What do folks forget when making a retirement budget?

[MercyMe]

In a continued effort to fine tune our retirement plan, just thought I'd ask...

What do folks sometimes forget when making a retirement budget?

My expense list is based on the last 10 years of expense tracking (including ACA), but may be there is something I'm missing. I did include ghost expenses like car depreciation, home repairs (roof, HVAC, etc), and new furniture.

 

[W2R]

Maybe income tax and health insurance?

 

[npage]

How about the "didn't see that coming" line item I have. How much you put there probably depends on risk tolerance, health and other factors.

 

[aja8888]

I just add a yearly contingency fund of 15% of planned spending. That usually covers most things you couldn't budget for.

 

[karen1972]

1. Items one replaces far less often, like 10+ years, like mattresses are expensive. Gutters/siding/windows..

2. Increase in costs because you are use to getting things free or discounted from work. Lots of people haven't paid full rate for hotels/car rentals/phone service etc in a long time and while discount plans can give you some discount, its not anywhere near what my company rate was. For us Medicare will be a huge windfall but I hear often people being shocked how much Medicare costs and how little it covers compared to their companies platinum health care plans.

3. Taxes, partly because tax law is constantly changing.

 

[swakyaby]

Dental care. Because you often don’t incur too much during your w*rking years, but in your 50’s and beyond the uncovered costs of multiple crowns, crown replacements, and dental implants are often unexpected.

 

[Dash man]

Budget?

 

[savory]

IRMMA got me. Did not do my homework.

 

[daylatedollarshort]

Some expenses that have been more than my initial plan -

We have a wooded lot as and the trees have gotten bigger so have the arborist bills. The bids usually come in at $5K to $10K every couple of years or so. The biggest expenses have been having big trees removed due to disease, damage or for safety reasons.

Before the ACA we had our health insurance increase by over $1K a month one year. But that hasn't happened post ACA.

We've had a big jump in home owner's and earthquake insurance, due to inflation and increased rebuilding costs from the wildfires.

Our vet costs really increased as our dog got older.

We're spending money on nutrition and microbiome testing these days, something we're interested more in now than when we retired.

We've optimized a lot of other expenses with being retired and having more time to review the budget, so overall expenses have been much lower than planned.

 

[Sunset]

Divorce.

 

[whatnot]

This is a controllable expense, but Helping a family member is something that can pop up.
If you have children, are there any weddings to plan and fund.

 

[Scusan]

Fun. Obviously, it's a pretty controllable expense...but if you suddenly find yourself with an extra 40+ hours a week where you have a decent amount of energy you can easily wind up spending more ( or a lot more!) on travel, activities, and hobbies. Ditto for all the projects you may have been putting off " until you have more time".

 

[jebmke]

Income taxes and uninsured health care items (dental and vision, mainly).

 

[brett]

I believe that people forget the unexpected or simply fool themselves.

Everyone's life and financial situation is different. We built in inflation to our number, a conservative ROR for investments, a spend plan for travel, a fudge factor, and then another 15 percent for just in case. We based day to day year one on our after tax spend over the four years prior to retirement.

After ten years the numbers have changed. Some were under, others over.

But the bottom line after tax was just about right on for each of the past 10 years of retirement. With the exception of the past two covid years where we have been under by large amount.

It is one reason why we do not track expenses at the micro level. Don't care how much we spend on cans of peas throughout the year. The only number we really care about tracking is our total annual after tax spend.

 

[jebmke]

I believe that people forget the unexpected.

My planning budget included a 10% contingency for things I didn't anticipate.

I created the budget once (2005) and it has been quite accurate in total. Average spend (ex income taxes) is within .6% of the number. The individual categories are wildly different and the variation year to year is substantial.

 

[Midpack]

Like others have said, the big ticket infrequent (not annual, 5-20 years) items are the most overlooked in retirement budgets. Replacing the roof, repainting the house, replacing the furnace and/or AC, replacing cars, replacing appliances (washer, dryer, oven/cooktop or range, refrigerator, microwave, disposal, dishwasher, sump pump, de/humidifier), replacing furniture (definitely mattresses if nothing else), remodeling, landscaping, deck maintenance, desktop/laptop/tablet/smartphone. I’ve been retired for 11 years and I planned for 20% for infrequent big ticket items - and that’s been about right. It will fluctuate quite a bit, $5K one year and $30K another. Of course you can delay some expenses, but you can’t avoid most of them for 20-30 years, so it’s important to budget something IME.

Long term care is another for some. Relocation/moving expenses is another biggie in the cards for some, sometimes the forever house doesn’t work out.

And if you add boats, planes or second homes.

 

[COcheesehead]

Fidelity’s retirement planner which you can access with or without an account, has an excellent budget tool. It includes things like medigap insurance, deductibles…little things you might overlook.
For us the biggest thing is to budget for lumpy expenses like cars.

 

[skipro33]

Medical expenses. Especially medicare and co-pay increases. Along with medical are health maintenance supplements. As you age, you start to feel the effects and will try all sorts of supplements to offset the aches and pains as well as trying to stay as healthy, including your immune system, as possible. Eating healthier is also more expensive.
However, other expenses drop while trying to ward off getting COVID. Dining out, movies, travel for example. Isolating activities such as bike riding, hiking, fishing, camping, RV travel can make up some of the reduced spending, but not all. We are ending up with more cash in our checking that stacks up each month so now we are starting to gift it to our family, our children who don't have the same concern with getting COVID as an elderly person and can travel with their kids in relative safety.
Cheers!

 

[Car-Guy]

I'm now ten+ years into retirement and I really haven't had any unexpected expenses except for this CRAZY inflation. I really need to spend more before it's too late. The problem is now that I'm getting older I can't do/enjoy some of the things "as much" as I would have ten years ago.

 

[jebmke]

Like others have said, the big ticket infrequent (not annual, 5-20 years) items are the most overlooked in retirement budgets. Replacing the roof, repainting the house, replacing the furnace and/or AC, replacing cars, replacing appliances (washer, dryer, oven/cooktop or range, refrigerator, microwave, disposal, dishwasher, sump pump, de/humidifier), replacing furniture (definitely mattresses if nothing else), remodeling, landscaping, deck maintenance, desktop/laptop/tablet/smartphone. I’ve been retired for 11 years and I planned for 20% for infrequent big ticket items - and that’s been about right. It will fluctuate quite a bit, $5K one year and $30K another. Of course you can delay some expenses, but you can’t avoid most of them for 20-30 years, so it’s important to budget something IME.

Long term care is another for some. Relocation/moving expenses is another biggie in the cards for some, sometimes the forever house doesn’t work out.

And if you add boats, planes or second homes.

ODTAA - One damn thing after another.

HVAC replacement
Dental implant
Cataract surgery
Replace driveway
New dryer arrives next week
Dead tree removal (~ 50 mature dead or dying trees)

 

[brett]

Our retirement lives changed completely post retirement.

We sold our home and downsized. Traveled internationally for seven months. Rented a furnished condo for three months. Then rented a condo, got our possessions out of storage and stayed for four years. Got rid of one car.

Then we bought a lock and leave duplex. Spent four-five months each year traveling. Replaced our roof, fridge, garage door, and major dental work including implants plants,crowns,etc. DW had 15K of other medical expenses that were not covered.

After 10 years we are on our projected after tax spend. Our financial situation is such that it would not matter.

As others have mentions...the distribution of our spend was different than anticipated. Yes, we had unexpected issues crop up.

This is why we believe that one has be very realistic, expect unexpected expenses and budget accordingly for them.

 

[USGrant1962]

Maybe income tax and health insurance?

Income taxes and uninsured health care items (dental and vision, mainly).

People frequently suggest that folks forget about income taxes. But is that really true? I've never seen a posting suggesting it is actually so, and seen many posts suggesting the retirement tax burden is less than they planned/expected due to favorable CGs/qualified divs, untaxed portion of SS, Roth withdrawals, principal withdrawals, etc.

 

[aja8888]

Our biggest unavoidable, but shocking, cost wise, after retirement spend was for dental expenses. I ended up having a bunch of fillings that went south after 40 years, needed three implants, a few crowns, and had a surprise upper gum infection that required surgery, tooth extraction, and another implant.

DW had an old bridge failure and some reconstruction that was needed to get things back to normal.

I'd guess we spent $60 K on this stuff over a two plus year period. No help from Medicare and dental insurance would have covered a minuscule amount.

 

[skyking1]

I have the taxes coming right out of the pension when I start drawing it. It'll be enough taxes to cover Roth conversion too.
For the rest of it, we are lean fire and no budget no guardrails, hanging out on the longboard of life with five toes on the edge of the board and the other foot in the air. YOLO!!

 

[Souschef]

. Relocation/moving expenses is another biggie in the cards for some, sometimes the forever house doesn’t work out.

That is exactly what happened to us. We moved to a +55 MHP about 13 years ago. We recently decided it was no longer for us. We moved to a beautiful beach side apartment. Furnishing and decorating it was about $ 20K