Poll:Big Ticket spending

[scrabbler1]

I live in an apartment which is part of a large co-op complex, so my share of any large home improvement project (and we have had some over the years) is little or nothing (if they use their reserve fund).


The only big personal expense I have had over the years has been the new car I bought 12 years ago. I do expect my aging car, which has been running fine, to last me several more years. If I do need to replace it, I have a slush fund I would tap into to pay for it, more like a third-tier emergency fund which has been around since before I ERed 11 years ago. Therefore, I couldn't answer the poll with any of is choices. "I just buy the stuff as needed" would be the best option, as others have agreed with.

 

[mrfeh]

Need another option: buy them when necessary (regardless of what the market is doing).

 

[euro]

I just buy the stuff as needed

This! Need other options on poll

 

[NW-Bound]

I have not had any big expenses in the last 2 years. That's a factor for my WR to become so low at 2.7% for the last 12 months. And I still had some expenses that would not recur next year, bringing the WR down to 2% potentially, unless something comes up unexpectedly.

With a WR that low, and with no SS yet, I don't think I need to worry too much when wanting to splurge on something. Just have not had any desire yet.

 

[Clone]

We have one lumpy 'big' payment (income) each year. I have a big capital purchase that I will time with the arrival of that payment. Other things we will just buy out of the checkbook, and if the funds are short, we will replenish by taking some RMD payment or HSA money out. Eventually, we will tap tax deferred funds if we need more. Otherwise the tax deferred will get ROTH converted over time.

 

[kcowan]

How about an option E:
I update my financial forecast to include the major expense and see if I can still live to 100!

That is what we did when we decided to increase our lifestyle expense by the $350k purchase of a new snowbird condo last year.

Partly this is made possible by the above forecast returns since 2009. But the future forecast does not count on it continuing.

 

[NW-Bound]

I think it is all about whether a person thinks he can afford something or not, and there are many different ways he can use to be sure he can.

People who manage to retire early are usually knowledgeable enough about finance and their own situation. There is more than one way to skin the proverbial cat.

 

[ExFlyBoy5]

We don't necessarily "plan" for large expenses but are in position that unless I needed a very, VERY high powered lawyer for something, then there are no worries. I don't keep a lot of liquid available but enough for larger expenses that might pop up (like a total HVAC replacement). We have recently purchased a vacant lot behind us and that did require selling off some of my VTI, but it isn't a big hit to my portfolio and the tax implication will be slight.

I have debated doing a HELOC as senator has mentioned if the rates are decent. That would keep me from selling off any equities that I may not want to sell. We had a HELOC on our last house, but never tapped into it. I *might* get around to doing that eventually. Or not.

 

[GravitySucks]

Buy what I need when I need it.
Not listed was waiting for a major market down turn to buy toys.
Vacation condos, RVs and Classic Cars have a beta greater than 1. 1959 DeSotos and Packard Caribbeans have sky rocketed during this bull but fell fast back in the great recession. Ditto with ocean front condos.
Putting a little extra into treasuries so when the inevitable happens I might be able to pick up a toy or two.

 

[Teacher Terry]

We have a fund for those type of things.

 

[daylatedollarshort]

I sure hope we don't have too many other 50k expenses.

That has been how our retirement has been working out. We had one big medical expense year before the ACA, but I don't see that happening often again now between being on an ACA plan and Medicare on the horizon. We usually do one big home improvement project each year like new counter tops or replace the roof, which is in the annual budget. For cars, at our ages, living near a commuter train station and with stores and restaurants close by, I don't think we will need too many more cars so that expenses when it occurs will just come out of savings. When we do buy cars it is usually along the lines of buy a 2 year old Camry and trade in or sell a 10 year old Camry, so the difference will be more like $20K or less.

 

[Cobra9777]

First, we typically only spend 80-90% of what FIRECalc says we can at 95%, which provides a lot of flexibility when big-ticket items pop up.

Second, our spending plan includes a budget category for large non-recurring expenses. It's based on a 10-year rolling average of actual spending on such items. We know that some years will be much higher than that and others much lower. But the long-term average should fall in line with that figure. Plus, the 10-year average has been trending down, as some of that spending included cars for the kids when they were in high school and college.

So for us, we don't really "set aside" any funds for these infrequent big-ticket items. Nor do we wait for a booming market. When the time comes we just do it. It's all part of the plan.

If something really big pops up, we could also trade-off with the travel budget, which is also pretty large. We more-or-less did that this year. We bought our first new car since 2001 plus had some long overdue plumbing repairs (replaced 50 year-old cast iron drain pipes throughout the house with PVC). We're also doing some fairly major home improvements but we decided not to plan any big travel this year to keep our total spend on track. Instead, we're doing a lot more camping with the bikes and the new SUV. Life is good.

 

[jebmke]

None of the above. When the time comes to make the spend, I sell something and spend it. I don't withdraw until it is time to spend.

 

[bingybear]

just follow the budget? If you don't have a budget, just buy it anyway.

 

[Aerides]

D. Include this extra spending in the pre-retirement finances calculation.

Exactly. You put a swag into your budget of average annual expenses to include stuff like this, including things like a new roof, or large medical bill - things that also come up as Big Tickets but you can't plan always plan for.

That way, you get what you need/want, when you need/want, without depriving yourself or delaying a need. You also then get to enjoy the want earlier and possibly for longer.

 

[mystang52]

Big ticket items are often - maybe usually - a normal part of life. Be it house repair, need for a car, etc. one needs to plan for them, or simply pay for it as needed. As at least one other responder noted, if I got whammied with multiple big ticket items over a short time frame, maybe I'd just take a more modest vacation that year.

 

[athena53]

My tactics don't fit into the listed choices.

My W/D rate has been averaging just under 3.5%. There's some "fat" in that withdrawal and that allows for minor catastrophes such as a dental implant. Anything I don't spend from the withdrawals goes into the grandkids' 529s.

My car is a 2012 so I know it won't last forever but then I don't have luxurious tastes. The replacement will likely be another boring 2-year old sedan bought off-rental. Whatever I'm likely to spend would not raise the average W/D rate to 4% (have been retired for 5 years now). Roof has 44 years left on the warranty. I'm 66. HVAC was all replaced 4 years ago.

In a really crappy market I could stop the 529 contributions or cut back on travel or charity, which together make up 40% of my expenses. I hope I don't have to.

 

[aja8888]

IJBSWINI

 

[Marc]

I have a rough annual budget of $60K for everyday expenses and $110K for "big ticket items." I sort of allocate and preplan the big ticket items. 2018 was over $100K for travel, 2019 was $75K for home improvements and $20K for travel, 2020 will be $80K for travel (most of it to prepay a large portion of 2021 travel), and 2021 will be $60K for travel and $45K for a new car. Beyond that I haven't done any planning although I know I will need expensive dental work at some point. I feel this works for me as I can look at cutting back, if need be, but also not to be worried when my planned $50K backyard project stretched to $75K.

Marc

 

[audreyh1]

IJBSWINI

I just buy something when I need it?

 

[Jerry1]

D. Planned for big ticket items as part of my retirement budget. For example, if I want a $50K car every 10 years, I have $5K in my annual budget. Therefore, most years I should be under budget.

 

[jebmke]

In a really crappy market I could stop the 529 contributions or cut back on travel or charity, which together make up 40% of my expenses.

A bit unconventional but we did the opposite. We traveled and spent more on some one time things in 2009-10 because prices were great and, in the case of travel, there were no crowds.

 

[ncbill]

Examples in the OP were >$50K expenses like a new car, home improvement or RV. Many choose or are forced to retire on a budget that can't afford things like that. If you were forced out due to health reasons and unable to find other work, you may have to accept that. Hopefully they can afford to make necessary home repairs and replace an old car with a reliable newer pre-owned one, but that wasn't in the OP, nor are those >$50K.

I've structured my life to avoid as many lumpy expenses as possible.

I own a townhouse...all outside maintenance (including roof repairs) is covered by the monthly fee...so no surprise lump-sum cost like a new roof.

New car? RV? Those can be rented instead of bought.

Many households choose to lease in retirement, so transportation becomes just another recurring monthly expense.

Especially if they've downsized to one vehicle...normally a leased vehicle will always be in warranty, so no surprise repair bills.

 

[audreyh1]

A bit unconventional but we did the opposite. We traveled and spent more on some one time things in 2009-10 because prices were great and, in the case of travel, there were no crowds.

Yes, I remember great deals being available then.

 

[NW-Bound]

I've structured my life to avoid as many lumpy expenses as possible.

I own a townhouse...all outside maintenance (including roof repairs) is covered by the monthly fee...so no surprise lump-sum cost like a new roof.

New car? RV? Those can be rented instead of bought.

Many households choose to lease in retirement, so transportation becomes just another recurring monthly expense.

Especially if they've downsized to one vehicle...normally a leased vehicle will always be in warranty, so no surprise repair bills.

People who are counting on steady income such as SS and pension will feel more comfortable with the above method.

Retirees like myself who have no pension and rely on withdrawal from an investment account to supplement SS will look at expenses over several years to be sure that the big expenses will average out and do not send us on a ruinous path.