Good Morning


Dryer sheet wannabe
May 30, 2004
:D I'm an early retirement wannabe and new to this board. A poster by the name of Nords recommended this board as being filled with well adjusted, real, early retiree's. Since I am a mere wannabe retiree,I was hoping I could get some guidance from others on this board about retirement. Info such as how do I get that 30% reduction in my cost of living that the government and some planners talk about? Other than not paying social security and maybe parking, I can't really see where my cost of living will go down after retirement. Also, it looks like health care will be a big budget item after retirement. Do Insurance companies set their rates by region? Are rural regions generally less expensive than metropolitan area's? I suppose these questions have been hashed over before by you regulars, but bear with me, I'll soon catch up and be able to contribute. ::)
First let me say that I love my 3 kids immensely.
Best thing to happen in my life. However,
after I got divorced in 1998 and reentered courtship
mode, I almost acquired a bunch of live-in kids and
even considered having another one of my own
(I was 54). Fortunately, I came to my senses in time.
I have enough problems without more children being
involved. I remember the observation of Ted Turner
"Once they are here you can't shoot 'em". :)

John Galt
Oh boy, did Nords oversell us this time.

Costs may go down, as they did for me. No expensive wardrobe, improving my cooking and eating all my meals at home, no need for expensive depressurizing vacations, no need for the "extra car" in case the first one breaks so I can still get to work on time, and improved health from reduced stress. I think you get the idea. I blew through 100-200k a year in my working years, about 25-30k a year now.

Edit: oh yeah, fired the housekeeper and gardener, and started doing most of my own work on the house and cars also saved a few bucks.

As far as medical costs, they vary by state and within each state in some cases. I was with a full service HMO (Kaiser) that kept raising their rates and when they hit $220 a month I went with a $120 a month BC/BS plan with a $1000 deductible and no pharmaceutical coverage, but later Kaiser offered a $170 a month plan with a $50 deductible instead of $15. I went back to that as it offered full coverage and the deductible isnt a problem as I only go to the doctor about once every year or two.

Curiously, urban coverage in CA through kaiser is cheaper than rural coverage. I havent thought that through but it seems counterintuitive.
My experience is similiar to THs. I had a busy technology job, had a house-cleaner, gardener, and would jump at most opportunities to spend money to save time. I'd frequently work til 7 or 8pm, then go to a restaurant for dinner.

I ERed in 2001 and sold the house ridding myself of the mortage (actually, I paid off the mortage 1 year before I sold the house) and expenses. I rent a house which costs around 70% of what my house cost (after upkeep and utilities.) I moved to a more rural area, and get my enjoyment out of activites that are free as opposed to restaurants, concerts, skiiing, and traveling. I cook myself, instead of eating out. And I fix my car myself.

Everytime I fix own car (or so something that I'd used to hire someone to do), I think about how I would have had to work X hours, pay 35% to tax, then put in the effort to hire someone, pay them, and pay the extra tax on their service.

I was on the work hard, make a lot of money, spend a lot of money treadmill. Now, I'm spending my time doing things that I really enjoy, which don't typically involve significant spending.

My understanding is that health insurance is regulated by the state. I lived in a state which offered a plethora of high-deductible plans. After I ERed I moved. I live in HI now, and there's very little competition, and catastophic plans that don't require a waiting period.
Cost of Living:confused:?

We have been retired 13+ years and our cost of living has changed little from Before and AFTER retiring. And if you look at our web-site, we travel extensively.

One of the benefits of retirement is that you have the time to find bargain airfares, and travel deals. Your not locked into weekend and holiday travel. If there's no deal...sit tight...there will be.

We have been flying to Asia annually for the last four years, at about $850.00 rt. net. Not the cheapest, but it's almost business class service...not coach. Now, if you booked that flight it would be we wait, what's the rush?

I have found that no matter where you are, you spend "X" dollars per the only difference is the cost of travel, and if you stay long enough that expense isn't a problem. Of coarse if you look at it like a vacation, and not a lifestyle then that's another matter.

Hey uncleharley,

Who in the government told you about a 30% reduction in costs? If a planner told you this, give him/her a call and ask for an explanation that suits you.

A lot of folks throw around facts and figures that they are just repeating. They can seldom give you a solid reason for it.

If they are refering to the oft quoted line that you should to spend 70% during retirement compared to what you spend pre-retirement, they are guessing. I have seen surveys/articles saying that you will need 110% plus inflation and have seen others indication only 60% will be needed.

My suggestion? Save until it hurts. Back up. Reduce savings a bit until you feel you are not "burdened by savings" then start to increase your savings until it hurts again. Then continue the cycle.
Once again folks. We are livng comfortably on about
25% of preretirement (family) income. Not only that, but it was relatively easy to achieve.

John Galt
A poster by the name of Nords recommended this board as being filled with well adjusted, real, early retiree's.

Did he or she also try to sell you a bridge?
Yeah I share Dory's skepticism. Real for sure,
and ERed or on the way. But "well adjusted"?? Anyway, it's a fun group :)

John Galt

The only way I am aware of to have a great deal of saving in the outgo dept. regarding working and retirement, is to create a totally different life style.
(Move from a high cost metro area to a rural area, or an overseas location.)
There are trade-offs. We spend a heck of a lot more on recreation, travel, etc. than when I was working. Health care costs are pretty burdomsome for most folks in retirement. The fact that you are no longer saving for retirement, and the kids are raised, I think gives the illusion of being able to live for a lot less than while working, but after 17 years, I have found that we actually spend more than while I was working.
Again, in my opinion, the only way to truly reduce your outlay is by taking advantage of the fact you no longer are required to live in a high cost area, and make a decision to get more bang for your buck.
However, for us it has been well worth it because of the luxury of freedom. (Not available at any cost when you're working.
Good luck, Jarhead
ex-Jarhead is right I think, at least that is what I did
(created a new lifestyle)

His and hers Cadillacs

a 7 year old pick up and a 13 year old Jeep

Big house on the beach, cabin in the woods

1000 sf cottage and 1000 sf condo (rented)

Country club and luxury resort tabs without a twitch

Motel 6 and McDonalds/Slimfast on the road

Expensive "toys", jewelry, guns, artwork

Mostly sold for cash

Designer suits, silk ties, Italian loafers

T shirts, jeans and boots from Farm and Fleet

I could go on but you get the idea.

John Galt
Hi uh,

Discussions about reductions in living expenses after retirement are often confused for a number of reasons.

Some people talk about living on a small percentage of pre-retirement income. While that may be a good thing, it may not be a very relevant way to discuss pre- and post- retirement living expenses. If you are reasonably finacially responsible, your expenses may not be determined by your income, but by your needs. So your expenses pre- and post- retirement may be totally unrelated to your pre-retirement income.

Others talk about expenses but consider your pre-retirement contributions to your savings/investments as a pre-retirement expense. If you were putting 50% of your disposable income into savings prior to retirement, you could double your spending after retirement and still break even using this accounting.

To me, the only thing that makes sense is to keep track of your spending by category pre-retirement and then use that accounting as a starting point to make a post-retirement budget (ie. increase or decrease each category according to your expectations). The resulting budget serves as a starting point to calculate your total investment requirements.

Good luck, and by the way . . . welcome to the board. :)
A while back, I asked posters here what their spending figures were per year, and the average was 24K...that is about the same number I have read in many articles on this topic.

Hope this helps.

Now, this is interesting.

My preretirement spending was not skewed by
inclusion of money saved, as I really did not have
any regular savings plan until AFTER I had semiretired.
Thus, the 25% of preretirement income we live on today
(pretax) is untainted by that factor. In my case,
up until 1992 (year I decided to semiretire), I gave
ER saving little thought. From 1993 until 1998
(when I fully retired), I thought about it a lot but did very little systematic saving and even did some serious
backsliding, spending-wise. After 1998 I got serious
but even today (to use an unclemick metaphor) I
only use a "hand grenade" approach to tracking spending. Lazy. Up until now, since my net worth
has continued to rise in ER, I have not worried too
much. There are still challenges ahead, but I feel like the hard part (of getting to ER) os over.

John Galt
Re:  Is this the source of the 80% "urban legend"?

UH is one of FundAlarm's best posters, and that board has lately been deluged with "Can I retire now? How 'bout now?!" questions. This new surge of business can't be any worse than reading about it in the WSJ or Newsweek... we'll know it's working when the FundAlarm moderator ERs.

If we ERs aren't well-adjusted & real, then who the heck do we have to blame? Quick, take a mental inventory-- if you're not feeling well-adjusted then maybe you need to think about going back to work. Good, I knew that'd make you realize how well-adjusted you are.

As for the 70-80% question, I think I'm getting close to the answer. I've read "somewhere" that the % was based on a 1980s study. The study examined typical expenses like commuting, drycleaning, lunching out, childcare, gardeners & housecleaning, and other "work-related" expenses. Then it assumed that those expenses vaporized in retirement. Of course we all know that the study didn't address all of the issues and that it has been widely misquoted/misapplied.

I've been plowing through the literature (stimulating oeuvres like RAND's "The Retirement-Consumption Puzzle: Anticipated and Actual
Declines in Spending at Retirement" at and I believe that the source was a NBER paper written by U Texas professor Daniel Hamermesh in 1984. It might be either " Life-Cycle Effects on Consumption and Retirement" or "Consumption During Retirement: The Missing Link in the Life Cycle". OTOH the guy has a 25-year history of writing NBER papers and he's pretty prolific as shown at . (Apparently his research hasn't led him to an actual retirement yet.)

But when I try to access the articles, NBER and other journals want money for their archives. I'm not averse to spending the $5-$10 or to haunting the stacks of my local university library, but does anyone else have a better way? Anyone here know Dr. Hamermesh or his research? Anyone know how to obtain a free copy of his paper? Anyone know the source of this urban legend?
Nords -

Welcome to the wonderful, wacky world of what I call "study building". Someone does something for a particular purpose, it gets bundled with several others that collectively are incompatible and have nothing to do with each other, however a consolidated "result" is generated that then becomes a widely accepted standard.

I looked into this. If I read one more thing that says "many experts recommend" or "financial analysts use the well accepted" or "the correct rule of thumb is", I may lose my lunch.

It appears that the bulk of the initial inertia for the 70% number comes from two sources. One source is from the simplistic taking the preretirement budget and removing obvious work related numbers. The primary source though appears to be surveys: a whole bunch of them asked retirees what they thought their post retirement expenses were related to preretirement income and a strong minority (usually about 44-45%) said "70%" or "70-80%".

Lets note that in the same surveys, questions pertaining to pre-retirees were also asked, and while more than half of those surveyed claimed to have "little or no" retirement savings, among those most felt they would be "comfortable in retirement".

So bottom line is that this magic number came from a pedantic formulaic subtraction composited with surveys of people who probably have absofrickinlutely no idea.

I was especially amused at the survey that declared anyone who said "50% or less" to be "wrong", and the retirement calculator that refuses to allow entry of a percentage below 50%.

Some folks did show a brain though, noting that these numbers are probably more appropriate for low to moderate wage earners, that some people are able to live well at a spending level below their means, and substantial differences in expenses depending on where someone lives, cultural differences and country differences. A canadian government site noted, for example, that canadians as a group tend to travel a lot and increase their travel in retirement. Probably because its freakin cold there. One of my ex girlfriends at one point was holding company stock worth about $7M; I asked her why she didnt cash out and retire. Her answer: I want to travel ALL the time when I retire and thats not enough money to do it on.

In short, its a completely hooey number, and everyone has to figure it out for themselves. That having been said, if you want a quick splat calculation its probably going to be reasonably conservative for the majority of people.

It is of interest to note that I'm currently living on approximately 5% of my preretirement annual income, and while my lifestyle is certainly very different, I find it substantially more satisfying.

Hi Billy! His ex. doesn't sound overly bright, or maybe
that's a plus :)

John Galt
Sure, you'd like her a lot. Very attractive, intelligent and well organized. Unfortunately since she caught her ex cheating on her, she'll never trust anyone with anything ever again. And I do mean anything and ever.

Glad to send you her #... :p
Good post Tom! 5%? Great goggly mooglies!

John Galt

Yep. I burned through roughly a mil a year pre-retirement; although uncle sam had a part in taking roughly half of that. Eating out 10-12 meals a week at expensive places, the latest suits every year, three new expensive cars every year or two, decorated mcmansion with all the trimmings, boat, $30-$50 bottles of wine, $20k vacations, skiing every weekend, etc. I was often bemused at how fast money ran through my hands. Unquestionably the poster child for overconsumptive lifestyles.

It was fun.

Staying up as late as I want and sleeping until I dont feel like it anymore is a lot of fun too.
Holy mackeral Tom! .............your history sounds just like mine, except you made more, spent more and
apparently have more left over. Anyway, I agree about
the staying up late and getting up whenever you feel like it.
For example, this morning I went back to bed about 8:30 and jokingly told my wife to wake me for lunch.
Got up at 11:15 and felt like a million bucks. You can't buy freedom like that. In the old days I'd have been
thinking about business, even on a holiday.

John Galt

Going through $l,000,000.00 a year, skiing every week-end, $20,000.00 vacations, $60.00 bottles of wine, new cars, Mcmansion, etc. etc.
Somebody must have really p-----ed you off at work :D
In any case, sounds like you had an interesting life, and kept the money in circulation.
You did what you wanted at the time, and good for you.
If you can go from that to $24,000.00 a year shows me that maybe the money wasn"t that important to you, and that"s good.
But holy mackrel, TH
John and Jarhead:

Nobody really pissed me off...when I took my 7 year sabbatical and had a 3 month separation, it all came clear to me. Before I left I was mortified at the prospect of what I was going to do with my time. I saw them all the time...the sabbaticalites who started responding to emails a week or two after they left. Could I really separate myself from my work and "do nothing" without feeling disconnected?

You bet I could.

I ended up spending most of the 3 months sitting in a cheap chair under a cheap umbrella drinking cheap beer at the edge of a lake, reading, swimming, or paddling a cheap kayak I bought around the rivers.

At the end of 3 months I felt better than I had since I could remember. Relaxed. Comfortable. Sleeping like a baby.

The SNAP was when I went back. It was all so transparent to me now. Unnecessary competition and friction. Politics. Self created stress that accounted for 60-70% of the workload without increasing productivity or quality. Rooms full of overly self important pufferies.

I never could really get back into the groove. I did however get more done in the 9 months or so that I was there before I checked out than I'd been able to do in years.

I wonder what it'd be like to go back to it with that same "who gives a ****, I'm just gonna get something done" mindset. In my dreams its a hoot and all goes well. Then I wake up...

As far as the money, all it ever did was buy me things that I had to maintain and worry about, and take me to places that werent any better than where I'd been in the first place.

I'm reminded of an old story. Theres a town nearby that was affectionately known as "hangtown" in its gold rush days. Theres a local dish known as the "hangtown fry" which is basically an oyster and bacon omelette. Turns out it was (allegedly) originally crafted by a prisoner about to contribute to the towns name; he decided he wanted the most expensive thing he could eat for his last meal, and eggs, bacon and oysters were the most expensive ingredients. Later this caught on with the goldminers who struck it rich as the way to tell everyone else in the saloon that he'd "made it" ordering the hangtown fry.

The hangtown fry tastes like crap.

Clarity is a good thing.
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