@sherpa - For the past few years I’ve tracked our “funds outgoing” in a general way. (It’s easy for us to do since they are are paid out of same credit union)., I track (originally on paper, now in a very simple spreadsheet) the monthly total of 3 categories (excluding college payments):
cash
2) checks
3) withdrawals (with a notation of how much is Visa, a biggie for us since lots of groceries, autopay etc)
Then each year we calculate average/month. This is the monthly income we’d ideally like (after taxes)… to live like we do today (and then DH’s complex spreadsheet figures in inflation, taxes etc.) If we pay off the mortgage before retirement, it will go down $1k/month. Also we know there will be a Medical adder of TBD amount (for now we figure $1000/month each pre-65, $500 with medicare…it’s the big Ouch in our planning).
Obviously some expenses could be trimmed after retirement. But with more time to play, travel costs could go up. It has been a worthwhile effort because it’s a good starting point for our discussions about where we’d be willing to compromise on with spending in order to retire someday.
Property taxes $4200
Homeowners & Umbrella Insurance $2000
Medical insurance, co-pays, meds, etc. $20,000 (based on our current OOP expenses)
Groceries $5000
Travel $12,000
Utilities (gas, electric, cable, phones) $8,000
Auto insurance/maintenance/gas $3,500
Household repairs/maintenance $4500
Yard maintenance $1000
Cleaning crew $2000
Entertainment (dining out, cultural events, etc.) $4000
Charitables
Computer/phone/electronics replacement $1000
taxes
Separate big-ticket items:
new roof, appliances, HVAC as these things hit their life spans
accessibility modifications
purchase of one car after retirement
home health care
By the time DH retires, we will give up the term life policies. DH carries a lot of term to protect me if he goes first. I have a term policy that we got when I was 30. Not giving that one up until it expires or I do. Medicare is getting finicky about expensive daily chemo drugs, so we will get Medicare and pay for DH’s current insurance as secondary (and possibly Part D, too). DH is belt-and-suspenders about making sure I’m adequately covered (bless him).
When DH retires, we’ll no longer have a mortgage, SS withholding, 401k contributions, commuting expenses, automatic savings deductions, etc. Those are all items we don’t need to include in our income replacement ratio. I think the biggest hurdle will be getting used to spending down our assets. We have been squirreling away nuts for college and retirement for so long that our mindset is very attuned to saving.
“I think the biggest hurdle will be getting used to spending down our assets. We have been squirreling away nuts for college and retirement for so long that our mindset is very attuned to saving.”
Amen. Same here. I cant imagine dipping into those “sacred cows.” But we will have to.
I have mine set up to 69 and I am sweating. Will have to get it down to a more manageable temperature, like 68.
Heck, no one beats my Mr. when it comes down to spending the kids’ inheritance. He just plunked down a wad o’cash on an electric tin can on wheels. I am beginning to like the dang thing… we have not stopped at a gas station in ages. And no oil changes needed. So it is a great time saver.
Dos, you need to move to a warmer place, like Seattle!! We just paid the highest ever PSE bill (combined gas and electricity), and it was $380. That also included the dang Tesla charging in the garage for a month. Plus the very inefficient heated MB floor that Mr. insists on keeping on.
Yeah, mine doesn’t even include electricity which is expensive here.
We have had a very cold month but my heating bills run at that level for January/Feb. I don’t mind the house at 62-63. I’m used to it and it seems too stuffy at higher temps these days.
The cover of this month’s New Yorker magazine basically sums up our January right down to the ice storm yesterday on the 23rd (including a several hour power outage).
I turn it down to 55 at night. Yes, I expect my PG&E bill will be north of $600 this month. I am always cold… and I was spoiled by my NYC apt where the heat is included in the monthly maintenance and you can’t adjust those radiators, either they are on or off. My apt was 80° the day before the ‘bomb cyclone.’ I had to go out to the patio (9°) to cool off and kept the patio door ajar for a while.
Glad Mr. B is enjoying his toy…I told mine to get one as numerous friends have and love them as well.
Turn the heat down to 60 at night. Can’t go any lower or the cats will rebell. With so much fur you would think they would want the house to be a bit cooler. But we don’t have AC. Technically, we do, but it is kaput. The previous owners let the unit go abandoned and get covered with ivy. Next to the infamous “ivy covered stump.” We are still debating whether we need to resurrect AC or not.
@CountingDown we have similar spending…except for the health costs.
Folks…I put what my costs needed to be…clearly, if I want to I can spend more. Probably triple. So I’m not going to be denied travel or eating out…or getting new clothes.
Property taxes $8,800
Home (includes HOA and insurance) $5,300
Utilities $4,200
Cars $4,300
Groceries (includes paper goods/cleaning supplies) $7,100
Restaurants $6,100
Gifts/Charity $4,500
Medical/Dental $6,900
Travel $17,600 (My weak spot, obviously!)
Exercise $1,700
Entertainment $1,300
Life/Umbrella Insurance $1,000
Personal (Clothing, hair, dry cleaning) $2,800
Plus, we fully fund 401Ks and IRAs that we are allowed to.
DH still works, but would like to cut back to part time or contract work. We are mid-fifties though, so health insurance is a problem. But I know exactly where we should cut back if we need to. Like Thumper, we could spend more but choose not to. In our case, it’s because we are plowing quite a bit towards retirement.
We did downsize five years ago – what a difference that made on our expenditures! I highly recommend it. Love the smaller space and lower utility costs.
DD will start a grad program in the fall at the age of 27. We may help her out, but haven’t decided how much.
The best way to plan for retirement spending is to look at what you spend now. If you try figuring out a bottom-up budget you will probably miss things and guess too low. I’ve been tracking spending for a few years, and there is a pretty big category of “stuff” that doesn’t fit anywhere else and is hard to plan for specifically, but the magnitude is pretty constant.
Starting with your current income probably doesn’t make sense because you probably have retirement savings, and you pay more taxes now.
I’m retired, DH will retire this year or next year, and our biggest unknown is health care cost prior to Medicare. It won’t be a small number, the marketplace in our state is terrible. I’m hoping we can continue to buy a policy from Megacorp after COBRA runs out. It looks possible, but needs some research.
I keep my house at 71 when I am there and awake. No apologies, I like to be warm.
DW did a pass at a budget, and it came in around $75K per year (assuming no mortgage), which included a generous $20K/year for travel. I think she used $2K/month for health insurance, this might be low.
This number is post-tax, so would require around $100K per year pre-tax, or thereabouts.
Everyone’s spending habits and needs differ. The only thing that matters is what YOU spend and how YOU want to live in retirement. I don’t think there is any need for estimations or guesswork to answer @sherpa’s question. The way to determine your retirement budget as you get close to stepping off (3-5 years) is to track with precision your current cash flow over at least a two-year period (more is better). It’s not hard. I’ve been doing this for about 18 years and the data tells me exactly what I need to know. Once you really know what it takes to support your current lifestyle and home, you can play with the buckets to determine how much more or less you need or want to live on in retirement. If you do the tracking properly, you’ll have all the buckets accounted for and in front of you, and it will be pretty obvious which ones may go away (mortgage, life insurance, 401K contributions, tuition payments, etc.) which may increase (healthcare, property taxes, travel, etc.), and which may stay roughly the same or increase at known rate. With a detailed spreadsheet that accounts for everything you spend, you have the data you need to answer your question and play with alternate scenarios, @sherpa. No one else’s estimates matter. You just need to do the work.
Because we knew what our cash run rate has been over so many years, it was pretty easy to work with our financial planner many years ago to say we “need” X to maintain our current lifestyle, but we “want” to live on Y (Y>X) in retirement and build our investment plan around that target. In the meantime, we worked to make X even less by buying a smaller, solar home in a less expensive part of our state. I continue to track our cash flow (always will) and, after three years in the new place, our expenses are actually a bit less than what I charted but pretty close. Our portfolio hit our Y target a few years ago, but we weren’t mentally ready to retire until last year, and I’ve posted that part of our retirement plan was to have enough cash reserves on hand to take DH to 65 and me to 64 before we start any withdrawals or SS, so we’re living retirement-lite until then (DH and I are 60 and 61 currently.)
The worst part of all of this, of course, has been gritting our teeth over the cost of private health insurance until Medicare can offset. Not much we can do about those costs. We’re still eyeing other parts of the world…
Cooling is the big $$$$ suck where we live. The solar system has been amazing. Our average monthly H/C bill is $75. I keep the thermostat at 74 in the summer, 68 in the winter (or turn it off altogether). Both of those numbers would be lower, but DH complains that I’m trying to freeze him to death all year round.
I am beginning to like the dang thing… we have not stopped at a gas station in ages. And no oil changes needed. So it is a great time saver.