Have your expenses declined as you’ve aged?

[luckydude]

As the OP - I appreciate all the feedback on this thread. Overall it seems that the majority of people spend more (sometimes a lot more) during their earlier retirement years and much less in their later years (excluding those who have health or LTC expenses) so I feel that many of the retirement models (e.g. 4% “rule”) and the various tools out there do not model the “real world” - at least not by default as I know some tools allow you to adjust expenses each year but it’s a PITA.

We know that we don’t want to leave a significant nest egg to our mostly ungrateful kids but we also don’t want to live only on SS late in life. The curse is that I’m only 51 and DW is 53 so we have a long time left on this earth (at least we hope/think). Does anyone know of a tool that more accurately reflects the real world (where withdrawals decrease with age - especially after say 80 years old - and then perhaps jump a little more the last few years)?

Years ago, when I first started planning for FIRE, I built an Excel spreadsheet with projected year-by-year expenditure, investment returns and liquid assets on hand that reflect higher spending in my 50s and 60s for things like traveling and sports, and lower spending once I hit my 70s and 80s.

Over the years I've refined the spreadsheet to a fairly elaborate degree and use it to track my cash flow (including monthly income from various source and outlays) and tie it back to my overall NW spreadsheet to project out my overall NW and cash flow needs up to age 100. It did take a bit of trial and error and tweaking to reflect my individual situation but it's pretty easy to do and it has now become an indispensable tool for me to track my cash flow and NW on a monthly basis.

I suggest that you can easily do the same. Whatever you set up is going to be way better than a generic tool you find on the internet, because you can set up yours to reflect your own personal situation, and you can tweak it to a level of detail that a generic tool just won't provide.

In my case, I have a lot of RE with dividend/rental income and I am frequently buying and selling properties. So my monthly income and cash bucket can fluctuate wildly depending on my investment decisions. I set up my spreadsheet to be able to easily account for these transactions and that's a much more accurate and detailed picture of my finance than what a generic tool could ever provide.

I am around your age and I agree that it's more realistic to model higher spending in the next couple of decades while we're still physically capable of a more active lifestyle.

 

[DrRoy]

We BTD on travel. Even in a year that we are done with the home remodeling projects or replacing the car, we will spend 1.5X our last year before RE.

 

[levindb]

I also created the spreadsheet from hell to help make decisions on when to retire, when to take SSA, and how much we would have to spend each year for the rest of our lives.

With all of the iterations, I realized that there were a lot of assumptions: ROI, Inflation, SSA COLA, taxes, when we are going to die...and on and on. While I was being very accurate in applying these assumptions, the choices I made for some of these numbers had a big impact on the decisions that we were going to make over the next 30-40 years.

That was the big aha moment. I needed to reduce the number of assumptions or insulate our lives from the impact of those assumptions:

First, I eliminated Inflation and did everything in today's dollars. When we purchased our FOREVER home at age 70, we took out a 30 year mortgage at 2.85%. That expense was now fixed. We update the spreadsheet annually with current SSA benefit numbers and assume no COLA, since that will be very close to Inflation anyway. We also have done and are doing some Roth conversions within our current tax bracket so that future RMDs will not have a significant impact on taxes/IRMAA.

Second, we do not know when we are going to die. We could spend more each year if we knew we were going to die early, but what if we lived longer than expected? So, I chose age 105 as a good age to live to. If we are gone earlier, the spreadsheet really did not matter.

Third, we assumed our investments would be 3% larger than inflation. We know things can go cattywampus along the way, but we cannot pin down which years will be better than others.

Fourth, we assumed our last check would bounce, or we would Die With Zero. This is not a popular choice, but it made calculations easier in the spreadsheet. If we do not live that long, then there will be funds for heirs and charities. We also delayed SSA so we have most of our essential expenses covered by an inflation protected income.

That's it!! We know we are going to have chunky expenses the rest of our lives with travel, medical, vehicle and home repairs, but we do not know when or how much these will be. I calculate how much (maximum) we could spend each year on average. We also look at how much we have spent in the past year as we do our tax planning in Nov/Dec. We budget for 60-70% of our maximum spend for the coming year, and we then throw in a few BTD experiences when the markets have been good to us.

If you try to be real precise when looking at 30 years into the future, with all of the assumptions that must be made...well, I would rather be out in nature, or on a multi-month cruise away from the computer. We do not want to sit in the house watching TV in our later years...maybe checking to see if the doors are locked or the coffee pot is still on. We want to LIVE.

 

[SecondCor521]

Does anyone know of a tool that more accurately reflects the real world (where withdrawals decrease with age - especially after say 80 years old - and then perhaps jump a little more the last few years)?

You might take a look at http://www.firecalc.com -> Spending Models -> "Bernicke's Reality Retirement Plan" to see if it works for you. For a jump in the last few years, you could use the Investigate -> "Leave some money in the portfolio for my estate" option.

...

I'm 54 and am at the stage where my kids are finishing college and/or leaving the nest, so my expenses are dropping due to those two factors. I'm watching many of my FB friends starting to post their travels, which I could do but don't really feel the need to. Partly I've already been fortunate enough to travel quite a bit already (38 states, 28 foreign countries). Partly I don't personally see much difference between a beautiful cathedral in Spain and a beautiful cathedral in France or Germany or England. Partly the jet lag, cost, and other hassle factors deter me.

I will have a new roof and a new car in the next few years, but those are relatively minor blips in the big scheme of things.

...

My Dad is 87 and his big expenses for a while were his independent living rent, travels with his girlfriend, and taxes. COVID shut down the travel expenses for a few years, and now he and his girlfriend have health issues which prevent travel. Now that my Dad has moved into assisted living, his rent has gone up but his taxes will drop by about 2/3 due to itemized medical deductions, which is surprisingly an overall reduction in expenses. He also used to buy various baubles for his girlfriend, but lately that seems to have slowed down as well. His medical bills have increased in number, but he somehow has really good insurance that has covered the vast majority of it so far.

If he has to go into memory care, that will probably be a 25% jump in his CCRC rent and another slight drop in income taxes.

 

[Andre1969]

DW and I (mid-70's) have definitely seen a loss of interest in travel in the last few years, even sold our RV. I've also developed an aversion to traffic and crowds, resulting in an enhanced stay-at-home mentality, especially during weekday rush hours and on weekends.

Yep, same here. I've gotten to the point where I usually only go out twice per week. On Tuesdays, I make a run to the local Aldi, which is about 6-7 miles away. If the car needs gas, I'll fill up on that trip, as well. I'll usually go out either in the late morning or early afternoon, when there's not much traffic.

My housemate does most of the bulk grocery shopping. He has occasional back/neck issues, so I'll usually go with him, to help out with the heavy lifting. But there, we'll usually go to BJ's either Sunday morning, or some weekday evening, after most of the crowds/traffic have died down.

With my work schedule, I'm usually off by noon on Thursdays, and on Friday I'll either leave at noon, or take the whole day off depending on what the workload is like. If I feel like exercise, well with 6 1/2 acres and a pool, there's always some kind of work to do around the house/yard. I've also cut some trails through the woods on the hill behind my house (still on my property), and they're actually enough to keep me entertained for a bit. Also, with the pool, and the surrounding woods/forest that hide most of the neighbors and a good deal of the road out front, it almost feels like being on vacation, even at home.

There's a few local trails, that get a bit crowded on the weekends, but sometimes I'll hit them during the day during the week, and they'll be almost empty. As in to the point I could walk maybe 5-6 miles, and only run across 5-6 people.

 

[ShokWaveRider]

Yes certainly, in the following areas.

Clothing
Auto Fuel
Auto Maintenance
Eating Out

These have increased:

Travel
Hobbies
General Home Expenses - Home improvement, Appliance replacement etc.
Food
Wine

 

[Markola]

…Also in April during my 6th trip to Europe I found myself thinking that I have seen enough beautiful ornate castles, palaces and churches.

Same. I’m 57 and have reached the point that I avoid cathedrals. I’m fortunate to have seen several of the great ones and, since I’m not an illiterate peasant or need to impress and oppress same to maintain medieval social order, I like seeing cathedrals from the outside better. I’ll still tour an interesting castle, though after an hour I start thinking about what local wine we’ll taste with lunch.

 

[athena53]

There’s a lot written confirming spending decreases with age for most people, although a big uptick in health care expenses near end of life isn’t unusual. Some describe spending by age as a U or a “smile.” Just do a search, but here’s one discussion https://www.kitces.com/blog/estimat...penditures-and-the-retirement-spending-smile/

Yeah, that's what I'm expecting in my case. I'm 70 and still in the "go-go" phase but travel feels more rigorous than it used go be and I know at some point I'll maybe cut back to one major trip per year (from two currently) and then stop entirely. Not looking forward to that. I have no other expensive tastes and Medicare has been very good about covering my expenses so far so expenses will reduce, but I have to allow for possible LTC in very old age. Mom died of a recurrence of breast cancer at 85 but Dad died at 89 after 18 months in LTC.

One thing I did notice while married so my second DH, who was 15 years older, was that extra $$$ can make a big difference in a comfortable old age: major dental work when needed, more expensive travel (private car rather than public transport to and from airports, hotels closer to everything with more room to hang out and rest, etc.), hearing aids, hiring out more work on the house... I could go on. That happens even in the "go-go" years.

 

[USGrant1962]

...

We know that we don’t want to leave a significant nest egg to our mostly ungrateful kids but we also don’t want to live only on SS late in life. The curse is that I’m only 51 and DW is 53 so we have a long time left on this earth (at least we hope/think). Does anyone know of a tool that more accurately reflects the real world (where withdrawals decrease with age - especially after say 80 years old - and then perhaps jump a little more the last few years)?

In my personal FIRECalc model I show step spending reduction of about 20% at 80 years old. You can do smaller steps at different ages if you like. To do this in FIRECalc go to "Other Income/Spending" tab and enter an amount as "Pension Income (or off chart spending reduction)". It is actually the later. So if you are spending $100K, you might enter $10K at age 70 and another $10K at age 80, leaving your old-age spending at $80K.

You might take a look at http://www.firecalc.com -> Spending Models -> "Bernicke's Reality Retirement Plan" to see if it works for you. For a jump in the last few years, you could use the Investigate -> "Leave some money in the portfolio for my estate" option.

...

I find that the Bernicke model in FIRECalc starts the spending ramp-down too soon (age 56). Heck, that is when I had time to ramp up travel and spending! You can adjust by adjusting your current age under that option. Enter that you are 10 or 15 years younger than you are, so the decline runs from ages 61-81 or 66-86.

Interesting thought on the "Leave some money..." option to simulate LTC/end-of-life care costs. I like it.