How much to do need to live off of in RE

[retire@40]

That means you can retire with...$850,000 @4% SWR to just squeak by.  If you think I missed something, here are my 'categories':

Monthly bills:

Home Ins
Home Tax
Baby
Nat Gas
Water
Elec
Trash
CATV/BB
Phone
Car Tax
Car Ins
Gas
Food
Med
Misc
Movie rentals
"my misc crap that I buy"

The "misc" above breaks down to:

Shampoo
Conditioner
Soap
Lotion
Toothpaste
TP
Kleenex
Shaving Cream
Razors
Bandaids
Rubbing alcohol
Hydrogen peroxide
Deodorant
Wash cloths
Towels
Dog and Cat food
Dog biscuits and jerky
Costco/Sams memberships
Wormer/dog/cat meds/vet
Car maintenance
Bug killers
Fertilizer
Mower gas + oil
Drinking water
Books, music
Laundry det
Cleaners
Fireplace Logs
OTC meds
Vitamins etc
Paper towels
Foil
Plastic wrap
Small baggies
Big baggies
Dish soap
Dishwasher detergent
Garbage bags
Stamps
Batteries

I then add a 30% pad to this to cover little things, oversights, or occasional buys, plus 7.5% sales tax.

For capital costs, I include annual 'set-asides' for:

Car replacements
Water heater
Furnace
AC compressor
Housepaint
Refrigerator
Dishwasher
Range
Microwave
Washer and dryer
Car tires
Computers
Printers
Tivos/DVR's
Televisions
Living room set
Bedroom set
Gas grill
Clothes
Exercise equipment
Personal care tools (electric toothbrushes, etc)
Vacuum Cleaner
Steam Cleaner
Tools

How about federal (and possibly state) income tax on the $34,000 you are drawing from your investments?  There may be another few hundred to a few thousand dollars to gross up the total amount needed to NET $34K a year.

 

[ShokWaveRider]

2004 was our first full year of ER. We spent $34,000.

We have catastrophic health insurance ($5,000 deductible) for >$2400 per year for both. We're 44 and 45 and pay outright for high blood pressure and high cholesterol meds. Otherwise we're healthy.

Sparky:

If you do not mind sharing, Who is you health provider? What are your Doctor visit deductables, and what area of the country do you live in?

Thanks

SWR

 

[retire@40]

It does not include medical insurance as thats paid out of my wifes paycheck, so you will need to add that in.

And another thing, I don't think you can avoid including health insurance in your family budget if it is paid out of your working spouse's health insurance.  It has to be part of the retirement budget equation.  It would be like saying you're retired, but you go over your mother's house every night for dinner, so you don't have to include food in your retirement budget.

A pure retirement budget should not be commingled with income or benefits from a working spouse.  I would consider that more of a semi-retirement budget.

 

[Sparky]

Sparky:

If you do not mind sharing, Who is you health provider? What are your Doctor visit deductables, and what area of the country do you live in?

Thanks

SWR

SWR:

Health insurance is through Golden Rule, recently bought up by United Healthcare.  Deductible $5,000, no doctor visit coverage, no prescription coverage.  Premium is $193 per month for both of us.

A doctor friend of ours recommended Golden Rule; he said, "they pay quickly and you'll save a fortune over other types of insurance by going with a high deductible".

We are in CT and pay outright for high blood pressure and high cholesterol meds (we buy from Canada and save about 40% over U.S. prices).

Sparky

 

[unclemick]

If you go to the FireCalc front page and read the blurb on 'Spending in ER' - that line of thinking rang so true for me - I joined this forum in 2003. The thread then was - 33% That's My Story.

Never budgeted 'that close' but concentrated on cranking down on frugal to the point of 'Cheap SOB' - with little 'luxuries' on occasion.

I haven't a clue what our budget is for this year - but I know frugal/not frugal when I see it.

We have a temporary cash flow problem - too much money coming in - so I have to wait till things stablize to - get back to a groove.

 

[cute fuzzy bunny]

Wow Mr "and another thing..."...what a set of demands on my budget!

I did say that another analytic would need to add health care. I think I said it twice. I just said it two more times...

I paid zero federal and state income taxes before I got married last year. We've been putting a huge % of my wifes income into tax deferred instruments. Since we're married filing jointly, I basically dragged her tax load down so far that even a high exemption witholding more than covers it.

So for my purposes, factoring taxes into my budget is unnecessary. If you're smart enough to ER and manage your own finances, you'd probably figure that out from looking at my budget and work that out for yourself.

As far as medical care, we take out a chunk of my wifes income as a health savings account and pay pretty much all of our out-of-pocket costs from that, so I dont need to budget for that either. Everything else is covered by her insurance and as she works in health care. we get discounts and all sorts of nice extras most people wouldnt get. But then I did say you should add in your own health care. Thats if you insist on health care, as some people live in countries that provide it and some people "go bare".

As far as the whole thing being a farce because my wife works...well, I suppose. I did have a viable plan before getting married, and it did work for 4 years through the worst bear market in the last few decades. My financial status meant we could live with no debt, she could cut her working hours in half (and she just wont quit), and she doesnt have to worry about money anymore. As her income covers our monthly bills and pretty much all of our capital spends, I can turn the portfolio to longer term growth from current income.

But then again, I thought the original question involved the actual costs of living in early retirement. I provided those, along with caveats and what you needed to add to make it suit your own particular needs. If that doesnt work for you, I greatly and humbly apologize :

 

[Mr._johngalt]

If you go to the FireCalc front page and read the blurb on 'Spending in ER' - that line of thinking rang so true for me  - I joined this forum in 2003. The thread then was - 33% That's My Story.

Never budgeted 'that close' but concentrated on cranking down on frugal to the point of 'Cheap SOB' - with little 'luxuries' on occasion.

I haven't a clue what our budget is for this year - but I know frugal/not frugal when I see it.

We have a temporary cash flow problem - too much money coming in - so I have to wait till things stablize to - get back to a groove.

Wow unclemick!........we have a "temporary cash flow problem" too,
but in the opposite direction. Lke you, we don't budget either.
I'm still loafin' and DW is still workin'. LIfe is good!

JG

 

[unclemick]

The old take in boarders trick - aka 'step daughter in spare room with income' bounced against the nugget - housing, utilities, and transportation is one jump. SO started taking interest/divs from IRA. I'm starting(mini Roth conversion) and will be 62 this year(SS).

When they threw away my webtv and bought a Thinkpad and later got Direct TV - it's been downhill ever since.

Even at 2% for me and 3% for her - ballpark div/interest from Lifestrategy mod and cons - layed against the prior ten yrs of being frugal - well - adjustments must be made.

 

[Mr._johngalt]

Otherwise, two can play at that game    I have to sit home all day waiting for a refrigerator delivery, so I can probably catch you by late this afternoon...

Besides, I've deleted at least 300-400 of my posts over time.  Can I have those back now? 

I MAY have deleted 2...............all my stuff contains pearls of wisdom
and wonders of insight. It would be akin to heresy if any of this was lost. I sometimes feel like my pearls
are "cast before swine". Never on this board of course

JG

 

[retire@40]

As far as medical care, we take out a chunk of my wifes income as a health savings account and pay pretty much all of our out-of-pocket costs from that, so I dont need to budget for that either.  Everything else is covered by her insurance and as she works in health care. we get discounts and all sorts of nice extras most people wouldnt get.  But then I did say you should add in your own health care.  Thats if you insist on health care, as some people live in countries that provide it and some people "go bare".

This is the point I am trying to make.  If you are using funds from a working spouse's income from her job to pay for out-of-pocket medical, then I don't consider that a pure retirement budget.

In other words, if you AND she were retired, there would be no earned income and you would have to put all out-of-pocket medical expenses in your retirement budget.  There would also be no employee health insurance coverage, so you would also have to put health insurance into the budget.

I don't think most rational couples with a child would want to "retire early" and go without health insurance, so I don't think it's optional.

I know you said this is "your" budget and you need to add in health care cost.  I even wanted to emphasize that so I made it part your quote in my prior post.

My beef isn't against your budget since it clearly works for you.  I just think it could be dangerous to say a family of 3 can retire with a budget of $34K when that budget is dependent on one spouse working providing some benefits that would otherwise be included in that budget.  Health insurance for a family can reasonably be estimated at about $1000 per month, so now that budget becomes $46K.  If you elect to do some traveling maybe you could add another $4K to that, so now you are at $50K.  You may not have any income taxes on your $50K withdrawal, but chances are you will have some, so tack the income taxes on to that and a "pure" retirement budget goes from $34K a year to over $50K a year. And that's a budget that assumes your house and car is paid off and you do a lot of the house and car repair work yourself.

 

[cute fuzzy bunny]

Sorry, but our health care if purchased on the open market would cost ~ 450-500 a month for our family...since health care obviously varies greatly including that in a standard budget is fruitless, just like factoring in taxes. My individual health care when I was single was $180 a month, and my annual budget was around $24k! If I had to pay that healthcare bill, I could easily slim down some other expenses and keep us in the <$40k range. We eat a lot of expensive food, have a very high electric bill, and I buy a fair amount of toys to play with.

There are also a number of 'rational' people here who 'go bare'. Thats a personal choice. Excepting the birth of our child, I could have gone without healthcare my entire life and been just fine. My dads 71 and he's never had a serious medical condition or had to take any expensive drugs. However I wouldnt recommend it to a retiree at all...one major medical problem would wipe you out and at that point, going back to work probably wouldnt be an option.

There are also a surprising number of people here where one spouse made a big bunch of money and quit working and the other keeps going, so seeing how that financial interaction works should be a plus. In our case, a few shifts keeps us in group health care, funds my wifes retirement accounts, and keeps some income flowing into the bank account. In a few years she might finally want to quit, we'll cobra/hippa the health care and start paying that ourselves...I dont expect a huge upswing in our total budget costs.

And yep, my budget did and didnt include a lot of things other people want to figure in, and it was so noted.

I thought there was some value in providing a good detailed set of core costs for people who may not have taken the time to consider the extent of those - in that I thought I was reducing a 'danger'. I pointed out what was and wasnt in there so people could add their own condiments to the mix. I still think if you take my 'miscellaneous' and 'capital' numbers, and add your own monthly fixed and variable costs, you have a pretty good budget.

But I guess if you want to find the negatives in the info I offered, even though I pointed them out myself, thats been done.

A single person can live a good debt free ER life on 24k a year. A couple with a child where one spouse works a few days a week can do it on $35k comfortably. A couple with a child with no job involved can do it under $40k. You might have to move to a new area to keep your cost of living rational, but we're not exactly living in podunk here...

 

[unclemick]

Yep

Not being a budgeteer - but with 11 years under our belt - the ballpark numbers ring true as reasonable - perhaps a tad 'fat' when I was in my super frugal mode. And I liked the budget list.

 

[cute fuzzy bunny]

Glad its interesting Unclemick...the misc is going to be a bit fat because as noted I add a 30% fudge factor and high california taxes. I also figure on the high side on the capital items just to play it safe. When my numbers with these fatter, conservative numbers plugged in still worked, I felt pretty good.

As it turns out, some months we approach the fat numbers when I do something like buy an extra external disk drive, a color laser printer, or an expensive toy for the baby. But so far we're running under over quarterly and yearly periods.

If it helps the peeps still twisting about a working spouse, even though we've been married about a year and living together slightly longer, all my wifes income has still gone into her bank account where I think she's tapped about $35 over the last year. The rest has still been paid from my old dividend cranking portfolio. I'm still pondering how to change that to produce less income and greater intermediate term returns. I still love high dividend paying stocks for the next few years for total return...but I'd like to cut back on the potential taxes.

 

[JohnP]

In honor of receiving my very first SS check today (all $227/mo of it, a victim of the dreaded WEP clause) I thought I'd post my estimate of expenses for a retired couple with a 19 year old living with them. 

To do this estimate, I took our quicken expenses for the past year and deducted house & car payments, investment payments,  etc to get to a basic living expenses spreadsheet.  The bottom line is that we spend about $3,800/month for basic living without factoring in state and federal taxes.  The $3,800/month does not include a factor for replacing appliances, etc but does includes property taxes, family health care, and LTC ins for us.   

I've concluded that we're 'in the pack' , maybe on the slightly high side, in terms of costs for a retired couple LBYMing.

JohnP

 

[yakers]

In honor of receiving my very first SS check today (all $227/mo of it, a victim of the dreaded WEP clause) I thought I'd post my estimate of expenses for a retired couple with a 19 year old living with them. 
JohnP

JohnP,

Any of that money include college costs for the 19 year old? We will have that situation when my soon to be 16 presumably year old goes away to college and we retire.

 

[Mr._johngalt]

In honor of receiving my very first SS check today (all $227/mo of it, a victim of the dreaded WEP clause) I thought I'd post my estimate of expenses for a retired couple with a 19 year old living with them. 

To do this estimate, I took our quicken expenses for the past year and deducted house & car payments, investment payments,  etc to get to a basic living expenses spreadsheet.  The bottom line is that we spend about $3,800/month for basic living without factoring in state and federal taxes.  The $3,800/month does not include a factor for replacing appliances, etc but does includes property taxes, family health care, and LTC ins for us.   

I've concluded that we're 'in the pack' , maybe on the slightly high side, in terms of costs for a retired couple LBYMing.

JohnP

Whoa! $227 a month? My ER would be DOA. PDQ!

JG

 

[Mr._johngalt]

And another thing.................if a motivated single person can't live on 18K a year, out in the country......................................well they can. Any single person in the USA can live on 18K per year (or less) easily. You have to use your brains and pick your spot. A slam dunk!

JG

 

[JohnP]

Yakers

None of my son's college costs are included in our monthly basic living costs - we funded a CollegeAdvantage account that covers the college costs.  

MRGALT2U

I have a fed pension and only 13 years under SS from military time and working during high school, college and while opening the first computer store in town  1976 to 1983.  If one has a non-SS-contributing pension you are subject to the Windfall Elimination Program (WEP) that basically reduces the small SS payment for 13 years by about 60% leaving me with the $227/mo.  It's a small benefit but I did pay into SS for those years.  The WEP reduction ramps from 60% at 20 years service and under to zero if one had 30 or more years SS credit along with a non-SS-contributing pension.  

For me to get a higher SS benefit meant that I needed to work another 7+ years to reduce the WEP hit...  No way.

JohnP

 

[Mr._johngalt]

Yakers

None of my son's college costs are included in our monthly basic living costs - we funded a CollegeAdvantage account that covers the college costs.  

MRGALT2U

I have a fed pension and only 13 years under SS from military time and working during high school, college and while opening the first computer store in town  1976 to 1983.  If one has a non-SS-contributing pension you are subject to the Windfall Elimination Program (WEP) that basically reduces the small SS payment for 13 years by about 60% leaving me with the $227/mo.  It's a small benefit but I did pay into SS for those years.  The WEP reduction ramps from 60% at 20 years service and under to zero if one had 30 or more years SS credit along with a non-SS-contributing pension.  

For me to get a higher SS benefit meant that I needed to work another 7+ years to reduce the WEP hit...  No way.

JohnP

Well, I understood how you could end up with such a small SS check.
It's scary to think that with my almost complete lack of foresight, I might
have been in the same position. As it is, I will draw pretty close to the
Max. (at 62) and will need every penny.

JG

 

[retire@40]

In honor of receiving my very first SS check today (all $227/mo of it, a victim of the dreaded WEP clause) I thought I'd post my estimate of expenses for a retired couple with a 19 year old living with them. 

To do this estimate, I took our quicken expenses for the past year and deducted house & car payments, investment payments,  etc to get to a basic living expenses spreadsheet.  The bottom line is that we spend about $3,800/month for basic living without factoring in state and federal taxes.  The $3,800/month does not include a factor for replacing appliances, etc but does includes property taxes, family health care, and LTC ins for us.

That's more like the budget I was speaking of. About $46K a year without house and car payments but including health care.

 

[Sparky]

That's more like the budget I was speaking of.  About $46K a year without house and car payments but including health care.

Hmmm. I'm in a pretty high cost area (NYC area) and am managing about $34,000 for 2, plus 2 dogs, including health care and taxes, paid off house and cars.

I could use more and I may, but this is the second year of ER. Not scrimpting very much, but at 44 and 45, I want to be cautious; we've got a long way to go.

 

[cute fuzzy bunny]

Pretty dang close to us, subbing the 1200 in expenses for the baby, plus we have one extra dog and three cats.

 

[OldAgePensioner]

Here is my monthly budget and I would appreciate any thoughts on what I missing. My girlfriend pays for her purchases so I did not include them in my budget. I copied Notth's misc list and took out some items.

I believe this accurately shows how much I need per month plus some for taxes year end.

So this is a yearly 59400 + 11,000 taxes(est) + ? gifts = over $70,000


Home
Payment 2750.00
Maintenance 0.00
Repair 0.00
Insurance 0.00
Furnishings 100.00
Cleaning 30.00
Utilities 40.00
Security 0.00
Yard 0.00
Garbage 0.00
Furniture Rental 170.00
Taxes
Federal Income (TBD)
State Income (TBD)
Property 0.00
Sales
Excise
Health
Medical 330.00
Dental (Incl)
Life 0.00
Perscriptions 0.00
Drugstore 10.00
Exercize 0.00
Misc
Entertainment
Cable TV 0.00
Internet 40.00
Phone 50.00
Photos 0.00
Hobbies 15.00
Magazines 10.00
Newspaper 0.00
Travel
Flight Cost 200.00
Rental Car 80.00
Hotels 200.00
Food 60.00
Tips 20.00
Incidentals 15.00
Misc 10.00
Interest
Mortgage 0.00
Credit Card 0.00
Auto Loan 0.00
Other 0.00
Insurance
Homeowner 0.00
Life 0.00
Liability 0.00
Auto 0.00
Medical above
Dental above
Other
Furnishings
Furniture Rental above
Furniture Purchases 50.00
Appliances 0.00
Repair 0.00
Automobiles
Payment 0.00
Fuel 0.00
Repair 0.00
Depreciation 0.00
Food
Groceries 400.00
Dining Out 100.00
Storage Bags 10.00
Misc 10.00
Clothing
Shirts 50.00
Pants 50.00
Coats 0.00
Shoes 25.00
Undies 10.00
Suits 0.00
Personal
Shaving 5.00
Shampoo 5.00
Haircuts 25.00
Toiletries 10.00
Misc 10.00
Gifts
Presents (TBD)
Charity 0.00
Pets
Food 0.00
Veterinary 0.00
Grooming 0.00
Savings
IRA 0.00
Misc 0.00
Other
Banking Fees 0.00
ATM Fees 0.00
Legal 0.00
Tax Prep 50.00
Accounting 0.00
Emergency Fund 0.00

Totals 4950.00

Misc includes

TP
Kleenex
Bandaids
Rubbing alcohol
Hydrogen peroxide
Deodorant
Wash cloths
Towels
Drinking water
Books, music
Laundry det
Cleaners
Paper towels
Foil
Plastic wrap
Small baggies
Big baggies
Dish soap
Dishwasher detergent
Garbage bags
Stamps
Batteries

 

[ShokWaveRider]

We are Er'd as follows, some items are anticipated, as we do not actually have some of the expenses yet. It is not as granular as some but you should get the idea:

Monthly Averages, Ages 51 & 47 resp. (Thinking about NOT buying a home until the bubble bursts)

Rent: $700 North East Florida
Car Running Costs: $200 (License, Insurance etc)
Gasoline: $400 (Touring and looking around)
Food & Drink: $500
Utilities: $150 (Most are included in Rent)
Health: $150 (Supplimental) This will go up.
Misc.: $350 (Guess)
Renter's Insurance: $50

That works out about $3000 We allocate $3500 ($500 for incidentals) so some months we save. Our income from our Nestegg is about $5k monthly (Totally Fixed Income) We are going to allocate $300k of the nest egg for a new home later when the prices go down. Why buy now? It is cheaper to rent a resort style apartment right now. This way we can spend 6 months living in different places reviewing th area(s). There is nothing like living in a community for a while, to help decide if it is right for you. Even a private home rents or condo for under $800pm.

SWR

 

[REWahoo]

Here is my monthly budget and I would appreciate any thoughts on what I missing.

OAP, I don't see a listing for "kitchen sink", but otherwise it looks like a pretty comprehensive list...



REW