Scaring the Old Folks

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Hugh Prolly-Wright
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Scaring the Old Folks

Post by Hugh Prolly-Wright » Thu Sep 06, 2018 1:48 pm

Did anyone see this? http://www.marketwatch.com/story/youre- ... 2018-09-06

The article seems to make some rather foolish assumptions, chief among them, after I retire I will not change my spending habits at all.
Eating out 3X a week? That seems crazy. In most cases, these articles are written by a CFP who wants to garner business. This time, it's a journalist, but still—much of what he writes here seems utterly foreign to me.

DesertDiva
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Re: Scaring the Old Folks

Post by DesertDiva » Thu Sep 06, 2018 2:03 pm

Maybe it's a slow news day at MW.
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delamer
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Re: Scaring the Old Folks

Post by delamer » Thu Sep 06, 2018 2:04 pm

It makes a classic mistake — confusing income and expenses.

Even if it is true that people spend more in early retirement than they expected, that has no direct relationship to how much their salary was in pre-retirement.

When people are working, they pay payroll taxes, they save for retirement, and they pay higher income taxes.

Dottie57
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Re: Scaring the Old Folks

Post by Dottie57 » Thu Sep 06, 2018 2:12 pm

Starting retirement in March of this year, I did find I was tempted to spend more than in working days. i’ve updated my wardrobe to more casual. Now I seem to want a new purse and have outdoor furniture. And I have still maintained my working lfe eating out habbits. So I see more truth to the article than others.

However , am learning about how to handle retirement. Recently started doing more home cooking. I will see at end of year how I have done.

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celia
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Re: Scaring the Old Folks

Post by celia » Thu Sep 06, 2018 2:21 pm

We hardly ate out while working as we'd get home at different times and had kid/school/community activities to do in the evenings. Now that we're retired we eat out more than 3 times a week, partly due to doing more walking. Our neighborhood is surrounded by eateries and shopping and they are reasonable-distance stopping points during our walks. Of course, we walk part of it off on the walk home. :D

Iridium
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Re: Scaring the Old Folks

Post by Iridium » Thu Sep 06, 2018 2:28 pm

I saw an article in the paper (think it was WSJ) that said the same thing, but made the point a bit better: as a worker, much of your waking hours are spent on an activity that is pretty cheap: you commute in and maybe buy lunch. Otherwise, pretty much everything you spend 9-5 is covered by your employer. Perhaps the article resonated with me because I happened to read it at work (in the break room which is provided with a couple newspaper subscriptions and a variety of caffeinated beverages), but now I am starting to wonder where the idea your expenses will go down comes from. It seems you save on commute, but end up paying more in utilities and entertainment. Where is the big source of savings?

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celia
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Re: Scaring the Old Folks

Post by celia » Thu Sep 06, 2018 2:33 pm

Iridium wrote:
Thu Sep 06, 2018 2:28 pm
...now I am starting to wonder where the idea your expenses will go down comes from. It seems you save on commute, but end up paying more in utilities and entertainment. Where is the big source of savings?
For us, our expenses dropped substantially because the house was paid off, the kids were done with college, and retirement accounts were funded. All that we had left to pay were living expenses which were a small fraction of what our expenses were earlier.

NotWhoYouThink
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Re: Scaring the Old Folks

Post by NotWhoYouThink » Thu Sep 06, 2018 2:38 pm

Many of these articles conflate income with spending or expenses. When you are retired, you don't pay FICA, you don't contribute to IRAs or 401Ks, and you probably pay less income tax because your income is lower. So you can have higher monthly household expenses without needing higher income. But fear sells, and scaring old people is very good for business.

livesoft
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Re: Scaring the Old Folks

Post by livesoft » Thu Sep 06, 2018 2:39 pm

What's with all the bashing of eating out? It's one of the things that cannot be shipped overseas nor replaced with AI algorithms.

Plus eating out is very cheap if one brings home the leftovers. Take-out is even cheaper. And think of all the time savings: Less shopping. Less time preparing. No time cleaning up. I've had 6 restaurant-prepared meals just this week for $22.
Last edited by livesoft on Thu Sep 06, 2018 2:45 pm, edited 1 time in total.
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The Wizard
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Re: Scaring the Old Folks

Post by The Wizard » Thu Sep 06, 2018 2:41 pm

Hugh Prolly-Wright wrote:
Thu Sep 06, 2018 1:48 pm
Did anyone see this? http://www.marketwatch.com/story/youre- ... 2018-09-06

The article seems to make some rather foolish assumptions, chief among them, after I retire I will not change my spending habits at all.
Eating out 3X a week? That seems crazy. In most cases, these articles are written by a CFP who wants to garner business. This time, it's a journalist, but still—much of what he writes here seems utterly foreign to me.
I read the article and I think you misinterpreted something.
Article said many retirees increase their spending during first few retirement years.
I certainly have.
And when I'm in travel mode, I eat out something like 21X a week...
Attempted new signature...

delamer
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Re: Scaring the Old Folks

Post by delamer » Thu Sep 06, 2018 2:41 pm

Iridium wrote:
Thu Sep 06, 2018 2:28 pm
I saw an article in the paper (think it was WSJ) that said the same thing, but made the point a bit better: as a worker, much of your waking hours are spent on an activity that is pretty cheap: you commute in and maybe buy lunch. Otherwise, pretty much everything you spend 9-5 is covered by your employer. Perhaps the article resonated with me because I happened to read it at work (in the break room which is provided with a couple newspaper subscriptions and a variety of caffeinated beverages), but now I am starting to wonder where the idea your expenses will go down comes from. It seems you save on commute, but end up paying more in utilities and entertainment. Where is the big source of savings?
No more payroll taxes and no more savings for retirement.

Why would your utilities go up, except marginally if you adjusted your thermostat by a few degrees when you are at work?

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Sheepdog
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Re: Scaring the Old Folks

Post by Sheepdog » Thu Sep 06, 2018 2:46 pm

Hugh Prolly-Wright wrote:
Thu Sep 06, 2018 1:48 pm
Did anyone see this? http://www.marketwatch.com/story/youre- ... 2018-09-06

The article seems to make some rather foolish assumptions, chief among them, after I retire I will not change my spending habits at all.
Eating out 3X a week? That seems crazy.
Sorry to break your thoughts about old age. My wife and I are 78 and 85 respectfully. We eat out at least 2 evenings meals and 3 midday meals a week....some times more. Our spending habits are similar-- examples, for restaurants, football and basketball games (season tickets NFL), several theater and show season tickets(about 30 shows a year). We spent $111,275 in 2000 and 2001 and $125,880 in 2016 and 2017 which probably covers inflation We stopped long distance travel and cruises just 3 years ago though. It's all about what you want to enjoy in senior age life, isn't it?
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

dknightd
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Re: Scaring the Old Folks

Post by dknightd » Thu Sep 06, 2018 3:02 pm

Hugh Prolly-Wright wrote:
Thu Sep 06, 2018 1:48 pm
Did anyone see this? http://www.marketwatch.com/story/youre- ... 2018-09-06
Yep, I saw it. Don't know why I bother reading them any more. Of course it contained the requisite hire a financial planner and work till you are 70 sentences.

I expect to retire soonish. I expect my spending to be about the same as when I am working. I'll need less money since I won't pay as much tax, and will stop saving for retirement. But I expect my actual spending to stay about the same. It might go up a bit in the first few years, but I expect to balance that out later if needed.

Apparently saving for retirement is not taken seriously by some people (nobody here I assume) so these types of articles are probably a useful reminder for those folks.

Ron
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Re: Scaring the Old Folks

Post by Ron » Thu Sep 06, 2018 3:06 pm

I have to agree on the contents of the article.

My wife/me are 70 years "young" :mrgreen: , and are both retired. I retired in 2007 (11 years ago, at age 59) - she six years ago, at age 64.

We do have the convertible. I purchased it new in 2002 and even though I don't drive it often (22k on the odometer) I do keep it for that perfect spring/fall day when I can drop the top and take advantage of the sunshine. BTW, I used to drive a motorcycle (actually, I had three over the years) but I gave it up since more and more people didn't "see" me :annoyed). Yes, it does cost money to keep it on the road but it's something that I always lusted after (yes, my wife knows the story). It's a garage queen, but I/we can afford it.

Travel is my wife's passion; always has, always will be up to the point that she can't get around anymore (if I can't get around, she would go anyway 8-) ) and has done so in the past. We're both on our third passports (thus far) and have a ball traveling the world in retirement. In fact, it's certainly much easier than when we were both still employed and had to "shoehorn" our trips within our allowable vacation periods.

Since retirement, we've spent a month in Oz, a month in China, and multiple weeks in countries around the globe. In fact, we were on an ocean cruise from Amsterdam to Bergen (Norway) in July and will be going on a river cruise (France) in November. BTW, we've already booked another cruise for 2019 (Barcelona to Venice) and will be staying over in Venice for a few days at the end of the trip. We've been there several times and are always ready to return.

And when our travels are reduced/eliminated in the future? We're counting on the money we are spending/spent over the years to pay for our elder care in the future - be it for assistant living or just paying for the things we now do on our own, around the house.

Just because you're retired, it doesn't necessarily mean that you sit in front of a TV from morning to night. While we both do volunteer service for several organizations (Meals on Wheels, Hospital "NODA" volunteering), you can find us walking (the dogs) several miles a day. My wife even extends her exercise with 2-3 zumba classes each week, along with her weekly Pilates class.

You may be retired, but that doesn't mean you can't have an active life and pursue your passions once you become a senior. However, to pursue those passions often require substantial financial resources.

Just some thoughts from one who could be considered a representative of the article...

- Ron

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dogagility
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Re: Scaring the Old Folks

Post by dogagility » Thu Sep 06, 2018 6:18 pm

livesoft wrote:
Thu Sep 06, 2018 2:39 pm
I've had 6 restaurant-prepared meals just this week for $22.
You must eat like a mouse, livesoft! :P
Taking "risk" since 1995.

Gnirk
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Re: Scaring the Old Folks

Post by Gnirk » Thu Sep 06, 2018 6:25 pm

Briefly, while working we had commute costs, business wardrobe and dry-cleaning expenses, saving for retirement, and payroll taxes. in retirement we have increased leisure time, which for us means more travel expenses, more hobby expenses, and more eating out. And as we age, higher healthcare expenses.

Overall, our expenses haven't decreased in retirement. But in reality, we haven't had to cut our spending, because we have enough saved. Even if we need LTC. Hard work and yes, luck, have a lot to do with that, plus living below our means during our working years.

Sadly, there are many, many who don't have the means to enjoy their retirement years like we do.
Last edited by Gnirk on Thu Sep 06, 2018 6:32 pm, edited 1 time in total.

mouses
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Re: Scaring the Old Folks

Post by mouses » Thu Sep 06, 2018 6:31 pm

dogagility wrote:
Thu Sep 06, 2018 6:18 pm
livesoft wrote:
Thu Sep 06, 2018 2:39 pm
I've had 6 restaurant-prepared meals just this week for $22.
You must eat like a mouse, livesoft! :P
I would like to know what those meals were :-)

dknightd
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Re: Scaring the Old Folks

Post by dknightd » Thu Sep 06, 2018 6:51 pm

Ron wrote:
Thu Sep 06, 2018 3:06 pm
I have to agree on the contents of the article.

My wife/me are 70 years "young" :mrgreen: , and are both retired. I retired in 2007 (11 years ago, at age 59) - she six years ago, at age 64.

We do have the convertible. I purchased it new in 2002 and even though I don't drive it often (22k on the odometer) I do keep it for that perfect spring/fall day when I can drop the top and take advantage of the sunshine. BTW, I used to drive a motorcycle (actually, I had three over the years) but I gave it up since more and more people didn't "see" me :annoyed). Yes, it does cost money to keep it on the road but it's something that I always lusted after (yes, my wife knows the story). It's a garage queen, but I/we can afford it.

Travel is my wife's passion; always has, always will be up to the point that she can't get around anymore (if I can't get around, she would go anyway 8-) ) and has done so in the past. We're both on our third passports (thus far) and have a ball traveling the world in retirement. In fact, it's certainly much easier than when we were both still employed and had to "shoehorn" our trips within our allowable vacation periods.

Since retirement, we've spent a month in Oz, a month in China, and multiple weeks in countries around the globe. In fact, we were on an ocean cruise from Amsterdam to Bergen (Norway) in July and will be going on a river cruise (France) in November. BTW, we've already booked another cruise for 2019 (Barcelona to Venice) and will be staying over in Venice for a few days at the end of the trip. We've been there several times and are always ready to return.

And when our travels are reduced/eliminated in the future? We're counting on the money we are spending/spent over the years to pay for our elder care in the future - be it for assistant living or just paying for the things we now do on our own, around the house.

Just because you're retired, it doesn't necessarily mean that you sit in front of a TV from morning to night. While we both do volunteer service for several organizations (Meals on Wheels, Hospital "NODA" volunteering), you can find us walking (the dogs) several miles a day. My wife even extends her exercise with 2-3 zumba classes each week, along with her weekly Pilates class.

You may be retired, but that doesn't mean you can't have an active life and pursue your passions once you become a senior. However, to pursue those passions often require substantial financial resources.

Just some thoughts from one who could be considered a representative of the article...

- Ron
I think that is great. But I have to ask, if you had to live on less, or the same, as you could spend while you were working, could you also be happy? There is a conundrum for me. I could keep working and have more money to spend in retirement. Or I could quit working and have more time (but perhaps less money). I'm shooting for a compromise - maybe less money, but more time. Thoughts?

GoldenFinch
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Re: Scaring the Old Folks

Post by GoldenFinch » Thu Sep 06, 2018 7:02 pm

mouses wrote:
Thu Sep 06, 2018 6:31 pm
dogagility wrote:
Thu Sep 06, 2018 6:18 pm
livesoft wrote:
Thu Sep 06, 2018 2:39 pm
I've had 6 restaurant-prepared meals just this week for $22.
You must eat like a mouse, livesoft! :P
I would like to know what those meals were :-)
Yes. Details, please. :D

livesoft
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Re: Scaring the Old Folks

Post by livesoft » Thu Sep 06, 2018 7:27 pm

mouses wrote:
Thu Sep 06, 2018 6:31 pm
dogagility wrote:
Thu Sep 06, 2018 6:18 pm
livesoft wrote:
Thu Sep 06, 2018 2:39 pm
I've had 6 restaurant-prepared meals just this week for $22.
You must eat like a mouse, livesoft! :P
I would like to know what those meals were :-)
Well, readers of the forum already know that 3 of them were each a third of a Chipotle sofritas bowl. :) Another 3 were each a third of a great TexMex meal where I brought home leftovers. And tonight I am doing take-out Thai which I have posted a photo of before.

No alcohol though.
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cheese_breath
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Re: Scaring the Old Folks

Post by cheese_breath » Thu Sep 06, 2018 7:28 pm

GoldenFinch wrote:
Thu Sep 06, 2018 7:02 pm
mouses wrote:
Thu Sep 06, 2018 6:31 pm
dogagility wrote:
Thu Sep 06, 2018 6:18 pm
livesoft wrote:
Thu Sep 06, 2018 2:39 pm
I've had 6 restaurant-prepared meals just this week for $22.
You must eat like a mouse, livesoft! :P
I would like to know what those meals were :-)
Yes. Details, please. :D
Maybe...2 Whoppers @$6.00 three times equals $18.00 for six meals. Free senior coffees. Still leaves $4.00 for splurges. :D
The surest way to know the future is when it becomes the past.

John88
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Re: Scaring the Old Folks

Post by John88 » Thu Sep 06, 2018 7:28 pm

Duplicate don't know how to delete
Last edited by John88 on Thu Sep 06, 2018 7:32 pm, edited 1 time in total.

John88
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Re: Scaring the Old Folks

Post by John88 » Thu Sep 06, 2018 7:30 pm

The senior community center has $3 lunches and many restaurants have discounts during the week.
Last edited by John88 on Thu Sep 06, 2018 7:33 pm, edited 1 time in total.

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cheese_breath
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Re: Scaring the Old Folks

Post by cheese_breath » Thu Sep 06, 2018 7:31 pm

cheese_breath wrote:
Thu Sep 06, 2018 7:28 pm
GoldenFinch wrote:
Thu Sep 06, 2018 7:02 pm
mouses wrote:
Thu Sep 06, 2018 6:31 pm
dogagility wrote:
Thu Sep 06, 2018 6:18 pm
livesoft wrote:
Thu Sep 06, 2018 2:39 pm
I've had 6 restaurant-prepared meals just this week for $22.
You must eat like a mouse, livesoft! :P
I would like to know what those meals were :-)
Yes. Details, please. :D
Maybe...2 Whoppers @$6.00 three times equals $18.00 for six meals. Free senior coffees. Still leaves $4.00 for splurges. :D
edit: Unless he's using 2 Whoppers for 5.00 coupons. Then it's only $15.00 for six meals.
The surest way to know the future is when it becomes the past.

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cheese_breath
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Re: Scaring the Old Folks

Post by cheese_breath » Thu Sep 06, 2018 7:34 pm

John88 wrote:
Thu Sep 06, 2018 7:28 pm
Duplicate don't know how to delete
Once someone's posted after you, you can't delete anymore.
The surest way to know the future is when it becomes the past.

dknightd
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Re: Scaring the Old Folks

Post by dknightd » Thu Sep 06, 2018 7:42 pm

livesoft wrote:
Thu Sep 06, 2018 7:27 pm

No alcohol though.
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nisiprius
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Re: Scaring the Old Folks

Post by nisiprius » Thu Sep 06, 2018 7:45 pm

At the moment, we are living in a manner that feels comfortable to us, and is very comparable to the way we lived when we were working, spending that is less than 70% of our pre-retirement income. To begin with, we no longer have the burden of having to save for retirement. We only need one car. (It's two years old, we bought it even though the old car was running fine). So if you like our standard of living is lower because we only have one car instead of two, but it doesn't signify, because we aren't driving to work. And even with an eight-week road trip out to Yellowstone and back, we aren't putting as many miles on it as when I was driving 80 miles round-trip to work every day.

And we didn't even do the thing of moving to a low-cost-of-living part of the country.

I remember a book by Charles Schwab arguing that you needed 100%, not 70%. But I also remember going in for my "retirement checkup" at Fidelity in 2006 and being "sold" on a whole lot of aspirational things. The idea was to enter projected future expenses into their retirement Monte Carlo simulator.

I think there is a lot of upselling in hope of convincing you to that you need to give them as many dollars as possible for them to manage.

I can't speak for anyone else, and we're not that far into retirement (but supposedly in the high-spending part), and of course I worry about cuts in Social Security, Medicare, etc. but I would say it's gone considerably easier than we'd thought. So far. Keep your fingers crossed, etc.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Iridium
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Re: Scaring the Old Folks

Post by Iridium » Thu Sep 06, 2018 8:08 pm

celia wrote:
Thu Sep 06, 2018 2:33 pm
Iridium wrote:
Thu Sep 06, 2018 2:28 pm
...now I am starting to wonder where the idea your expenses will go down comes from. It seems you save on commute, but end up paying more in utilities and entertainment. Where is the big source of savings?
For us, our expenses dropped substantially because the house was paid off, the kids were done with college, and retirement accounts were funded. All that we had left to pay were living expenses which were a small fraction of what our expenses were earlier.
Thank you for the response. Sounds like you retired when your expenses went down, rather than your expenses going down when you retired. Which makes a certain amount of sense, actually.

delamer wrote:
Thu Sep 06, 2018 2:41 pm
No more payroll taxes and no more savings for retirement.

Why would your utilities go up, except marginally if you adjusted your thermostat by a few degrees when you are at work?
Fair point. I had interpreted expenses as meaning spending (so excluding savings and taxes). I think this was a misinterpretation on my part, as I remember now that the rule of thumb is usually expressed as 'have income to replace 70% of salary', which makes it more clear that it includes the effects of payroll tax reduction and the end of retirement saving.

I was thinking that A/C bills would be higher. At least in my case, the townhouse is set to get potentially a lot warmer when I am away, and usually outside temperatures have dropped considerably by the time I get home from work (the scale of savings might be a quirk of my local climate and work schedule). In addition, I would expect to use more electricity during the day if retired from TV, tools, opening the fridge, etc. Probably a minor effect.

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Re: Scaring the Old Folks

Post by RudyS » Thu Sep 06, 2018 8:33 pm

dogagility wrote:
Thu Sep 06, 2018 6:18 pm
livesoft wrote:
Thu Sep 06, 2018 2:39 pm
I've had 6 restaurant-prepared meals just this week for $22.
You must eat like a mouse, livesoft! :P
Many Chinese restaurants here have a main course dish for maybe $12. but it's so much food half can come home. If it's a lunch, I can figure 3 meals. So, that's close. If the whole thing is takeout, it is still "restaurant-prepared" but no tip to be added.

jclear
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Re: Scaring the Old Folks

Post by jclear » Thu Sep 06, 2018 8:51 pm

Some people have a long list of remodeling projects they’ve been putting off until they retire. It’s easy to find ways to spend. I know a couple who golf five times a week, and travel to do it too.

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nisiprius
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Re: Scaring the Old Folks

Post by nisiprius » Thu Sep 06, 2018 8:56 pm

Actually, the proof that the article is dishonest is the part about "And as you consider these things, don’t ignore inflation, which eats away at purchasing power as sure as the sun sets in the West..." Every retirement calculator, estimator, and planning tool I've ever seen includes inflation. "Replacing 70% of pre-retirement income of $100,000/year" doesn't mean 700 $100 bills every year, it means $70,000 for the first year, then increasing in accordance with inflation subsequently. That was true as far back as the Trinity study, and I think Bengen, too. Social Security is indexed for inflation, and virtually every retirement portfolio can be expected to have a positive real return--even bank accounts as long as you go for MMDA savings accounts and CDs.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

delamer
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Re: Scaring the Old Folks

Post by delamer » Thu Sep 06, 2018 9:01 pm

All of the comments mostly go to show that there is no substitute for determining your own expenses in retirement as the date gets closer, rather than relying on some rule-of-thumb.

And that it is in financial advisors best interest to get you to save as much as possible under their management.

sambb
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Re: Scaring the Old Folks

Post by sambb » Thu Sep 06, 2018 9:03 pm

i dont think eating out or in will make too much a difference if savings are really good and investments also before retirement. All depends on the net worth at the end.

TN_Boy
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Re: Scaring the Old Folks

Post by TN_Boy » Thu Sep 06, 2018 9:48 pm

RudyS wrote:
Thu Sep 06, 2018 8:33 pm
dogagility wrote:
Thu Sep 06, 2018 6:18 pm
livesoft wrote:
Thu Sep 06, 2018 2:39 pm
I've had 6 restaurant-prepared meals just this week for $22.
You must eat like a mouse, livesoft! :P
Many Chinese restaurants here have a main course dish for maybe $12. but it's so much food half can come home. If it's a lunch, I can figure 3 meals. So, that's close. If the whole thing is takeout, it is still "restaurant-prepared" but no tip to be added.
We almost always get at least one meal at home from a restaurant meal. Sometimes more. There is an Asian place near us I like - I can get 4 to 5 meals (including the one at the restaurant) out of their $15 house fried rice!

SimplicityNow
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Re: Scaring the Old Folks

Post by SimplicityNow » Thu Sep 06, 2018 10:24 pm

I don't like the use of fear to influence opinion and this is what this article is about to me.

I'm retired, wife is not but we probably eat out less then we did since I retired. And as Livesoft described, we almost always have leftovers and many times for several meals.

When my wife is retired we no will have to pay for college tuition, high property taxes, state income tax, social security or savings for retirement.

We have started to spend more on travel for ourselves but less for our kids.

I don't think there is any magic percentage of preretirement salaries that works across the board. What about those who save a large percentage of their salaries like 30+ percent? Why would they need 130% of salaries.

I think its just another ad for the financial services industry.

HIinvestor
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Re: Scaring the Old Folks

Post by HIinvestor » Fri Sep 07, 2018 1:58 am

Imho, the best way to calculate your post retirement spending is to start with a good idea of your pre-retirement spending & income as well as good guesstimates of your post retirement spending and income.

We made a simple spreadsheet, estimating these back in 2010-2011, before H retired in 2012, just to be sure things would be comfortable for us financially. It really isn’t rocket science. We lived below our income before and continue to lives below our funds coming in (even if it’s coming from different sources—pension, RMD, etc).

I think it’s fun to travel when schedules are more flexible and there isn’t a mound of paper growing on anyone’s desk. It’s also good to travel when healthier. We are enjoying travel and seeing places we enjoy. We are also having fun donning out, sometimes sharing an entre, sometimes bringing extra food home.

Only the individuals involved can know what $$$ will be right for what they want and have planned. For us, paying off all the kids’ ed expenses and our mortgage freed up lots of cash that we now can figure out how WE want to spend.

TwstdSista
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Re: Scaring the Old Folks

Post by TwstdSista » Fri Sep 07, 2018 4:17 am

Hey hey, what's with bashing eating out? I know several retired folk who eat out daily. Breakfast usually, and at a local inexpensive establishment. But that sounds perfectly delightful -- Life goals!

And Livesoft seems to be doing something right. I don't think I could get 1/3 portions our of those restaurant meals, but certainly 1/2 portions. Although 1/3 may be possible Chinese and Thai take out -- delicious. I really, really, really like eating out.

This sounds like a fantastic retirement option to me. But I'm a homebody.

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Re: Scaring the Old Folks

Post by Lynette » Fri Sep 07, 2018 6:21 am

It really depends what one wants to do in retirement. I decided to take a few years to study at a community college and fix up my house and garden. I worked into my seventies but spent about $25,000 a year for nearly 20 years on traveling overseas and locally several times a year. For now, I am far more interested in trying to get my lawn seed to grow than an overseas trip. So, I am spending less on travel but more on the renovations. Food isn't important to me and I buy a lot of prepacked salads and meals I put into the microwave, frozen food etc. I spend too much on several trips a day to get Diet Coke and Coffee at McDonald's. Eating expense is about the same as when working. Health care premiums are far higher than my excellent employer scheme. I have to pay Medicare IRMAA as I have pensions. Travel was my big expense when working and is obviously discretionary. For now, I am perfectly content studying and gardening. In fact, I am thinking of taking a Master Gardener's course. I am able to live on SS and pensions and save about 30% of this. I do withdrawals from my portfolio for RMDs but save the balance after taxes.

So unlike those who want to retire at 35, I worked into my seventies, learned to put up office politics and hassle at work but put my energy into my hobby which was travel. One can adjust one's retirement expenses to what one can afford and still live a full life especially if one is in good health. I am fortunate in that I like learning stuff which can be quite inexpensive. I enjoy the energy of the younger (and older) people in the classes I attend.

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jharkin
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Re: Scaring the Old Folks

Post by jharkin » Fri Sep 07, 2018 6:25 am

delamer wrote:
Thu Sep 06, 2018 2:04 pm
It makes a classic mistake — confusing income and expenses.

Even if it is true that people spend more in early retirement than they expected, that has no direct relationship to how much their salary was in pre-retirement.

When people are working, they pay payroll taxes, they save for retirement, and they pay higher income taxes.
People on this board do, but all the statistics say that the majority of American families don't to any really meaningful level... Some even hit traditional retirement age in debt.

So yes, for us bogleheads this article is silly, but for a lot of folks out their it may just have a grain of truth. Those people do get by, but they end up having to drastically reduce the quality of life they became used to while working.

Nowizard
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Re: Scaring the Old Folks

Post by Nowizard » Fri Sep 07, 2018 7:00 am

Not everyone pays less taxes in retirement. Some face higher income if they were super-savers placing assets in funds with excellent returns.

Tim

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Re: Scaring the Old Folks

Post by The Wizard » Fri Sep 07, 2018 8:21 am

nisiprius wrote:
Thu Sep 06, 2018 8:56 pm
Actually, the proof that the article is dishonest is the part about "And as you consider these things, don’t ignore inflation, which eats away at purchasing power as sure as the sun sets in the West..." Every retirement calculator, estimator, and planning tool I've ever seen includes inflation. "Replacing 70% of pre-retirement income of $100,000/year" doesn't mean 700 $100 bills every year, it means $70,000 for the first year, then increasing in accordance with inflation subsequently. That was true as far back as the Trinity study, and I think Bengen, too. Social Security is indexed for inflation, and virtually every retirement portfolio can be expected to have a positive real return--even bank accounts as long as you go for MMDA savings accounts and CDs.
Remember that if you were savings 30%+ of gross income your final few working years, including payroll taxes, then 70% of gross income in retirement is the same 100% of NET income that you've been living on those past five years.

Not distinguishing between gross and net is a big mistake...
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NotWhoYouThink
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Re: Scaring the Old Folks

Post by NotWhoYouThink » Fri Sep 07, 2018 8:23 am

Remember that if you were savings 30%+ of gross income your final few working years
...then you might be a boglehead.

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Re: Scaring the Old Folks

Post by The Wizard » Fri Sep 07, 2018 8:25 am

Nowizard wrote:
Fri Sep 07, 2018 7:00 am
Not everyone pays less taxes in retirement. Some face higher income if they were super-savers placing assets in funds with excellent returns.

Tim
Right.
I'm in that boat along with at least a few others here...
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Murgatroyd
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Re: Scaring the Old Folks

Post by Murgatroyd » Fri Sep 07, 2018 8:38 am

And let’s not forget another huge savings in retirement. Federal taxes. In our case (early retirement prior to SS) dropping from 19% to ZERO.

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teen persuasion
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Re: Scaring the Old Folks

Post by teen persuasion » Fri Sep 07, 2018 8:43 am

Playing with the retirement savings calculator at the end of the article I found some ridiculous results. First, it capped our actual savings numbers - apparently it's impossible to save more than 40% of your income.

Next, there's some weird discontinuity between retiring at 55 vs 56. At 55 it insisted we should save a touch over $1,000,000 for an income of nearly $71k. But at age 56 we only needed $640k for an income of $59k. Numbers then rose gradually as retirement age increased past 56. :confused

yousha
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Re: Scaring the Old Folks

Post by yousha » Fri Sep 07, 2018 8:48 am

It would very interesting how the revised income tax structure impacts how much seniors are affected and how much retirement spending changes.

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Re: Scaring the Old Folks

Post by JBTX » Fri Sep 07, 2018 10:27 am

I think the article is correct, in that you have more free time in retirement, and occupying that time may end up costing more money.

Of course, you can only spend what you can afford, so most people change their habits to accommodate their retirement income. That doesn't mean that is what they want to do, that is what they have to do.

I would expect we would eat out more than 3 times a week in retirement.

For me, it is one of the pitfalls of retiring too early. I'd rather have enough to enjoy my retirement, vs eating PBJs and mac and cheese all week and constantly worrying about spending too much money. If I have to work a little longer to make that happen, to me it is worth the trade off.

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Re: Scaring the Old Folks

Post by randomguy » Fri Sep 07, 2018 10:36 am

Iridium wrote:
Thu Sep 06, 2018 2:28 pm
I saw an article in the paper (think it was WSJ) that said the same thing, but made the point a bit better: as a worker, much of your waking hours are spent on an activity that is pretty cheap: you commute in and maybe buy lunch. Otherwise, pretty much everything you spend 9-5 is covered by your employer. Perhaps the article resonated with me because I happened to read it at work (in the break room which is provided with a couple newspaper subscriptions and a variety of caffeinated beverages), but now I am starting to wonder where the idea your expenses will go down comes from. It seems you save on commute, but end up paying more in utilities and entertainment. Where is the big source of savings?
Sitting home and watching fox news is pretty darn cheap:) So is not buying any new clothes:) Obviously my biggest savings from retiring is no longer saving 25-40% of my income. The huge tax decrease (i.e. no SS, LTGC with cost basis) is going to be around another 20% savings. Thats a lot of golf, traveling, and eating out:)

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Re: Scaring the Old Folks

Post by Flashes1 » Fri Sep 07, 2018 12:58 pm

I anticipate spending a lot more money on ME in retirement. All the money that's currently going to the kids' sports lessons, tutoring, etc, I want to spend on ME. That means I want to belong to a golf club and an ocean club which means a lot more eating out.

delamer
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Re: Scaring the Old Folks

Post by delamer » Fri Sep 07, 2018 1:00 pm

The Wizard wrote:
Fri Sep 07, 2018 8:25 am
Nowizard wrote:
Fri Sep 07, 2018 7:00 am
Not everyone pays less taxes in retirement. Some face higher income if they were super-savers placing assets in funds with excellent returns.

Tim
Right.
I'm in that boat along with at least a few others here...
There will always be outliers, but this will not be true for the vast majority.

And the super savers are not the people going to be taken by surprise by the level of their retirement spending.

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