Last year before retirement more about spending than saving?

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TheTimeLord
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Last year before retirement more about spending than saving?

Post by TheTimeLord » Fri Jan 02, 2015 10:54 am

I am likely in the last 12-24 months of my work life and I am finding my planning is increasingly not about savings but about spending. I am not planning how to put more money in my portfolio but looking at how long I need to work to buy a new car for cash, repaint the house, buy carpeting or upgrade landscaping. Is this normal that last year or so before retirement is about getting pending big ticket items out of the way and paid for?
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Re: Last year before retirement more about spending than sav

Post by laughlinlvr » Fri Jan 02, 2015 11:04 am

It's true for me. I think of it as a transitional period. Retiring without upping spending in the penultimate (or ante-penultimate) year would be too much like going cold turkey without earned income in retirement.
Last edited by laughlinlvr on Fri Jan 02, 2015 11:52 am, edited 1 time in total.
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Re: Last year before retirement more about spending than sav

Post by Texas hold em71 » Fri Jan 02, 2015 11:07 am

I have seen this with friends who have retired. They seem to want to have any unplanned large exoenses out if the way so as to avoid surprises in early retirement. Also comments about - if I am going to be home all day now, I need to remodel the kitchen.

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Re: Last year before retirement more about spending than sav

Post by jebmke » Fri Jan 02, 2015 11:11 am

Large items need to be part of your retirement budget -- if not, you probably can't afford to retire anyway. I certainly wouldn't buy a car or paint the house unless it was needed. Retirement date would have nothing to do with it.
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Re: Last year before retirement more about spending than sav

Post by Stonebr » Fri Jan 02, 2015 11:11 am

I don't think there is a normal. We didn't do anything special the year before retirement. Quite the opposite, we kept loading the 401k and IRAs to the max.
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Re: Last year before retirement more about spending than sav

Post by TheTimeLord » Fri Jan 02, 2015 11:21 am

jebmke wrote:Large items need to be part of your retirement budget -- if not, you probably can't afford to retire anyway. I certainly wouldn't buy a car or paint the house unless it was needed. Retirement date would have nothing to do with it.
So you see no value in buying an item like a car that will last 10 years for cash before retirement or going ahead and taking care of maintenance items around the house like flooring, landscaping or painting? I guess I am wired different and would prefer to work some extra months to make sure these things are taken care of and out of the way before entering retirement so I don't have to deal with these expenses early on in retirement. Just seems to remove a couple more variables that could be effected by a down market. But maybe I can't afford to retire after all. I need to consider that possibility I guess.
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Re: Last year before retirement more about spending than sav

Post by jstrazzere » Fri Jan 02, 2015 11:23 am

Seems entirely reasonable.

My wife and I are on a "5 year plan" now, and starting to prepare for retirement. We are attempting to stagger the spending parts across 5 years or so, while simplifying things.

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Re: Last year before retirement more about spending than sav

Post by jebmke » Fri Jan 02, 2015 11:24 am

TheTimeLord wrote:So you see no value in buying an item like a car that will last 10 years for cash before retirement
Not if my existing car is in good shape and doesn't need to be replaced, no. In fact, if I were going to try to "time" a car purchase, I'd wait until the next big recession to get a better deal. Same with renovation type work. Contractors are much cheaper when the economy is in the tank.
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Re: Last year before retirement more about spending than sav

Post by midareff » Fri Jan 02, 2015 11:27 am

Stonebr wrote:I don't think there is a normal. We didn't do anything special the year before retirement. Quite the opposite, we kept loading the 401k and IRAs to the max.
+1

It was only after the first 8 or 9 months while the market was steadily rising did I consider changing the 9 year old Jeep for something new. I did go on Safari a few months before I retired though.

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Re: Last year before retirement more about spending than sav

Post by dbr » Fri Jan 02, 2015 11:31 am

TheTimeLord wrote:I am likely in the last 12-24 months of my work life and I am finding my planning is increasingly not about savings but about spending. I am not planning how to put more money in my portfolio but looking at how long I need to work to buy a new car for cash, repaint the house, buy carpeting or upgrade landscaping. Is this normal that last year or so before retirement is about getting pending big ticket items out of the way and paid for?
No, that's silly. Retirement is not some kind of dig the fox hole and hunker down experience.

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Re: Last year before retirement more about spending than sav

Post by TheTimeLord » Fri Jan 02, 2015 11:37 am

dbr wrote:
TheTimeLord wrote:I am likely in the last 12-24 months of my work life and I am finding my planning is increasingly not about savings but about spending. I am not planning how to put more money in my portfolio but looking at how long I need to work to buy a new car for cash, repaint the house, buy carpeting or upgrade landscaping. Is this normal that last year or so before retirement is about getting pending big ticket items out of the way and paid for?
No, that's silly. Retirement is not some kind of dig the fox hole and hunker down experience.
Interesting because I would see not spending as digging a foxhole and hunkering down. I am obviously missing a point some folks are seeing quite clearly. So I think I need a little more explanation.
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Re: Last year before retirement more about spending than sav

Post by jebmke » Fri Jan 02, 2015 11:48 am

Try this. Suppose you are planning to retire 12/31/15. The roof is due to be replaced in 2017 and will cost $25K. So this year, put the $25K you need for a roof aside (CD if you want to do mental accounting, otherwise, just put it into your portfolio). Then when the roof needs to be replaced, replace it. Why throw away 2 years of roof value if you don't need to? If you get lucky, the economy will fall apart and you can get a new roof for $20K.

You retirement budget needs to be able to absorb these large items eventually. Your "average" year should include amortization of the large capital items. Plan accordingly and you will be fine.
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Re: Last year before retirement more about spending than sav

Post by poker27 » Fri Jan 02, 2015 11:56 am

While I am nowhere near thinking about retiring, I could see myself wanting to do the same thing. I like to play it a bit safe, so saying i need to get a new roof, I will work another 2 months and get it out of the way. Obviously dont let it get carried away as you will never retire.

I usually prepay my mortgage a few months in advance to also have that same 'safety net'

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Re: Last year before retirement more about spending than sav

Post by Texas hold em71 » Fri Jan 02, 2015 11:56 am

I think what some are saying is that you have planned for income in retirement that should replace current income and since you have been able to manage all of these things on current income, you should not front load a lot of unnecessary expenses just because you are retiring. If you are doing so because you are worried you won't have enough money to pay for them in retirement, you might be retiring too soon or you might be worrying too much.

I think of it a little differently in that you are essentially trying to "insure" against unforeseen cash flow "emergencies" you are worried that once you retire, you will find a very expensive landscaping project that you can no longer afford and will regret retiring?

I also look at it this way- you will have more time in retirement to do repairs for yourself, comparison shop etc.

If the question is whether this is normal - I have seen it in others. If the question is whether it is rational- it depends on whether the expenses are necessary in the first place.

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Re: Last year before retirement more about spending than sav

Post by HomerJ » Fri Jan 02, 2015 12:00 pm

One could just save that money and pay for those big purchases later... It's the same thing...

but I understand that it IS mentally easier to pay for something while you're still pulling a salary than it is to pay for it out of savings.

I understand TimeLord... He's working an extra year in order to buy all that stuff now... before he retires... My wife "retired" 2 years back, but she picked the date based on a car purchase...

She was going to quit in the spring, but decided to work until September instead... Every cent she made that summer went into her "car fund", and when she retired, she bought a new car for herself (which will last a LONG time, since she no longer drives to work)

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Re: Last year before retirement more about spending than sav

Post by Gropes & Ray » Fri Jan 02, 2015 12:02 pm

I am doing something similar, because I am prepping for my wife to stop working if we have a baby. I am trying to anticipate large costs in the next 2-3 years, and make sure I can cover them. But that is partially what an emergency fund is for, but there are some predicable items. For the most part, I am putting the money aside (in a money market) rather than spending it, because, although my furnace is 22 years old, it still works.

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Re: Last year before retirement more about spending than sav

Post by TheTimeLord » Fri Jan 02, 2015 12:03 pm

jebmke wrote:Try this. Suppose you are planning to retire 12/31/15. The roof is due to be replaced in 2017. So this year, put the money you need for a roof aside (CD if you want to do mental accounting, otherwise, just put it into your portfolio). Then when the roof needs to be replaced, replace it. Why throw away 2 years of roof value if you don't need to?
I will skip the part where if a 20 year item is near the end of its life I can exactly predict the day of it demise or how you can know if buying a car a year or two early will or won't save large repair bills. I will also skip the optional items mentioned like upgrading landscaping or upgrading flooring. Things you would presumably enjoy as soon as they are done. Forgetting all that, and admitting my original post could be better worded I was discussing the fact that I am setting retirement date not around hitting my number any more but how long I have to work to set aside money to be able to buy my next car, repaint the house, etc. And yes, I will use mental accounting to separate this money from my investment portfolio. Otherwise you end up actually skewing your AA by adding in money that is essentially spent whether it is tomorrow or next year. I am under the impression from my reading that the first 5 years of retirement are the most critical, so anything I can do to minimize downside surprise in those years to me increases my chances for a successful retirement at the standard I am projecting.
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Re: Last year before retirement more about spending than sav

Post by HomerJ » Fri Jan 02, 2015 12:04 pm

poker27 wrote:I like to play it a bit safe, so saying i need to get a new roof, I will work another 2 months and get it out of the way. Obviously dont let it get carried away as you will never retire.
This. And it is easy to keep putting off retirement this way... I think TimeLord definitely has this problem... I'm pretty sure he has enough to retire right now, but he's still saying 12-24 months (actually he's saying "likely 12-24 months, so he's double-hedging) :)

But I completely understand the feeling of "Work another 3 weeks and I can replace the air conditioner... Work another 3 months, and I can buy a new car..."

But at some point, enough is enough.

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Re: Last year before retirement more about spending than sav

Post by staythecourse » Fri Jan 02, 2015 12:23 pm

I think you should do whatever makes you feel more comfortable going into retirement. As a physician I always joke with my patients the only thing better then doing something for the patient is to do something to help the doctor. Many things in life we do is purely for psychological well being. In reality humans have VERY little control of major issues that happen. Your spouse or you may die in the first 5 years of retirement seriously cutting down retirement needs or you may have a catastrophic stroke needing 24 hour care requiring A LOT more money then you anticipate. I don't mean to be grim, but their are so many what ifs that happen in life it is impossible to protect against many of them in advance.

Do the best you can do and just like during your working life Flexibility is the most important attribute. I am not sure why folks treat retirement as if they are suddenly holding a grenade with the pin pulled out. Just like when you are working your last 30+ years there was a chance of being fired each and every year yet you went on with your life. There was no guarantee 30 years ago you would have ended up in the financial position you are now and there will be no guarantee of anything in the future as well. It sucks, but that is life.

Good luck.
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Re: Last year before retirement more about spending than sav

Post by HawkeyeJD » Fri Jan 02, 2015 12:30 pm

TheTimeLord wrote:
jebmke wrote:Large items need to be part of your retirement budget -- if not, you probably can't afford to retire anyway. I certainly wouldn't buy a car or paint the house unless it was needed. Retirement date would have nothing to do with it.
So you see no value in buying an item like a car that will last 10 years for cash before retirement or going ahead and taking care of maintenance items around the house like flooring, landscaping or painting? I guess I am wired different and would prefer to work some extra months to make sure these things are taken care of and out of the way before entering retirement so I don't have to deal with these expenses early on in retirement. Just seems to remove a couple more variables that could be effected by a down market. But maybe I can't afford to retire after all. I need to consider that possibility I guess.


My first thought here is that you are going to be fine either way because you are actually thinking through your retirement plans and looking for pitfalls and potential issues ahead of time. I suspect that alone puts you well ahead of most folks.

My second thought is that the only major variables that makes much difference is your ability to earn income, and potential market volatility (if it matters for you):

To the first point, think about if you left the workforce only to find out a year later that you don't have enough to meet your true needs. You go looking for work only to find out you can only find jobs paying 1/3 to 1/2 as much as your current job. So, you end up working an extra 12 to 18 months at some job when you could have just worked 6 months extra at your current job.

To the second point about market volatility, if you put $100k away over the next two years to cover your known "needs" in the next few years, and defer spending on the "needs" until retirement, a large market correction could turn that 100k into 50k or 60k in just a few months. That might necessitate you returning to work to fill the gap, which as noted above, might be problematic. Of course, this assumes that the new $100k invested is a significant portion of your retirement accounts. If the 100k is part of a 500k 60/40 portfolio vs if it is part of a $3MM 60/40 portfolio can make a significant difference as to whether a market correction might make any difference to you.

My last thought is that your question is a matter of behavioral/psychological issues rather than pure "numbers. Are you the type that wants to have a paid off mortgage even though investments yield more over the long term? Do you have a lot of anxiety that a major market movement early in your retirement will seriously derail your retirement plans and force you to go back to work? Only you can answer these questions, and at the end of the day, whether you do the things now or later is more or less irrelevant in the grand scheme of things since your timeline is relatively short. Therefore, I would do whatever helps you sleep well at night and helps calm any anxiety you might have about going into retirement.

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Re: Last year before retirement more about spending than sav

Post by TheTimeLord » Fri Jan 02, 2015 12:34 pm

HomerJ wrote:
This. And it is easy to keep putting off retirement this way... I think TimeLord definitely has this problem...
But at some point, enough is enough.
I would be a fool to argue with you there. I tell myself if I was a bit older or making less money I would have probably pulled the trigger already. When I went back to work as a contractor I started making more than I at any point in my career. I admit it is kind of hard to walk away from that went you can say hey another 3 months and I can buy this or in 6 months I could get that. At least at them moment I am deluding myself that once I have taken care of saving to pay for my list of big items I will be ready. Who knows but there are things on the list like a sportscar for my wife that neither I would spring for or she would buy if we don't have a check coming in and the money already set aside. She always wanted one and I am in a position now to pay for one if I work a little while longer so to me if it would give her something she has always dreamed of it is worth staying at my job a bit.
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Re: Last year before retirement more about spending than sav

Post by jebmke » Fri Jan 02, 2015 12:36 pm

One thing we did do during the last year before retirement is fund 10 years of charitable donations by opening a donor advised fund and donating appreciated securities. That definitely popped our spending in the last year but it was purely a tax rate arbitrage move. The timing worked out well since that was 2007 and we donated some legacy stocks at the peak.
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Re: Last year before retirement more about spending than sav

Post by Leeraar » Fri Jan 02, 2015 12:39 pm

TheTimeLord wrote:I am likely in the last 12-24 months of my work life and I am finding my planning is increasingly not about savings but about spending. I am not planning how to put more money in my portfolio but looking at how long I need to work to buy a new car for cash, repaint the house, buy carpeting or upgrade landscaping. Is this normal that last year or so before retirement is about getting pending big ticket items out of the way and paid for?
I'll suggest it's a question of planning, not of doing.

Make a list of your anticipated cash flow needs through age 70. Also make a list of major expenses that are not veyr time critical, like landscaping and painting the house. Budget for those expenses, and plan where the cash flow is going to come from.

I personally think that lowering your cash flow needs as much as possible is a good idea. Pay off the mortgage, get college expenses out of the way, buy a car (I had to buy two, one for the kid beginning to drive, and one to replace the car my company had provided), But then, once you have a plan and a budget, when you actually do stuff does not much matter.

L.
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Re: Last year before retirement more about spending than sav

Post by BTDT » Fri Jan 02, 2015 12:47 pm

I'm not sure what is considered 'normal retirement', but I wouldn't call it a bunker mentality that two or three years before my retirement we upgraded the windows to energy savers, replaced the old shingled roof with a metal one, added a heat hump, and replaced the water heater with two high efficiency tank-less systems, plus all new appliances. I also added another heated garage/man-cave for me to 'work' in and give my DW some respite from my new 24/7 home life.

Looking back, I'm really glad we made the upgrades, as I now have a really cool place to 'play' in, and most high cost items are still under warranty. We are also saving money on utilities and gasoline with more energy efficient windows, appliances, and vehicles. I also feel more comfortable knowing my wife has a like new home with no mortgage, should I depart this world unexpectedly.

I have always lived below my means, and now my biggest challenge in 'normal retirement' seems to be learning to loosen up the purse strings, as my monthly expenses are not coming even close to our monthly income. Last night, the DW and I discussed helping both physically and financially, the local humane society with their need for more space. :beer
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Re: Last year before retirement more about spending than sav

Post by Beth* » Fri Jan 02, 2015 12:56 pm

As I move toward retirement I am increasing the amount of money I keep in cash and cash equivalents. I have been in the fortunate position in recent years where I could pay for almost any expense from current income by drawing on my emergency fund (generally kept at three months of living expenses) and then reducing the amount of money I put into taxable savings for a couple of months to build the emergency fund back up. Once I am retired I will need to pull money from investments to fund large expected/unexpected expenses such as a new car or a new heater and I don't want to be in the position of having to pull a large amount of money out of investments when the market is down. Therefore, I want to have more cash on hand. I think you are trying to do something similar by paying up front for these types of expenses.

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Re: Last year before retirement more about spending than sav

Post by Watty » Fri Jan 02, 2015 1:06 pm

TheTimeLord wrote:I am likely in the last 12-24 months of my work life and I am finding my planning is increasingly not about savings but about spending. I am not planning how to put more money in my portfolio but looking at how long I need to work to buy a new car for cash, repaint the house, buy carpeting or upgrade landscaping. Is this normal that last year or so before retirement is about getting pending big ticket items out of the way and paid for?
Part of it may be that at this stage there is little you can do on the savings side that will make much of a difference.

For example if you are expecting to have 20 time your income saved up(or whatever ratio is right for you) on the day you retire then increasing your 401K contributions by 5% over your last year of working would only increase your nest egg to be 20.05 times your income.

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Re: Last year before retirement more about spending than sav

Post by BigJohn » Fri Jan 02, 2015 1:12 pm

TheTimeLord wrote:I guess I am wired different and would prefer to work some extra months to make sure these things are taken care of and out of the way before entering retirement so I don't have to deal with these expenses early on in retirement.
Not sure I see this as a valid reason to work longer. If you've planned for big lumpy expenses in your retirement analysis you're ready and working another few months isn't going to change that. I mean no insult with the following comment but this just feels like the latest in a series of reasons you've had to "just work another few months". Unless you're saving up to buy a real TARDIS, time is ticking and at some point you may well wake up and find that you have more money than time left. :beer

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Re: Last year before retirement more about spending than sav

Post by Leeraar » Fri Jan 02, 2015 1:26 pm

TheTimeLord wrote: Who knows but there are things on the list like a sportscar for my wife that neither I would spring for or she would buy if we don't have a check coming in and the money already set aside. She always wanted one and I am in a position now to pay for one if I work a little while longer so to me if it would give her something she has always dreamed of it is worth staying at my job a bit.
Buy yourself a copy of "How to retire, wild, happy, and free".

http://www.thejoyofnotworking.com/ebook ... E-book.pdf

I believe that happiness does not come from things, it comes from experiences. Working longer so you can get more things seems pointless to me.

That said, I still work because I am regarded as an expert in my field, and that I enjoy. It's not for the money or the next thing we can afford to buy. It's the professional respect I get.

There are two really tough things about retiring:
1. How to go from saving to spending?
2. The non-financial part, what are you going to do?

L.
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Re: Last year before retirement more about spending than sav

Post by MathWizard » Fri Jan 02, 2015 1:34 pm

I think this is a quite reasonable approach,
just as budgeting into the retirement accounts
for big ticket items.

Sequence of returns risk is often mentioned on
this board, and it sounds like that is what
your are guarding against. You are getting
big ticket items out of the way so those expenses
are not forced on you during a down market early
on in retirement. This strategy has the advantage
that you could stay working for a few extra
months, contributing during a down market rather than
withdrawing during that period.
This is much easier than trying to return to the
labor market after retiring.
The effect of just not having to withdraw in
those few months while the market recovers can
be significant.

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Re: Last year before retirement more about spending than sav

Post by celia » Fri Jan 02, 2015 1:43 pm

OP, Your planning and spending now is similar to paying off a mortgage. That's one less thing hanging over you in retirement to worry about. The timing of this spending is an emotional need rather than a financial one. (Plus, you'll be able to travel for long periods without worrying that something is about to break at home.)
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Re: Last year before retirement more about spending than sav

Post by Ron » Fri Jan 02, 2015 1:53 pm

jebmke wrote:Large items need to be part of your retirement budget -- if not, you probably can't afford to retire anyway. I certainly wouldn't buy a car or paint the house unless it was needed. Retirement date would have nothing to do with it.
I would agree with this outlook and can confirm that this was/is what my wife/me have done since retirement (me, almost eight years; she, almost three).

We both purchased cars years after our respective retirements - not in preparation for retirement. I purchased a (used) SUV to allow me to have more/easier access to storage space for my volunteer Meals on Wheels "work". My wife just purchased a new Subaru two weeks ago since she actually drives more in retirement (volunteer work) than when she worked, just a few miles from our home. She also wanted an AWD vehicle rather than the 13-year old FWD she traded.

The cars were part of our vehicle replacement budget - the same "bucket" we had for many years before retirement and continued to fund each month even after retirement.

We "refreshed" our kitchen last year with new countertops, floors, and appliances. That was also done with budgeted money that we had saved for over the years. It wasn't done in preparation for retirement, nor was it done due to spending more time there since retirement (which we do). It was simply that our home (built new, in 1994) needed a kitchen update after two decades of use.

Jointly, we contributed to our respective retirement (401(k) and IRA's) until each of us retired, ending the last decade of contributing one-third of our total gross pay (but starting out in the early years with much less). I even contributed to a spousal IRA after I retired since my wife decided to delay her retirement beyond the original date and that allowed me the option.

Just because you retire, it doesn't mean that your expenses for big ticket items will go away. And it makes little sense to spend money before you retire before an item (such as a car, or even a kitchen) has outlived its useful life.

However you should continue to save and budget for eventual replacement of such items; the same thing you should have been doing during your many years while working.

FWIW,

- Ron

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Re: Last year before retirement more about spending than sav

Post by TheTimeLord » Fri Jan 02, 2015 2:38 pm

I still don't understand how this is a bunker mentality and since many people use a variable withdrawal rate the concept that budgeting it in is the same as physically purchasing or setting aside in something without risk like a CD seems untrue because market returns may lower your withdrawal rate.
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Re: Last year before retirement more about spending than sav

Post by Beth* » Fri Jan 02, 2015 2:46 pm

TheTimeLord wrote:I still don't understand how this is a bunker mentality and since many people use a variable withdrawal rate the concept that budgeting it in is the same as physically purchasing or setting aside in something without risk like a CD seems untrue because market returns may lower your withdrawal rate.
You should do what you feel comfortable with. It seems like different people on this forum have different ways to reach what I think is a common goal for all of us: sleeping well at night. I don't see why what you are doing can be harmful in any way. Other people may have different ways of approaching retirement (mine is to save extra cash rather than to front load expenses).

Your original post asked if it was true for other people that the last year before retirement was more about spending than saving. The answer you got from many forum participants is "no." That doesn't mean you have to change what you are doing.

In my opinion this thread isn't going anywhere and it is probably time to end it.

island
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Re: Last year before retirement more about spending than sav

Post by island » Fri Jan 02, 2015 4:15 pm

TheTimeLord wrote:
dbr wrote:
TheTimeLord wrote:I am likely in the last 12-24 months of my work life and I am finding my planning is increasingly not about savings but about spending. I am not planning how to put more money in my portfolio but looking at how long I need to work to buy a new car for cash, repaint the house, buy carpeting or upgrade landscaping. Is this normal that last year or so before retirement is about getting pending big ticket items out of the way and paid for?
No, that's silly. Retirement is not some kind of dig the fox hole and hunker down experience.
Interesting because I would see not spending as digging a foxhole and hunkering down. I am obviously missing a point some folks are seeing quite clearly. So I think I need a little more explanation.

I don't think it as silly or hunkering down behavior either, but I guess it's how people view their jobs and how quickly they can or want to retire. Some people count the days, squeeze every penny so they can retire ASAP. I'm not of that mindset. DH and I are mid 50's, have stable jobs that we still find rewarding and most likely have enough to easily retire. We aren't ready yet, but I can see it on the horizon. We also have some things we'd like to take care of before we do, like update the interior of our home and some we have to do like replaster and retile our pool all to the tune of low 6 figures. We have funds earmarked for that and can pay for it now, but I also like the idea of working more to replinish before retiring. Makes work an even more worthy experience if I think that's where the additional work funds will go. Would also like to take advantage of my dental insurance while I have it to upgrade old fillings.
So I don't think of it as paying for something early that I don't need now. In a way it's all savings now because I've got a big cushion and can take my time easing out of work or not. I doubt anyone who wants out of work ASAP at any cost can relate to that.

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Re: Last year before retirement more about spending than sav

Post by kolea » Fri Jan 02, 2015 4:47 pm

For pre-retirement it is all about maximizing assets. For post-retirement is is all about cash flow. Our cash flow is more constrained than when we both worked. You want it to be smooth and predictable. I think it is good to get big ticket items out of the way before you are living with a more constrained budget. This is especially true in this economy. One of these days it is going to correct and the last thing you want is to have to pay for a big ticket item when the market has cratered.

We budgeted for some pretty significant spending the year before we retired but it was not because we were retiring per se, it was because we were moving upon retirement to a second home and we knew there would be significant start-up costs to the new house. It all worked out well - we stuck to the budget and it was detailed enough that there was never any fear of overspending it.
Kolea (pron. ko-lay-uh). Golden plover.

b4real
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Re: Last year before retirement more about spending than sav

Post by b4real » Fri Jan 02, 2015 6:21 pm

There is no difference between paying for a big ticket item pre or post retirement. Either way the money is spent and no longer available. If funding known big ticket items out of your retirement funds is a concern then it is reasonable to work longer to cover those items. It doesn't matter when you incur the expense as long as the money is available without jeopardizing your desired SWR. As long as you are able and willing to continue working you have the luxury to save those additional dollars and not have the expenditure be an issue.

The decision of when to replace the big ticket item is separate from the decision to work longer to save for the replacement. If the expenditure is anticipated within a few years then it can be added to your emergency fund in mm or something similar to be available when needed whether that is pre or post retirement.

cherijoh
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Re: Last year before retirement more about spending than sav

Post by cherijoh » Fri Jan 02, 2015 7:20 pm

poker27 wrote:While I am nowhere near thinking about retiring, I could see myself wanting to do the same thing. I like to play it a bit safe, so saying i need to get a new roof, I will work another 2 months and get it out of the way. Obviously dont let it get carried away as you will never retire.

I usually prepay my mortgage a few months in advance to also have that same 'safety net'
You know that you are getting no value for your money on this, don't you? It doesn't reduce your principal at all to make your regular mortgage payment early.

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Toons
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Re: Last year before retirement more about spending than sav

Post by Toons » Fri Jan 02, 2015 7:26 pm

TheTimeLord wrote:I am likely in the last 12-24 months of my work life and I am finding my planning is increasingly not about savings but about spending. I am not planning how to put more money in my portfolio but looking at how long I need to work to buy a new car for cash, repaint the house, buy carpeting or upgrade landscaping. Is this normal that last year or so before retirement is about getting pending big ticket items out of the way and paid for?
I consider it very normal.I know that my wife and I were quite focused on paying off any and all debt,making home improvements before we sold the home,auto purchase,etc several years before we retired.
Excellent idea to become as "free of debt" as possible before you retire. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

angelescrest
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Re: Last year before retirement more about spending than sav

Post by angelescrest » Fri Jan 02, 2015 7:34 pm

My in laws are retiring this year. They don't have a very large amount of 401k cash and maybe some 5k a month coming in from SS and pension, but are still planning to spend some 75k to remodel the kitchen and master bath that is coming from their salary in the final years. The house is paid off. It's not what I would do, but it's important enough to them. Spending for sure.

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