How do you plan for lumpy expenses / travel in your number?

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corn18
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Joined: Fri May 22, 2015 6:24 am

How do you plan for lumpy expenses / travel in your number?

Post by corn18 » Sun Dec 24, 2017 9:38 am

I am 51 and plan to retire at 56. We are empty nesters and have a good handle on expenses we can expect during retirement. We are targeting $75k. This has some travel included. No new cars or big lumpy expenses. How do you plan for these?

dbr
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Re: How do you plan for lumpy expenses / travel in your number?

Post by dbr » Sun Dec 24, 2017 9:44 am

corn18 wrote:
Sun Dec 24, 2017 9:38 am
I am 51 and plan to retire at 56. We are empty nesters and have a good handle on expenses we can expect during retirement. We are targeting $75k. This has some travel included. No new cars or big lumpy expenses. How do you plan for these?
Retirement expenses are always lumpy. The planned for annual expenditure is a smoothed average of reality. To be more specific, if you might spend $50,000 on a new automobile every ten years, then that is $5000 per year. Your target needs to be $80K.

An alternative for really lumpy expenditures is use a model like FireCalc and similar that allows you to enter additional expense or income at a date. Some models may be more flexible and detailed than others. In FireCalc the best tab to use would probably be the one where you can remove a lump sum from the portfolio on a date.

A further possible step, highly recommended, is add 10%-25% to your estimate of spending as a contingency.

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MikeWillRetire
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Re: How do you plan for lumpy expenses / travel in your number?

Post by MikeWillRetire » Sun Dec 24, 2017 10:03 am

I take the cost of things like a car, and divide it by an estimated ownership time. That is how much I should be saving each year to cover replacement costs. For retirement planning, I then add that amount to my expenses.

UpperNwGuy
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Re: How do you plan for lumpy expenses / travel in your number?

Post by UpperNwGuy » Sun Dec 24, 2017 10:20 am

I save $500 a month in a separate savings account that covers major auto repairs and a periodic new car. I also save $500 a month in another savings account to pay for vacations. So, for me, these expenses are not lumpy.

DorothyB
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Re: How do you plan for lumpy expenses / travel in your number?

Post by DorothyB » Sun Dec 24, 2017 10:22 am

I agree with the others on setting aside money monthly outside of your retirement funds for car replacement. I also set aside money monthly for home repairs so that isn't "lumpy".

Travel is included in my annual budget each year and I will take 1/4 of the annual budget (less income from other sources) out of my IRA each quarter.

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