Percentage of retirement budget for housing?

[emi guy]

Hello everyone. I don't post often, I'm more of a reader, I guess. I visit often and find this forum to be among the best I've found. So here goes. DW and I are about four years from retirement, both will be 60. As we prepare, building budget scenarios and saving all we can, we're looking at our model budget and wondering if we are in line or not. We're looking at the housing portion of our budget in particular and it looks like it will be about $20,000 per year. This number includes property taxes, electricity, heat, insurance, regular/predictable maintenance, etc.
This number will be about 25% of our projected gross income. Does this sound like too high a ratio to you?
We live in a modest home but in a high property tax state which is driving up the number. We hope to stay here to be near the kids/grand kids.
I'm wondering if the group might respond with the percentage of income you spend on housing in retirement so that we might compare?
Thanks, EMI GUY

 

[Meadbh]

My housing costs are less than 10% of my lifestyle spending, but I live in a condo and property taxes and utilities are reasonable, so we would be comparing apples and oranges. When I lived in a house, my ongoing expenses were significantly higher. No mortgage.

 

[REWahoo]

Made me look.

Nine years into retirement my housing expenses (using your definition) are are averaging 15.5% of our annual spend.

 

[Accidental Retiree]

We've only been in our new home for 6 months, but from what I've seen and what I project, about 18% of our annual budget will go toward the housing categories you've laid out.

 

[braumeister]

Somewhere around 12% here.

 

[Rustic23]

About 12%, but house paid for. Closer to 20% when we first retired.

 

[emi guy]

I should have mentioned that we do not anticipate a mortgage in retirement...
EMI GUY

 

[RetireAge50]

6% now and 11% in retirement (less gross income in retirement).

 

[W2R]

Somewhere around 12% here.

Last year my paid off house also cost me 12% of what I spent last year, not including utilities. Electricity (AC) and gas (heat) added another 4%.

The rest of the 12% included paying for:

mowing/yard service (3%)
property tax (2%)
homeowners' insurance with wind and hail (hurricane) coverage (5%)
flood insurance (2%)

and a few other minor maintenance expenses under 1%.

However, had my offer on another (nicer) house been accepted, my expenses would have gone up to around the 25% you are anticipating. A lot depends on what you want to spend your money on, right? I don't enjoy travel so I might as well spend it on my home, where I am most of the time.

 

[Alan]

This year housing cost 17% of annual spending (not including what we spent on income taxes).

This includes rent, utilities, & contents insurance.

 

[arky]

~10% (no mortgage).

 

[Theseus]

Using those categories, I have $18,750 for a 4 year rolling average annual spend. Sub categories are: equipment (tools, appliances); maintenance; supplies (housekeeping consumables); real estate taxes (ugh); electricity; heating fuel; homeowners and liability insurance (if not for having acreage would probably drop the liability policy). Rather extensive remodel in 2010 should be representative of infrequent major costs like roof or furnace, so one each of those every 12 years would be accurate for estimating.

 

[youbet]

I should have mentioned that we do not anticipate a mortgage in retirement...
EMI GUY

It's a good idea to keep a mortgage out of the calculations. I'm assuming you either don't have a mortgage and therefore no payment or you do have a mortgage but your portfolio is bigger, by the amount of the mortgage, and you've chosen to keep the mortgage and pay it out of the incremental portfolio dollars.

 

[youbet]

This year housing cost 17% of annual spending (not including what we spent on income taxes).

This includes rent, utilities, & contents insurance.

That's an interesting view Alan. Income taxes are our biggest spending category and I always include income taxes in our budget related calculations. Just another way of looking at things I guess.......

I think it likely that OP should have asked for absolute dollars of housing expenditure as opposed to housing expenditures as a percentage of retirement spending. Then he could have taken the dollar amounts and compared them to what he plans to spend. Percentages seem to bring in a lot of "it depends" based on what is included in the dividend and the divisor.

 

[W2R]

I think it likely that OP should have asked for absolute dollars of housing expenditure as opposed to housing expenditures as a percentage of retirement spending. Then he could have taken the dollar amounts and compared them to what he plans to spend. Percentages seem to bring in a lot of "it depends" based on what is included in the dividend and the divisor.

Yeah, but then dollar amounts also bring in a lot of "it depends" - - one person might have a 900 square foot house in rural flyover country, and another might have a 6000 square foot house in an upscale San Francisco neighborhood.

Honestly I just don't see what can be obtained from any of these figures. How we spend our money in or before retirement ultimately depends on what we value most. I spent $0.00 (0%) on travel last year, and I am sure others spent considerably more on that. My unused travel money can be spent on my house, since I am a homebody and value my house a lot, thus I am looking for a nicer place.

The best way to work through these figures in retirement planning, IMO, is to use your present housing expenses and any expected changes in them, to project what these expenses probably will be in retirement.

 

[youbet]

Yeah, but then dollar amounts also bring in a lot of "it depends" - - one person might have a 900 square foot house in rural flyover country, and another might have a 6000 square foot house in an upscale San Francisco neighborhood.

But I think the variables you suggest, such as house size or geographic region, are appropriate "it depends." They're representative of variations in housing choices. Inappropriate "it depends" items might include whether you include income taxes in your expenses or not or whether you include the opportunity cost of the money you have tied up in your house or not. That is, items in the dividend or the divisor that are not directly housing related.

I do agree with you though, whether expressed as a percentage or an absolute number, there's lots of room for interpretation and misperception.

I wonder what OP plans to do if he discovers that his budget for retirement housing is higher or lower than typical........ whatever "typical" means......

 

[2017ish]

Yeah, but then dollar amounts also bring in a lot of "it depends" - - one person might have a 900 square foot house in rural flyover country, and another might have a 6000 square foot house in an upscale San Francisco neighborhood.

Honestly I just don't see what can be obtained from any of these figures. How we spend our money in or before retirement ultimately depends on what we value most. I spent $0.00 (0%) on travel last year, and I am sure others spent considerably more on that. My unused travel money can be spent on my house, since I am a homebody and value my house a lot, thus I am looking for a nicer place.

The best way to work through these figures in retirement planning, IMO, is to use your present housing expenses and any expected changes in them, to project what these expenses probably will be in retirement.

Amen. Instead of taking the words out of my mouth, you stated it much better than I was going to.

 

[scrabbler1]

I live in a co-op apartment complex so I included my monthly maintenance payment minus the monthly parking fee but added back additional non-maintenance payments such as electric and insurance. It comes out to about 30% of overall spending.

 

[rodi]

We're about 18% for the year - but that includes some rare item maintenance - replaced the slab front driveway with pavers this year - and replaced 5 windows from the original 1960's single pane aluminum to low-E metal clad wood double insulated windows. (Only 5 windows left in this multiyear, DIY project, and funds already escrowed aside.)$

If you take out the driveway and windows we're at closer to 13%... which includes a $5k/year maintenance budget.

We are anticipating a new roof and solar panels in the next 5 years - again a rare - but planned for expense - that is not part of that 13%... again, money is already escrowed aside and not part of the retirement nest egg.

 

[Cobra9777]

Our housing spend is $24K/yr (no mortgage), or about 27% of total spending, excluding income taxes. We're in Texas with very high property taxes, but overall one of the lowest tax-burden states. So presumably, this is partially offset elsewhere in the budget. Homeowners insurance is also very high in North Texas due to hail damage on roofs. No one in North Texas actually buys a new roof. You just pay monthly in your insurance payment, and then get it replaced whenever you get hit. The house is also large and old, with a pool, which drives high utilities and maintenance costs. There's also an endless list of improvements that we'd like to make. And of course, there's the un-quantified, additional indirect cost of keeping so much money tied up in brick-and-mortar instead of the portfolio. We intend to downsize at some point but, for now, staying in the dream house a bit longer is one of our few splurges.

 

[Alan]

That's an interesting view Alan. Income taxes are our biggest spending category and I always include income taxes in our budget related calculations. Just another way of looking at things I guess.......

I think it likely that OP should have asked for absolute dollars of housing expenditure as opposed to housing expenditures as a percentage of retirement spending. Then he could have taken the dollar amounts and compared them to what he plans to spend. Percentages seem to bring in a lot of "it depends" based on what is included in the dividend and the divisor.

Income taxes are our biggest category as well, but they are unusually high because I am choosing to be very aggressive in doing ROTH conversions.

The OP did say he was calculating his percentage on gross income, but if I did my calculation only on income then it would be a % based on pensions + dividends + cap gains, and my spending is currently much greater than income, which is why I calculated it on spending, and that spending does not include ROTH conversions.

Comparing Apples to Pomegranates I guess.

 

[scrabbler1]

Ouch, I misread the OP's question about the denominator. I used % of expenses (i.e. budget), not % of gross income. Because my investment income is about twice my expenses, I would have to halve my original figure of 30% (to 15%) if using % of gross income instead of % of expenses.

 

[FIREd]

Currently housing is less than 10 of our gross income. We don't quite know what we will do after DW retires. It could jump to nearly 30% if we decided to keep renting in the San Francisco area. Or it could stay below 10% if we moved back to the southeast US or Europe.

 

[Senator]

Mortgage $0. Property taxes are ~$2402. Insurance ~$1,433. Maintenance, $3,000 likely much less.

So, less than 10% as I am planning on over $100K income.

 

[prototype]

My annual expenses (I had no mortgage) on my very modest 30 yo Northern Virginia TH (sold this summer for $400K) were as follows:

4K Prop Tax (2014 rate)
1K HOA
0.6K Ins
3.5K Utilities (including FIOS bundle)
4k Maintenance/&Upgrades (average over 13 years of ownership)

So about 15K/yr , which is/was 23% of my 65K after Fed/State tax budget.

I am looking at newer homes in areas where the property tax will be half of what I'm paying now and with little or no HOA fees so I'm hoping to drop the 15K/yr down to about 10-12K/yr.