I can run a 10K race.

 

[DrRoy]

RE for 4 years. First year spending was about the same as before RE. Has gone up every year since then because of market returns. Down is auto, since we got rid of one car. Up is travel and remodeling the house.

 

[W2R]

Anyway, curious about those who have already fully transitioned to a retirement budget, what did you find that increased and what decreased? What did you anticipate and what did you not?

I never traveled and do not want to travel in retirement.

Anticipated changes:

(1) I am not spending as much on clothes now.
(2) I am not spending as much on gasoline now.
(3) I am spending more on medical and dental as I gradually experience more and more of the deteriorations of old age. Dental implants are a miracle but they can cost an arm and a leg.


Unanticipated changes:

(1) I did not anticipate the fact that without work stress in my life, I don't need nearly as much discretionary spending to be happy.
(2) I am spending more on eating out than I did before retirement.
(3) I bought a different home for retirement, and it has higher property tax and insurance.

 

[bearkeley]

Retired 5 years ago and each year, we travel internationally for about 5 months, except this year, of course. Interestingly enough, our overall expenses are consistent for the year, regardless of our travel.

Specific line item variances include:

Down: Health Insurance, Primary Home Mortgage (sold), Dining
Up: Activities, Hobbies

 

[2017ish]

As expected/planned, travel went way up. It has been 50% of our spending, although it fell to second behind taxes in 2020 (Roth conversions and less than 5 months traveling). Wine/alcohol expenditures went down, as we drew down the cellar after realizing that 6 months of travel per annum had doubled the anticipated time to finish its contents.

Taxes way down, clothes (even allowing for specialty travel clothing) also way down. Similar result for utilities and restaurants/groceries (we quirkily allot all food on the road to travel). Auto expenses generally down, as 1/2 or more of travel is via plane.

Health insurance and medical up some, but not drastically. (DW paid all of hers as a partner when working, and was locked into the policy chosen by the group; mine was mostly provided by employer).

No real surprises (other than the wine), which sounds like it may be the case for you as well.

 

[Teacher Terry]

Travel and health insurance were our biggest expenses. Clothing went way down except for recently losing 30lbs required some new clothes.

 

[rk911]

I'm 4 years FIRE'ed, DW is working 1.5 more years. We are now (barely) living off her salary and not touching the portfolio.


Today, after a Zoom call with a Fidelity guy, we revisited out budget and took a stab at a "retirement" budget. We made guesses about where we would live (we have some idea) and went through our 2018 budget as a reference. Pulled all sorts of utilities averages out and checked those in.



We boosted the food and beverage budgets a bit (we love fine wines and spirits, and I love to cook) and boosted the dining out budget by 20%. Auto costs we kept the same probably could decrease it, we have 3 cars plus 3 antique ones. Kept cable and cell phones the same and added $1800/mo for healthcare (for until we get to Medicare).


Travel, I'm leaving out of the month by month stuff. We want to do a bunch of it, but I will pull annual lump sums out and it will be a "use it until it is gone type of account".


Anyway, curious about those who have already fully transitioned to a retirement budget, what did you find that increased and what decreased? What did you anticipate and what did you not?

we may be the outlier but virtually all of our discretionary expenses went down. we’re living in retirement pretty much the same way we did before. we did buy a new jeep for my wife 10-yrs ago (cash) but i still have my ‘03 jeep. travel in our MH is up a bit. non-RV driving miles are down. utilities are up but mostly due to their increases but we are streaming more. health insurance is likely our biggest increase. medicare pt b/part d/medigap for both of us vs employer health care (me $, my wife free). we’re still LBYM but our unspent $ at the end of the month and NW has increased.

 

[daylatedollarshort]

we may be the outlier but virtually all of our discretionary expenses went down. we’re living in retirement pretty much the same way we did before. we did buy a new jeep for my wife 10-yrs ago (cash) but i still have my ‘03 jeep. travel in our MH is up a bit. non-RV driving miles are down. utilities are up but mostly due to their increases but we are streaming more. health insurance is likely our biggest increase. medicare pt b/part d/medigap for both of us vs employer health care (me $, my wife free). we’re still LBYM but our unspent $ at the end of the month and NW has increased.

We also spend much less overall in retirement. Our earthquake insurance went up, our pet is older and has higher vet bills, our health insurance went up crazy high right before the ACA but then it has been much less with an ACA plan than we budgeted for. We spend more on entertainment but the cost per outing went down as we figured out how to buy a lot of annual memberships and passes, plus have the time to look for cheap / free community, senior special and college events. Being home we have more time to cook from scratch, price shop, make the house energy efficient, make our own cleaning supplies and probably a hundred other little cost saving items that all added up.

 

[Koolau]

15 years in. Never actually budgeted. Just spent and made sure we weren't dipping too deeply into the stash. This year, we've bought almost nothing with the exception of consumables. Just don't need/want anything. Having said that, charity is way up as well as giving to kids. 2020 was a very strange year in so many ways. I'm so in hopes that 2021 will get back to "normal" - whatever that is. YMMV

 

[Markola]

Well, my Costs to Work line item dropped dramatically

 

[Midpack]

Boating $ went down, but medical $ more than replaced those substantial expenses.

Taxes went down, then up with Roth conversions (6-7 years).

Otherwise there were no surprises because we went on our projected retirement spending budget two years before I retired. I’d recommend same for anyone before retiring.

The other good decision we made was budgeting for “accrual” expenses - the major expenses that occur infrequently such as replacing cars, roof replacement, HVAC replacement, furniture/appliance replacement, repainting, remodeling, relocation once, etc. They may only hit every 5-20 years but they’re substantial, about 20% of annual spending on average for us, so they need to be factored in. Evidently some people forget to budget for these big $ hits. It also made us plan them a little better to smooth the hits, e.g. don’t buy a new car in a year we know we’re replacing our roof.

 

[Tom52]

We will be retired 7 years end of next month. Dining out and entertaining had gone way up, same for traveling. Insurance for vehicles and home have gone up but primarily due to move from rural midwest to Florida. Overall health care insurance much higher now we are on Medicare plus Medigap.

There are more expenses at our Florida house such as HOA fees, termite bond, pest control, plus bond fees. The improved lifestyle in Florida are well worth the extra costs.

 

[jollystomper]

So far, in 2.5 years of retirement as of the end of 2020, We have not had any expense surprises. The categories we expected to spend more of we have, the categories we expected to spend less of we have.

For what it is worth, attached is our "Periodic Table of Expenses, 2016-2020", reflecting the last 2.5 years of my working and 2.5 years of my retirement. It ranks for each year the top 10 expense categories (which typically are 90% of our expenses) and the percentage of expense for that category that year.

 

[Out-to-Lunch]

So far, in 2.5 years of retirement as of the end of 2020, We have not had any expense surprises. The categories we expected to spend more of we have, the categories we expected to spend less of we have.

For what it is worth, attached is our "Periodic Table of Expenses, 2016-2020", reflecting the last 2.5 years of my working and 2.5 years of my retirement. It ranks for each year the top 10 expense categories (which typically are 90% of our expenses) and the percentage of expense for that category that year.

Hey, I like that idea! I may have to work out our own "periodic table."

 

[pacergal]

Retired 4 years. Like others, clothing, gasoline went down. Dining out costs up. Auto costs went up, as we bought 2 new cars just prior to retirement at 0% interest--but just made last payments, so that cost will go down again!

 

[brett]

Nine years retired.

Most things down. Income tax down significantly. Travel expenses up significantly. As anticipated.

I only keep track of net after tax spent. One number. It has remained fairly constant through the past nine years but there have been lifestyle changes. Downsized home expenses, increasing travel expenses.

 

[brett]

Nine years retired.

Most things down. Income tax down significantly. Auto expenses down. Travel expenses up significantly.

 

[karen1972]

The biggest change was taxes, more because I didn't think we would see the returns we did which then changed the strategy I was using...ie a nice problem to have.

The rest was more just I should have budgeted more for exploring new things. With all that free time I picked up way more hobbies and each comes with its own cost.