@busdriver11, I get that point. 
Don’t cut your expenses. You don’t have to cut expenses.
I can see how expenses could even go up initially, for people who travel a lot, and have to pay for health insurance. Then costs should go down as they get Medicare, and start slowing down.
The idea that you work hard all your life and have to decrease costs while in retirement doesn’t sound too appealing.I work at home so basically I am retired…when my husband retires, our costs will increase because we like to travel. We have stayed at $10/night at hotels in Kathmandu in 1970’s but along the way, I like staying at Four Seasons and The Peninsula better now. Our kids live at the other side of the country and we like to see them often…so we plan to pay for the vacations they and their families will spend with us and fund 529 plans for our future grandkids…
Wow, you are such nice and generous parents. We are unable to do any of these. Last time we (well, only my wife) traveled to the other coast to see our son, it was almost 3 years ago!
Even though we are not as generous as you, we do try to say to our son that if he needs to use money, e.g., to travel to see his GF, it is perfectly fine to use our family’s money to do so. (We remember that we did not have money when we ourselves were young and were dating with each other. We do not want him to have such an inconvenience. For him, it is just a bus hop away instead of a flight away. It would not cost too much.)
Our usual “go-to” hotel is La Quinta, Days Inn, or the alike. We had upgraded from Motel 6 a long time ago. But we spent a “big fortune” to stay at a Residence Inn last time when he needed to take a test (CK?) in LA, California.
This woman is 93 and she is not retiring.
Yes, our expenses have shifted since H retired and our kids graduated from college. We’re doing significantly more traveling – for fun and to see our kids and for my work. We are also not paying tuition but continue to provide full support for D. One day, we hope she will get a job and we won’t have to support her any longer.
We are also spending some on our house–lots of deferred maintenance, photovoltaic installation, updating bathrooms, etc. at some point we may be helping pay for weddings and contributing towards ed funds for grandkids.
If we didn’t have the resources, we could be content living very simply, like our neighbors across the street. They’re trying to save everything they can so their disabled D and his caregiver brother will have enough resources.
It’s nice to find a good balance that works. It helps one be comfortable instead of envious or full of regrets.
We do have a correlation, but the other way around - we’ll be looking at retiring because the school expenses for 2 kids of 100-something grand a year will go away in a few years (hopefully…)
Yes, I’m sure there are plenty of people out there that would like to retire, but feel they can’t, because of those college expenses, or health insurance. Things that generally go away, sooner or later.
“The idea that you work hard all your life and have to decrease costs while in retirement doesn’t sound too appealing”
I agree with @cbreeze. I always thought of retirement as the big reward, after all these years of work, now you can do what you want. And if that means I have to go back to staying on a friends floor on an air mattress, sleeping in the back of a truck, or a Motel 6, maybe I’d delay retirement for awhile. I like 4 star hotels, though I’m way too thrifty to pay for them, I want them at a 2 star price. A good thing with retirement, I suppose, is that you might have the flexibility in travel, to get those good deals.
I do hope to cut housing costs. I can save (if my wife agrees) about $500-600 a month. If we go to cats only no dogs that will also save.
@notrichenough said:
"The $30-40K/year we’ve been putting into retirement accounts goes away. As does the $25K+ we’ve been paying for college for the last 7 years that we are paying out of our income.
Add in the taxes we’re paying on the $25K.
We paid over $20K in FICA taxes last year (DW is self-employed) plus the taxes on the income used to pay the FICA taxes, that goes away. If we downsize we save another $5K in property taxes and a similar amount of mortgage interest.
That’s $100K less in expenses without even trying.
For us, our expenses will drop significantly too. The following expenses offhand will stop when we retire: mortgage expense, college expense and my child’s expenses (which are both hefty), state income tax (we plan to move to a no state income tax state to save 6%), lower property tax, etc.
I’m not using my 401k in our retirement equation because the contributions are already being taken out of our paycheck before we even see it.
Instead, I’ve been using our net pay to estimate what we need for retirement as a starting point. I’m adjusting it for all the expenses that will stop and adding any new expenses (medical). I guess it is a bottoms up method.
I will say one thing - it is definitely all very complicated with having so many moving parts!
One good news…I officially have one child off our payroll which is awesome! He just recently graduated from college and has a job! He also got married in Spain. It was a crazy year!
Great news, newjersey17!! It’s a wonderful feeling, isn’t it?
Yes it is!!
nj17 if you pay an effective rate of 6% tax in NJ you have a fairly high income. I would guess in that case you will also see significant property tax savings.
@tom1944 - I thought all of NJ paid 6%. Interesting!
I had to google it and found as of 2014 if you make over $40k up to $499K you have to pay around 6%.
$ 0 - $ 20,000 .014
$ 20,000 -$ 35,000.0175
$ 35,000 - $ 40,000 .035
$ 40,000 - $ 75,000 .05525
$ 75,000 - $500,000 .0637
$ 500,000 and over .0897
But that is not the effective rate because it is only 6% on the taxable amount over $75,000. I made over $115,000 last year and paid less than $2000 in NJ tax after taking deductions and credits.
Also remember NJ does not tax social security or the initial $20,000 of retirement income from pensions or a 401k/IRA for a married couple
That’s true.
NJ has a lower effective net income tax rate than I thought.
There are several income sources we do not tax- social security being the main one. We allow $10,000 of property taxes to be deducted from income. we allow medical expenses to be deducted once they are over 2% of your gross income.
We allow deductions for kids in college, for being over 65 and for relatives you support.
@tom1944, while my politics lean towards progressive taxation and I don’t think it’s wrong to do so, I think that every one of the “untaxed” items you mention are phased out at higher income levels. I am not sure about the medical deduction.
I think taxes are among the main reasons that more than 50% of NJ residents plan on leaving the state for their retirement.
Not phased out by income for NJ but property tax deduction is capped at 10K. So since many NJ homeowners pay 2 to 3 times that in property taxes there effectively is a cap.
The feds cap based on income. My sister and brother lose all of their deductions for the IRS.
SS is untaxed even for NJ’s wealthiest residents
Property tax in North Jersey is the driving force. That plus their property values make a nice nest egg. There is a person coming in to buy those homes and pay those taxes or else that 50% can dream about leaving but will stay put.