Realistic expenses over the long haul rant

[daylatedollarshort]

With a low taxable household income, state and federal income taxes, college costs and health insurance costs under the ACA can possibly be pretty close to zero dollars a year. Actually taxes may even be a revenue source for those with refundable tax credits.

 

[Balance]

Oh now, come on, who does not like a good drive by shooting. However, I will not come spray the place then not stand my ground. My rant was directed at the 30 and early 40 somethings with young kids that are checking out of the rat race and professing to live on +/-40K but their budgets do not include capex. I question whether it is sustainable long term both without capex figured in. Also, what about lifestyle creep from the pressure of consumerism that occurs when kids get into grade school.

It is clear from the comments that many of you who have retired early (50 to 60 age), with kids no longer being factored, have mastered the ability to live comfortably and happily in the 30 to 50K range. It is the efficient living concepts you expound here in this forum that I have come to appreciate and in some cases adopt. For that I thank you.

As to those that feel my budget of 70+K is a little excessive, well, I guess you should know that I do succumb to some of the pressures of consumer world as my kids are provided music lessons, play on club sports teams (travel tournaments are not cheap). Summer international travel and summer education camps in marine biology, engineering and sports (surfing and sailing). I have owned a boat all my life to which my oldest has her captains license at 16 yrs old so she takes it out on her own. Great confidence builder. Where do I live? A little brain teaser for you, I have water front property, but I can also walk to the beach.

Yes, I am not going to win the frugal as sh*t award but I can live with that as long as I can look back at the memories and smile.

 

[daylatedollarshort]

When I was growing up, our softball team "uniforms" used to be different color bandanas. One team would be yellow maybe another blue. We just played other teams in the neighborhood and I rode my bike to the games.

If I had to do life over again I wish we would have raised our kids in an environment more like that, not one where the better part of Saturdays for the whole family could be spent on traveling sports teams sometimes 100 miles apart. I think the teams I was on as a kid were a lot cheaper, simpler, less stress and more fun. I don't even know if any one kept track of win loss records among the teams, other than the score for the game that just finished.

 

[OAG]

One Spouse (50 years), 4 Kids but all on their own with their own, One Car (5 years old), One Condo, Retired Military (now in 36th year of retirement with medical care under Tricare for Life and/or VA). Our Budget is $32,000 per year and in 2003 it was $22,000 per year. Now at ages 73/76 do not see any big expenses (can self-insure up to about 10 years of LTC). We "retired" about 30 years ago and the budget creeps about 2-6% per year depending on a few reasonable variables.

 

[Meadbh]

I have found some older people actually have the money but don't want to put it into their house .... I know an older couple who's house needs shingles, windows, just general fixing .They have plenty of money and built this house new over 40 years ago. They don't see why they need to fix up their "new" house...

This is one reason why I like living in a condo. External maintenance does not depend on one individual and is not going to be neglected as long as we have an effective board and management. Of course, I don't take that for granted, which is why I joined the board!

 

[travelover]

When I was growing up, our softball team "uniforms" used to be different color bandanas. One team would be yellow maybe another blue.......... .

What? You had bandannas? We played shirts and skins and that included the girls.

 

[FUEGO]

When I was growing up, our softball team "uniforms" used to be different color bandanas. One team would be yellow maybe another blue. We just played other teams in the neighborhood and I rode my bike to the games.

If I had to do life over again I wish we would have raised our kids in an environment more like that, not one where the better part of Saturdays for the whole family could be spent on traveling sports teams sometimes 100 miles apart. I think the teams I was on as a kid were a lot cheaper, simpler, less stress and more fun. I don't even know if any one kept track of win loss records among the teams, other than the score for the game that just finished.

We're trying to do exactly this. Not raise kids in an ultra-busy environment. Most weekends are unscheduled by design and lead to lots of serendipitous adventures (that tend to be free or dirt cheap). Museums, hikes, play dates, board games, swimming at the pool or water park or lake, boating (we rent), parks, movies, etc.

Some of our kids' busier friends find our lifestyle amazingly freeing. Last weekend was our 8 year old's birthday party and one mom was exasperated after shuttling one kid to a morning game in one city (and taking her other 2 kids along for the ride) then rushing back to make an afternoon game. She was so excited to let her two daughters stay with us all day for the birthday party.

We're like "hey, we don't have any plans so leave your kids for as long as you want. We'll feed them dinner if necessary and walk them back home at dark if you want." It's like we invented this "lifestyle design" thing.

 

[jjquantz]

Fuego,

We had similar responses from the daughters' friends when they would come over for the afternoon and then stay for dinner. They would say, "Do you mean that you all actually sit down and eat dinner together?" We did, almost every night until the girls were in high school and even then we managed about 4 nights per week. The girls also went to bed by about 10:30 on weeknights through their high school years. This was viewed by other students as unbelievable since many of them would be up until 1:00 AM or so most nights.

It is possible to live a life that cuts against the grain of society, it just takes some backbone.

 

[Katsmeow]

Why do you need two cars when you are retired? Some get by with zero cars but one car should be enough if nobody has to commute.

I question if that would really be considered frugal middle class. Maybe frugal upper middle class...

I could go for the idea of having one "nice" car and the other just for occasional use which could be an older, not so nice car.

Where I live we have a walk score of 0. We are 15 minutes away from the closest gas station/convenience store (soon to be closer to 10 minutes which is really exciting for me). There is no real public transportation that is practical and reasonable in cost.

While DH and I like to be together we are not always together. I never want to be in a situation where he has taken a car somewhere and I need to go somewhere and can't. I don't want to be at home and have a dog need to go to the vet for an emergency and not be able to do it. I don't want to be at home and need to pick something up at the grocery store and not be able to do it.

And, there are times when DH and I have schedule conflicts where we both need to be at different places at the same time.

I could see feeling differently if I lived in area where there was good public transportation or where I could walk most places. But basically I don't want to feel that I am housebound every time DH goes somewhere without me.

 

[ExFlyBoy5]

I truly don't understand the infatuation with extra-curricular activities for kids. I have heard parents talk about taking their kids to some sports practices that started around 6:00 AM *BEFORE* school even starts!!! What is this madness all about!? I get that life *can* be a competition, and we must start as early as possible (slight sarcasm intended). When I was a kid, I did my homework after school over a plate of cookies (not some fruit or other *healthy* treat) and went out to play until about 7:15 when I had a home cooked meal (with vegetables that we seasoned w/ bacon fat!) and went to bed around 10. When I went to the bus stop (in the dark..OH MY!), there wasn't an adult to be seen for MILES! And, the crazy thing? I'm only 40 years old, so it wasn't that long ago.

Sorry about the highjack. My thoughts (and plans) on capital expenses. For our paid-for house that is about 40 years old, I plan about $5K a year. This is something I have built into with dividend income. Using the law of averages, I am looking at *maybe* 4K a year, but to me the extra grand is a worthwhile buffer. And living on 40K a year? Very easy for me to do...but this is with a cola protected pension, and *very cheap* health insurance. Also..no kids in the mix, so makes it quite easy.

I think the likes of MMM and ERE have proven themselves, at least to me.

 

[FUEGO]

Fuego,

We had similar responses from the daughters' friends when they would come over for the afternoon and then stay for dinner. They would say, "Do you mean that you all actually sit down and eat dinner together?" We did, almost every night until the girls were in high school and even then we managed about 4 nights per week. The girls also went to bed by about 10:30 on weeknights through their high school years. This was viewed by other students as unbelievable since many of them would be up until 1:00 AM or so most nights.

It is possible to live a life that cuts against the grain of society, it just takes some backbone.

First day of school here, and we bumped into friends on the walk home so invited them over for an hour or so to play (while the adults chatted). I started making the chicken marinade and I guess the friend got the clue so started packing up to go. Simple times. This never would have happened if we were busy with a packed schedule of extracurriculars.

My kids will never play in the (W)NBA or be concert level performers, but I bet they will end up doing something profitable and hopefully enjoyable later in life. In the meantime, they have fun and learn on their own.

 

[Walt34]

Where I live we have a walk score of 0. We are 15 minutes away from the closest gas station/convenience store (soon to be closer to 10 minutes which is really exciting for me). There is no real public transportation that is practical and reasonable in cost.

While DH and I like to be together we are not always together. I never want to be in a situation where he has taken a car somewhere and I need to go somewhere and can't.

That is about our situation as well. We have two vehicles (three if you count the motorcycle) and mostly use the Honda car. The GMC pickup, which I used to drive a lot, is used about once a week now but I'm not going to sell anytime soon for the reasons you mention.

And a pickup truck is always nice to have:

 

[haha]

Life around here would be tough if there were not so many hopeless others for us to throw off on. Thanks be to god for all those unenlightened wastrels, they are our salvation.

Ha

 

[youbet]

$80k a year after taxes is likely about $90k a year before taxes.

For an early retiree using a fairly safe 3% SWR that is a $3,000,000 portfolio.

I think a more appropriate rant would be how we expect a large portion of the population to be able to save that amount and retire early.

SS? Pension? 4% WR?

 

[youbet]

I used to peruse many other ER sites, but came to the same conclusion as Balance. Many of them IMHO do promote a kind of extreme early retirement that is probably not realistic for the long term. The bloggers after all are trying to promote their point of view, their site, (or book or whatever) and with that axe to grind will rarely want to point out any potential pitfalls. Often the blogger very young or not retired himself.

Rather than being a rant, I felt he was addressing this forum because the members here are NOT like that, that there is a great deal of wisdom here from people who have been there, done that. It is also why I am a member of only this forum. I want to know about the problems as well as possible remedies. I find that here. I think his post was actually a bit of a complement to this forum.

In addition I do feel that there must be a fundamental difference between retiring with young kids, and retiring after they have left the nest. Certainly for me it has been much easier to estimate expenses post kids.

+1. Nicely said.

 

[Nords]

However, one thing that has me perplexed is reading about what others proclaim are their budgets and expenses, especially the ERE and MMM folks who proclaim to live on less than 40K per year. It is my opinion that a lot of these people do not factor in capital expenditures with their typical annual expenses. Let me give a simple example. A small family (3 kids or less) in America is going to have housing, transportation and maybe college expenses. As such, they need to have reserves for replacement for housing components, cars and some college costs. In my case, I have banked enough in college funds for my kids already, but I put about 5k a year in there for over 15 years. As to housing, I assume around 4K per year as a reserve which covers Roofing, Paint, HVAC, Water heater, Appliances and Maintenance equipment (lawn mower, etc) for a 20 yr cycle. Lastly, I buy a new car to me every 4 to 5 years (We drive our cars for 8 to 10 years). This means I need around 25K (today's dollars) each 5 years, so 5k per year.

Thus, if one is being realistic, this small family needs around 14k for cap ex or in my case at least 10K. My insurance costs are running around 24K and my housing costs (taxes, utilities, etc) less insurance and cap ex is running around 6K.

So, what I am saying is I find it hard to believe people are being realistic when they say they can live on less than 40k per year "all in" when I need at least 40K to cover insurance, housing and cap expenditures for large ticket items. My current budget is 70k net and it's tight. Remember, I have no mortgage, college funds banked and no other debt.

I feel compelled to drop in on the MMM and ERE crowd and point out that they may not be realistically factoring in all of life's costs. However, I brought this up here because most of you in the Early Retirement forum are the more experienced group and would like your thoughts and comments.

You're presuming that people have kids, own homes, and buy new cars.

I'm a little confused at the characterization of three kids as a "small" family.

Jacob Lund Fisker (the guy who started ERE) has none of the above (although he parked his RV on a rental lot). He lived a lifestyle austerity that many would find unacceptable, but he lived it for a number of years and faithfully documented the costs. I think they were accurate and sustainable.

Pete (MMM) has one kid, fearsome DIY skills, and beater vehicles. He learned how to replace a wheel bearing from YouTube. I suspect that it's going to cost next to nothing to put his kid through college, and his budget for home & vehicle maintenance is probably limited to raw materials.

I think you're unreasonably skeptical of the expenses paid by the people who started those websites, as well as many of their posters. While many ERs have expenses of around $4K/month, a significant minority are down around $2000-$2500/month. Probably without owning homes, kids, or frequent car replacements. You call $70K "tight", but my spouse and I have been retired for the last 12 years on about that level with two mortgages, a child (since graduated from college) and money left over nearly every year.

I'm personally offended by your phrase "most of you in the Early Retirement forum". I'm a poster here, I've posted on ERE, I post extensively on MMM, and I also contribute to Bogleheads. So perhaps we all have different levels of experience on all of those forums, and they're not mutually exclusive.

 

[GTFan]

That's a great point about MMM (and the folks willing to do DIY in general) - the internet and especially YouTube has made it so much easier to fix most anything, to the point where your maintenance costs for common household stuff can be much lower.

Cars and trucks are a different story because of all the tech and the limited access that makes it harder to do work on them, but they are much more reliable in general nowadays. And with the limited miles most retirees put on them, they can last 20 years easy.

 

[JoeWras]

The diversity of the different forums is great, and I'm glad they are all here.

One thing about DIY. I am an ardent DIYer. However, as I age, I cannot do everything I used to do. No more 3 story ladders. I'm down to only 2 stories. So, that means hiring a professional painter for my house.

I'm sure as time goes on, I will not be able to do other things too. This is the kind of thing that I think we need to keep in mind.

Now, for the ERE crowd, they should be young today and very capable of much DIY. Just keep in mind that 30 or 40 years hence, it will be different.

 

[Kabekew]

A grand total of $61,700
New energy efficient water heater $1200
Electrical system upgrade $3,000
New metal roof $21,000
PV System $12,000 (20 year pre paid lease)
Kitchen Remodel 58K -50K budgeted $8,000
Replacing plumbing with copper lines $7,000
New Fence $2,500
Flooring and cabinets for downstairs $3,000 so far probably $7,000 total0 even after subtracting the $20k that should have spent it is still an extra $4200/year. I have lots of cushion but for people on tighter retirement budget this could spell trouble.

The worst of it is you spend all that and you're just back to where you were before.

 

[dallas27]

70k a year and it's tight? I have a nice looking porsche and a 4 door jeep in the garage, and live on 45k a year, 16k is the mortgage before insurance and taxes. I have a man cut my grass. I feel like im spending more than i should.




Sent from my iPhone using Early Retirement Forum

 

[FUEGO]

Now, for the ERE crowd, they should be young today and very capable of much DIY. Just keep in mind that 30 or 40 years hence, it will be different.

For our finances, I figure our kid-related expenses will drop to near zero about the same time as my body decides it's had enough DIY for one lifetime. Redirect expense stream from kid costs to hiring it out costs. I figure my $1500/yr amortized capital costs might double to $3,000/yr. I bet I spend more than $1500/yr on kids right now...

Last time I was crawling under my house through muck to replace the failed sump pump (which was 3 feet under water), I was thinking about how I won't be able to do this forever. I'm 34 now, but these pumps fail every 7-10 years. At 44 and hopefully 54 I'll be up for it, but not so sure about at 64 or 74!

I expect our portfolio will significantly increased in real value in the next 30 years (we're spending under 3%) so I bet we can hire out about everything and not break the ER plans.

 

[BellBarbara]

We are at 70K a year: 15K is health care, 15K is travel. Our cars are paid for, have small mortgage 800 per month. (Will downsize in less than 5 years) Although I totally believe people can live on these low amounts, we can't either. We used to spend 85K, but cut a lot of stuff. Would be interesting to compare where the differences are.

 

[daylatedollarshort]

The Consumer Expenditure Survey has average expenses broken down by various categories including age and occupation:

CE Expenditure Tables

I don't have any super amazing low budget like some of the ER forum and blogger have, but comparing these numbers to what we used to spend really helped bring our expenses down.

 

[daylatedollarshort]

We are at 70K a year: 15K is health care, 15K is travel. Our cars are paid for, have small mortgage 800 per month. (Will downsize in less than 5 years) Although I totally believe people can live on these low amounts, we can't either. We used to spend 85K, but cut a lot of stuff. Would be interesting to compare where the differences are.

I think a key part of many of the low expense folks; budgets are low or zero incomes taxes and significant ACA subsidies. With subsidies and a fairly healthy household, medical expenses can be a couple thousand a year or even less.

Pre-ACA many of the ER bloggers did not plan for increased health care costs as they aged, reaching OOP maxes or not being able to price shop insurance every year once any pre-existing conditions occurred, so their plans were not realistic long term.

 

[jim584672]

My realistic budget, and this is in New York, I live alone...

Condo (fully paid for) Maint $316 x 12 = $3792
Taxes $225 x 12 = $2700
Electric (averaged) $53 (-$10 mo low inc break) $43 x 12 = $516
Medical (UnitedHealthcare Medicaid) $0 x 12 = $0 ($300 year max)
Cell phone (low income break) $0 x 12 = $0
Food $300 x 12 = $3600
Gas $60 x 12 = $720
Car Ins. $100 x 12 = $1200
Car Payment (fully paid for) $0 x 12 = $0
Car Maint $40 x 12 = $480
Car Depreciation $100 x 12 = $1200
Clothing $25 x 12 = $300
Internet $65 x 12 = $780
==============================
Total $15,288

Major expenses
Car replacement: Usually keep cars 20 years, should be longer since no need to commute now, cost is part of depreciation above.
Major housing expenses, roof, boiler, lawn care, heat, and water are covered in monthly maintenance. Special assessments are possible, but my association is in good shape right now.

So about $15k are base expenses, way below 40K. The OP assumes that everyone needs a house, which is nonsense, also a new car every 4-5 years, which is also absurd. I could get by without a car if I had to, but it is nice and not that expensive since I already have it.