Retiree Spending Survey

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As an experienced retiree, my spending has:

Poll ended at Tue Oct 28, 2008 3:41 pm

Increased with inflation each year since being retired
25
69%
Gone down slightly each year since retirement.
4
11%
Gone down slightly each year since retirement.
4
11%
Initially increased each year, but is now going down.
3
8%
 
Total votes: 36

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Rick Ferri
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Retiree Spending Survey

Post by Rick Ferri » Sat Oct 25, 2008 3:41 pm

I am interested in gathering statements from people who have been retired for several years. If you have been retired for some time, please give others the benefit of your experience. Your insightful comments will help others those who are preparing to retire or thinking about retirement.

Please tell us:

1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.

Thank you for your participation!

Rick Ferri

PS. Late add-on question - What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement? Please specify if this amount is pre-tax or post tax.
Thanks!
Last edited by Rick Ferri on Sat Oct 25, 2008 4:25 pm, edited 1 time in total.

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mapleosb
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Post by mapleosb » Sat Oct 25, 2008 4:09 pm

Hi Rick,

I retired six years ago at age 54. I made a difficult decision in order to try to protect one half of a pension taken as a lump sum. I was to recieve and annuity for the remainder. That lasted about three years when my former employer declared bankruptcy, terminated the pension and turned it over to PBGC.

I am spending about what we anticipated and our monthly costs remain constant with a few exceptions. We had to purchase our own health plan and that has been the biggest annual cost increase. Utilities, Food and heating oil are the others that have increased consistently since retirement. My guess is that these same items will be those that may continue to go up for the future and we have planned accordingly.

We have yet to touch any of the rollover and I have learned how to "wind the clock" again, this time in reference to the market, but, it sure is uncomfortable watching, at least more uncomfortable than I have ever been. Luckily for me, I can't find the handle. :lol:

Thanks to all of the great insight from this forum, and, especially your last post "What should I do," we have decided to wait and watch. I beleive that we fall into your last category and have enough so our AA is 25/75.

Hope that helps.

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Taylor Larimore
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Spending in retirement?

Post by Taylor Larimore » Sat Oct 25, 2008 4:18 pm

Hi Rick:

Answer to questions:

1) How long you have been retired? -- 26 years


2) Are you spending more or less than you anticipated. -- We were spending more--mostly on travel. Fortunately, a major illness was covered by health insurance.

3) How your spending has changed over the years. -- We spent more at first, mostly on travel. Spending is tapering off.

4) How do you anticipate your spending will change in the future. -- We are spending less but are giving more to our children. The big unknown is Long-term care for which we do not have insurance.

5) If the current market downturn has changed your spending plans, and if so, how. -- So far, we are living comfortably within our income. However, if our portfolio declines another 10% I anticipate we would cut back on some of the small luxuries we now enjoy.

Best wishes.
Taylor

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Sbashore
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Re: Retiree Spending Survey

Post by Sbashore » Sat Oct 25, 2008 4:31 pm

Hi Rick,

1) I've been retired for three years.
2) I'm spending less than I anticipated.
3) Since I am fortunate to have a pension income and survivor benefit, I just make 4 % a year available to spend in any given year. If, as is the case now, the market declines significantly I just potentially spend less. It doesn't change my lifestyle.
4) I anticipate my spending of my portfolio will track the direction of my various asset classes, whatever that direction may be.
5) As mentioned in number 3) I just spend a little less since 4% calculates out to be a little less.
Steve | Semper Fi

AlwaysaQ
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Post by AlwaysaQ » Sat Oct 25, 2008 5:27 pm

Interesting

1) I am finishing my thirteenth year of retirement.
2) I didn't really do much planning or anticipating.
3) My spending has been up and down. Some years I spent less than my social security and pension. Most years I spent more; sometimes quite a bit more like the year I replaced the windows and then had to also replace the roof and there was the year I put half down on a new car.
4) I expect my expenses will go up because of the cost of utilities and because I have more home improvements to do. Health related costs will also increase.
5) No the market hasn't changed my plans except that this may be a good time to get many of the home improvements done. My health and my energy level are the determining force. When I feel good I spend more because I do more - I like to travel and I belong to a travel club and I have a big list of home furnishings that need replacement.

.

unclemick
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Re: Retiree Spending Survey

Post by unclemick » Sat Oct 25, 2008 5:43 pm

Rick Ferri wrote:I am interested in gathering statements from people who have been retired for several years. If you have been retired for some time, please give others the benefit of your experience. Your insightful comments will help others those who are preparing to retire or thinking about retirement.

Please tell us:

1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.

Thank you for your participation!

Rick Ferri

PS. Late add-on question - What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement? Please specify if this amount is pre-tax or post tax.
Thanks!
I was canned(aka layoff) 1993, conviently income pretax his and hers including rental income from a duplex last year of work(1992) was right at 100k.

1. 15 yrs at the end of this year.
2. Spent way way less because of 1. above I had planned to work until Aug 2006.
3. All time low in the 90's was 12k, several 18 - 20k, two 30 and 35k remodeling yrs - Katrina wiped us out in 2005 - moved inland 1000 miles, ran 50,89(the year after with a new house, vehicle, remodeling) now settling back toward 50. Three unplanned deaths/funerals within a year after the hurricane.
4. My spending in my 60's seems to loosely track 3-5% of portfolio - health/travel ideas/remodeling/hobbies/etc.
5. Yes - discrestionary tightning is pushing me more toward 3%(SEC portfolio yield) than 5% variable - my ballpark range - I gleaned the 5% variable from Vanguard although I've seen it mentioned elsewhere.

Vs Jan 1993 - still running ballpark 50% unadjusted $ of final his and hers income with spikes here and there. Still trying to loosen up on frugal a tad.

heh heh heh - 12 to 89% of last working years income(1992) over almost 15 years. 8) age 65 so a long time(I hope) for spending to drift up with inflation.

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Sheepdog
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Location: Indiana, retired 1998 at age 65

Post by Sheepdog » Sat Oct 25, 2008 6:39 pm

. Late add-on question - What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement? Please specify if this amount is pre-tax or post tax.

Rick, I want to answer this question first. I believe ithat what is important is the amount of income you need in retirement in relation to the expenses you had before retirement. My income before retirement is not important at all because I was saving a high percentage at the time. I do wish retirement writers would not compare incomes, but instead compared expenses. In this case pre or post tax is irrelevant.
In retirement, I have, in some years, spent as much as I did as in my high expense years prior to retirement (new autos, travel, and so on). In some years I have spent less. In total, I would say overall our expenses have not changed at all, inflation ignored.

1) I have been retired 10 years I retired at age 65. We live off of investment income and Social Security.
2) We are spending as much as I anticipated. Our overall spending habits has not changed. We travel as much domestic and international. I buy autos. I buy clothes slightly less while my wife spends as much. Other expenses are virtually the same. I don't pay nearly as much income tax since I have very little taxable income, thanks to tax deferred IRAs and I Bonds and tax free Roth investments. Since 2003 we have paid less than $1000 a year in federal taxes.
3) Our spending has changed very little. Using 1998, my last year of employment, as base retirement expense constant 1.0, 1999 was 1.2; 2000 was 1.0; 2001 was 0.79; 2002 was 0.79; 2003 was 1.0; 2004 was 0.95; 2005 was 1.15;, 2006 was 1.0; 2007 was 1.1. So, even with inflation, our expenses have been fairly steady.
4) I expect expenses to increase some if medical expenses increase for one or both of us, especially a major illness or long term care expense.
5) The present downturn has not changed our spending too much so far, but it will, for sure, in the near future. My wife bought a new auto in February. I had planned to buy one for me in 2010, but I now know I will not until at least 2012. We will not take an expensive vacation this year or next. We hopefully will for our 50th anniversary in 2010 though. We will try to spend no more than 4.5% of what we have on 12/31 in 2009, so, because our investment value will be down 8 or 9% at the end of this year, we must spend less next year. Energy costs alone will make things even more challenging next year.
Jim
Last edited by Sheepdog on Sat Oct 25, 2008 11:19 pm, edited 1 time in total.
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

flowerbuyer
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Post by flowerbuyer » Sat Oct 25, 2008 8:39 pm

We were semi-retired for ten years. We owned our own business, but had a wonderful manager to take care of it for us, so we had a steady income to invest. We have been retired for three years in December, and as small business owners, our only retirement is our own savings/investments plus social security. We were invested 45% bonds, 55% mutual funds, and have seen our portfolio dive, which does have us concerned. My DH will be 70 in March, so we have to start taking out of his depleted IRA next year.
We have no debt, and are not "spenders", but we are snowbirds and he owns two houses. Expenses are not outlandish, and we can manage both right now. Besides, it's not a good time to sell. :roll:

We anticipate our expenses will remain about the same, adjusted for inflation. Except for medical expenses, which have been increasing along with health issues we are experiencing.
In retrospect, we probably should have invested more in fixed-income and less in other mutual funds, so that our portfolio would not have taken such a drastic hit.

cdelena
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Post by cdelena » Sat Oct 25, 2008 9:09 pm

1) 4 years.
2) Spending more.
3) More on health care, more on retirement housing, more on travel.
4) Will have to reduce all discretionary spending,
5) The current market downturn has reduced portfolio below the level needed to allow for ongoing living expenses.
6) Changes in location and lifestyle increased post tax expenses by 23%.

Ours may not be a situation that fits what you are trying to model. We have a failed plan that took a perfect storm. We did choose relocation and housing choice that was more expensive than our pre-retirement environment but the change was within original projections.

Two failed contracts on the property we were leaving delayed the sale for 13 months pushing into the housing drop and costing a substantial amount to close a sale and get out from under the carrying costs.

An illness required full payment out of pocket of two years of the deductible of our high deductible health insurance and additional major expenses.

Our portfolio was well diversified but too aggressive with 60% equities.

This drop in the market has had a large impact on our portfolio dropping more than 30%.

Over 60 and four years out of the workforce can be a big disadvantage in good times but in today’s environment it makes resuming a prior career almost impossible,

We have the resources to avoid a crisis for a couple of years but know full well we do not have a sustainable situation. Since there are no good options available right now we are sitting tight but are worried we face another losing RE deal and a reduction in our standard of living.

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Dale_G
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Post by Dale_G » Sat Oct 25, 2008 9:13 pm

1) Retired for 8 years

2) I spend about what I expected to

3) My spending has been pretty steady w/o any conscious budget

4) I don't expect my spending to change significantly in the future. Catastrophic health problems could change that.

5) The current market downturn hasn't changed my spending plans. An additional 50% drop in equities will make me revisit the issue however.

Add-on: I never kept track of what I spent while working, but my spending now seems to be about the same as it was during my working years. My spending now is about 50% of my last working year pretax earnings. But this is deceptive because a lot of those earnings were saved.

My own add-on: My largest expense is federal taxes at 25% of my present spending. I am not talking marginal rate. For every $3 I get to spend, I send the feds $1.

Dale
Volatility is my friend

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tetractys
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Post by tetractys » Sat Oct 25, 2008 9:21 pm

Is it possible for the moderators to add a mute selection so that others interested besides retirees can see the survey results?
RESISTANCE IS FRUITFUL

btenny
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Post by btenny » Sat Oct 25, 2008 9:25 pm

I will be retired 10 years in December. My wife has been retired 5.5 years.

We both live on about 65-70% of our pre-retirement income. The big difference is less taxes, no longer making new investments, kids grown so no school expenses and a paid for smaller retirement home.

Our expenses have gone up huge for medical insurance and medical stuff, about 700% since I retired, maybe more. We are not on Medicare yet so we pay dearly for insurance. Other stuff is slightly more expensive like utilities, travel stuff, car expenses, food, etc. than it was when we retired. We used to get by easily on our pensions and a small amount taken from our savings but now we budget big expenses like some new furniture this summer. Maybe a new car next year.

We have lost a lot in the market and may cut back some if it falls further. We could also cut back if required on travel costs. Plus we have not signed up to take our Social Security so we have that buffer if needed, I hope. So net net we are not that worried, yet.

Bill

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Rick Ferri
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Post by Rick Ferri » Sat Oct 25, 2008 9:26 pm

tetractys,

I use the "View Results' link at the bottom of the survey. Isn't it there on your computer?

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celia
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Post by celia » Sat Oct 25, 2008 9:55 pm

I agree with Sheepdog. I'm not retired yet, but when we both retire in 2 years, the following expenses will disappear: saving for retirement, mortgage, college for kids. They are each about 15-20% of our income now, so I don't think you should look at retirement expenses as a per cent of your previous income. If you want to compare your expenses when retired with your expenses before retired, that makes more sense.

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ncrews
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Post by ncrews » Sat Oct 25, 2008 10:27 pm

Hi Rick:

Have been retired for 11 years. We are able to live on our defined benefit, COLA'd pension (two careers) with no need to draw from our investments. Our spending is about the same as it was before retirement in gross and is about what we expected it would be pre-retirement. The spending buckets have changed a good deal. We still save/invest about 15% of our income, have increased charitable giving, gifts to children/grandchildren, entertainment, travel and dining out. We do not have long term care insurance so that is the primary focus of continued saving/investing as well as growing estate for our children. We spend far less on clothing, transportation (only 1 car needed) and various miscellaneous expense items.

I anticipate that our situation will improve even more next year when our mortgage pays off. While the current market situation is disconcerting, it has not effected our living standards. We recognize how fortunate we are and appreciate our previous life decisions more than we previously did. If/when I predecease my wife she will receive about 55% of pensions and will need to draw down about 12k annually from investments.

Best wishes,

Norm

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fishnskiguy
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Post by fishnskiguy » Sat Oct 25, 2008 10:31 pm

Hi Rick,

We retired on my CPI adjusted Navy pension in 1992. I worked in a post retirement job for three more years then chucked it.

From 1995 to 2004 I made about $7K per year as a fly fishing guide, and from 1995 to present my wife and I make about $8K per year combined as ski instructors. It's all fun money- dining out and fun stuff.

Initially after retiring for good, our expenses went up but mainly because we moved, and as I have learned so well over my Navy career, when you move, you bleed money for at least a year.

There was only one unexpected expense I had not bargained on in retirement: dental bills. I knew dental was not covered in our otherwise excellent health benefits. Trouble is, I was planing on the occasional filling for wife and I, but learned that in old age, instead of the $200 filling, you need the $1500 crown. Ouch!

We don't travel. Been there, done that. May go to London once more before it's all over, but that's it.

Living on half my former pay was not too hard, but we did have a nice savings nest egg to fall back on for moving in expenses.

I have said it before on this forum and will say it again, our CPI adjusted pension has kept up with all normal expenses- property taxes, food, heating, electricity, clothing, gas. When I started drawing SS three years ago, I bought my wife a new car with a three year loan and banked the rest. When wifey started SS this year it all goes in the bank (spelled Vanguard).

Color us very lucky. When I blew my right ACL this last winter, the company covered it all under Workmen's Comp and paid me $5K to boot for "disability". When I did a perfectly classic endo on my bike on Oct 3rd this month, successfully avoiding hitting a three pound terrier, but breaking five ribs in the process, Medicare plus Tricare (Military) covered the whole $8K bill.

Retirement has been good to us even with the latest downturn. I just wish it could be as good for all other retirees as well.

Chris
Trident D-5 SLBM- "When you care enough to send the very best."

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wab
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Re: Retiree Spending Survey

Post by wab » Sat Oct 25, 2008 10:49 pm

Rick Ferri wrote:1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.
1) Retired for 6 years.
2) Less. Got rid of the second home. Not traveling as much as we thought we would.
3) Fluctuates wildly due to discretionary spending (like home improvement).
4) Non-discretionary will rise, discretionary will fluctuate.
5) Income hasn't changed much (probably has gone up a little), but we'll reduce discretionary spending till we see light at the end of the tunnel.

baldeagle
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Post by baldeagle » Sat Oct 25, 2008 11:53 pm

Hi Rick,

We are aged 64. Regarding your questions:
1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.
1) 3.5 years.
2) Spending what we expected (and what we spent while working).
3) Spending nearly the same every year.
4) Expect spending will rise next year because of increase in health insurance, then return to current the following year when we go on Medicare.
5) Current downturn has not yet changed spending. We live pretty much on the yield of portfolio plus SS and a micro pension. We will examine 2008 yield in January to determine if/how much to cut back in 2009.

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tetractys
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Post by tetractys » Sun Oct 26, 2008 12:05 am

Rick Ferri wrote:tetractys,

I use the "View Results' link at the bottom of the survey. Isn't it there on your computer?
Oh by golly Rick! Thanks for pointing that out! :lol:
RESISTANCE IS FRUITFUL

JayMack
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Post by JayMack » Sun Oct 26, 2008 12:28 am

Greetings, Rick.

1) How long you have been retired.--Retired 10 years ago at age 56.
2) If you are spending more or less than you anticipated.--Somewhat less than expected.
3) How your spending has changed over the years.--We planned an initial expenditure of 80 pct of pre-retirement, pre-tax gross earnings. Expenditures were higher at first (more travel) and are now less, in part due to some medical issues that shocked us for a couple of years. Very good insurance kept our out-of pocket medical payments low, and my physical condition kept us close to home.
4) How you anticipate your spending will change in the future.--I hope to get back on the road soon. If so, the expenditures will exceed the inflation adjusted 80 pct for a while. Increased medical insurance costs will probably cause long-term expenditures to be a bit higher than 80 pct, but not by much.
5) If the current market downturn has changed your spending plans, and if so, how.--No really big changes, but we notice that we're eating out a bit less, not because we want to stay home, but because several of our retired friends are not inclined to eat out. Judging by their conversations, their AA's were overly aggressive.

What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement? Please specify if this amount is pre-tax or post tax.--80 pct of pre-retirement, pre-tax earnings is about right for our first 7 years. As noted in (3) above, medical conditions kept us from enjoying our normal activities the last 3 years.

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Grandpaboys
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Post by Grandpaboys » Sun Oct 26, 2008 7:17 am

1) How long you have been retired. 30 years
2) If you are spending more or less than you anticipated. I am spending more, because I have increased my income 250%, from when I was working, by investing in stocks in the early years. Had many sleepless nights doing so. Now have 80% invested in bonds.
3) How your spending has changed over the years. In the early years we were on a strict budget. Now income exceeds costs.
4) How you anticipate your spending will change in the future. Will go up due to health care & taxes. Under most Medicare Plan D Rx, we will hit the gap in 2009.
5) If the current market downturn has changed your spending plans, and if so, how. Not unless my Vanguard Bond Funds quit paying dividends.
Good Day | GP

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Judsen
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Post by Judsen » Sun Oct 26, 2008 7:25 am

1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.
1)12 yrs
2)Sometimes more. Sometimes less. Average same.
3)When flush some DIY home improvements. When not get more frugal.
4)I know that I don't know.
5)Yes. Spending less. Saving more cash. Learning to cook.

guest42
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Re: Retiree Spending Survey

Post by guest42 » Sun Oct 26, 2008 7:37 am

1) How long you have been retired.
Medically unable to work - 12 years now.

2) If you are spending more or less than you anticipated.
Spending is similiar to base standard of living when I was an employee - such as my paycheck had been split 3 ways; taxes, savings, my budget --- the taxes and savings portion are not there any longer - my budget remains similiar (my standard of living has remained the same)

3) How your spending has changed over the years.
Yes - some years my health expenses have been huge ($15K - even with insurance) - other then that, in recession years I've tightened my belt, in flush stock market years, I've spent on home improvements.

4) How you anticipate your spending will change in the future.
I know of no way to predict the future, other then to budget for the same plus a 4% inflation, and always budget for a possible 25% unforseen health expense.

5) If the current market downturn has changed your spending plans, and if so, how.
In this recession year, I have cut my medication costs in half - mentioned, because the talking heads say we have to continue to spend on our presciptions - they are wrong, I am not. This lack of proper medication makes life harder to manage (more focus on dietary/exercise things - more feeling icky days) but it can be done. I don't tell the doctors. Flat out, patented medication is just too expensive, when you are expected to take multiple patented medication. I get one medication from Canada. (edited to add: This is with Medicare Part D - I actually spent less on medication before this government program, as the drug companies themselves have patient assistence plans - with Part D, I no longer qualify for those - thus, it is my belief, that at least, in my case, Medicare Part D is a subsidy to the insurance industry - I'd be better off without it)

PS. Late add-on question - What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement? Please specify if this amount is pre-tax or post tax.
Already answered. My spending is my base standard of living, without the savings and high taxes portion of my emplyee paycheck wages.

Linda-room42
Last edited by guest42 on Sun Oct 26, 2008 8:36 am, edited 1 time in total.

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soaring
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Re: Retiree Spending Survey

Post by soaring » Sun Oct 26, 2008 7:53 am

Rick Ferri wrote: 1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.

What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement? Please specify if this amount is pre-tax or post tax.
1 - five years -now 63 yrs young
2 - as anticipated (except moving expenses-moved 4 times)
3 - stays about the same. no medical issues or major expenses.
4 - If health holds up then not much change in expectations. If one area gets higher than expected then I'll reduce some discretionary spending in budget.
5 - no chg in plans...yet. My expectations for growth when budgeted years ago were not high 4-5% and inflation budgeted at 4%. No legacy just have savings last a life time.

50% of gross pre-tax after savings reduced from gross. in other words grossed $1 saved 25 cents. Total earned after saving reduction is 75 cents. retirement expenses are 37.5 cents or 50% of gross (pre-tax) without savings.

gene
Last edited by soaring on Sun Oct 26, 2008 12:01 pm, edited 1 time in total.
Desiderata

Chip
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Post by Chip » Sun Oct 26, 2008 8:57 am

Good idea for a thread, Rick.

1) 7 years. Retired at age 46. Living off the portfolio, no pension, SS or anything like that.

2) About as expected, but it's been more difficult than I expected to stay at the target spending level (3.5% of portfolio, inflation-adjusted). When you have more time it's easy to spend more money. Especially if you like to travel.

3) Basically a one time increase of 20% at retirement. Fairly steady since then (in CPI-adjusted dollars), with the expected annual ups & downs resulting from home improvement, travel, etc.

4) I expect that spending increases will probably average CPI+2% over the next 20 years, if the portfolio value allows it. I think it takes CPI+2 (or maybe CPI+3) just to stay up with standard of living increases and the likely higher inflation rate for services.

5) Not yet, but thinking about it. We sort of naturally cut back our discretionary spending in 2003 as a result of the 2002 decline in the market. Our overall spending dropped 25% compared to 2002. We will likely do the same this year, but it's only "fat" in the budget.

6) Agree with other posters that the more relevant metric is post-retirement vs. pre-retirement spending (20% higher for us). But, FWIW, spending has averaged about 65% of final post-tax salary in constant dollars.

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sperry8
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Post by sperry8 » Sun Oct 26, 2008 10:38 am

Hi Rick,

1) I have been retired for 2 years.
2) I am spending more than I anticipated.
3) It's only been two years, but I am spending more on rent than anticipated (I am re-thinking my locale to save costs). I do not own a home (which ultimately may turn out to be a good thing since I may be able to buy near a market bottom).
4) I anticipate spending less eventually. However not in the next 2-3 years.
5) I was pulling 4.8% of my money out per year, but with the downturn pulling this same amount has resulted in me now taking 6.5% out. That is too high to have my money last my expected lifetime, so I will have to reduce spending dramatically now. The easiest way to do this is to move (I currently live in NYC, which is simply too expensive). I want to get it back down under 5% (I believe 4% isn't necessary at the beginning of retirement). I'll reduce to 4% or lower in my later years.
6) My spending has increased about 50% (pre-tax), most of which is due to higher rents and the higher cost of living (e.g., restaurants/shows) in NYC. I can drop this amount by relocating in a few years (unfortunately I need to be here for a yr or two more).

Shane
Humbling BH contest results: 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

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Rick Ferri
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Post by Rick Ferri » Sun Oct 26, 2008 11:03 am

Thank you for the great comments and insights so far.

It has always been my belief that retiree spending tend to increase slightly in the early years with more travel and home improvement type projects, then stabilizes at a fixed rate, and finally begins to fall later in retirement when health becomes an issue. The survey and the comments above and help reinforce my belief in a curved spending pattern.

It appears from the poll numbers that, on average, annual spending tends to reflect a fixed amount in mid-retirement rather than following an upward spending pattern (over 50% of respondents chose fixed, confirmed by comments in the text). About 30% of respondents said that their spending has go up each year with inflation, and one person so far stated that their spending has increased greater than inflation although that could the same person who wrote that their wise investment decisions have allowed them to spend more. The remaining 15% stated that spending is currently going down. The comments suggest that spending decreases when health issues dictate that a retiree remain close to home.

The information above also questions the wisdom of financial planning models that assume retiree spending increases each year with the inflation regardless of the stage of retirement, and then assumes a person wants to pass on to heirs the remaining inflation adjusted principal. Although I did not ask if it was the intent of retirees to pass on inflation adjusted principal to heirs, a fixed spending amount with slightly decreasing spending in later years implies that heirs would get all the principal plus some.

The responses to this survey show that that progressive spending amount based on inflation is not an accurate assessment of how retirees actually spend money. A curved spending pattern tend to occurs starting from a fixed rate or a slightly upward rate leading to a fixed rate, and then eventually lowering in later years when health issues increase. These issues lead me to believe that the progressive spending models used in most financial planning software may overstate the amount retirees actually need to achieve their objectives. The financial planning industry should review and address these issues to more accurately match retirement assets and portfolio asset allocation with realistic retirement spending patterns. (Note: I am not a financial planner and am not a member of any financial planning organization. However, I am a portfolio manager who works with financial planners, and I have seen some very unrealistic numbers used in financial plans.)

Thanks again to those who have taken the survey and have posted comments. If you are a retiree and have have not yet posted, please feel free to offer your observations and advice. We all learn from you, and your insight is greatly appreciated.

Rick Ferri

Joe D
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Post by Joe D » Sun Oct 26, 2008 11:08 am

Hello Rick- enjoy your books and your comments, Keep it up !

1. 80 yrs old, retired 16 years , not dependent on Investment Income, comfortable savings- good health.
Port= 60%Equity-40Fixed
2. spend a bit less than planned ,4-5%
3. More in first 12 years, less the last 6
4.Same or slightly less
5. Same Same
5-a, About 60% pre tax

PaPaw
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Re: Retiree Spending Survey

Post by PaPaw » Sun Oct 26, 2008 11:34 am

Rick Ferri wrote: 1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.
6) Late add-on question - What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement? Please specify if this amount is pre-tax or post tax.
1. A bit over 7 years, wife and I are 63,
2. About the same,
3. More on major home improvement projects and repairs, medical insurance and expenses, and entertainment/travel; less on taxes, savings, and mortgage (paid off shortly after retirement),
4. Relatively constant but increasing with inflation with medical expenses being the largest unknown,
5. Have not really changed spending plans and won't unless the downturn gets much worse (our AA is currently about 25% equity, 75% fixed - was about 35/65 at retirement reducing to 30/70 a year ago at last Investment Policy Statement rigorous review) and I have a non-COLA pension plus we both receive SS,
6. About the same after taxes.

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Tall Grass
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Re: Retiree Spending Survey

Post by Tall Grass » Sun Oct 26, 2008 11:42 am

Rick Ferri wrote:I am interested in gathering statements from people who have been retired for several years. If you have been retired for some time, please give others the benefit of your experience. Your insightful comments will help others those who are preparing to retire or thinking about retirement.

Please tell us:

1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.

Thank you for your participation!

Rick Ferri

PS. Late add-on question - What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement? Please specify if this amount is pre-tax or post tax.
Thanks!
1. Retired eight years.
2. Spending about 30% less than I thought.
3. Hasn't changed much, maybe a little for inflation.
4. Very little.
5. Not so far.

P.S. Question...I spend about 40% less than I did before retirement.
"A wise man should have money in his head, but not in his heart." - Jonathan Swift

Youngblood
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Re: Retiree Spending Survey

Post by Youngblood » Sun Oct 26, 2008 12:51 pm

Please tell us:

1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.

Thank you for your participation!

Rick Ferri

PS. Late add-on question - What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement? Please specify if this amount is pre-tax or post tax.
Thanks![/quote]

1. I have been retired ten years (retired special education teacher).
My wife has been retired for five (also a retired Sp. Ed. teacher).

2. When my wife retired we moved from the Wash. D.C. area, sold our rather large house, moved to Tennessee and purchased a condo on the Tennessee River. As a result, we don't pay yearly income tax and living in a 1875 sq ft condo has our monthly utilities for the past five years as never over $50. The condo fee we do pay but it is definitely way less than yearly repairs and maintenance we spent on our single family home. I love the freedom and carefree existence of condo living. I guess I didn't realize how much work I was putting into the home. BTW, this is our second condo since moving. The first was not a concrete building as this one is. The first was too noisy! So now, this is the quietest place I have ever lived. So the plan to spend less in a cheaper area and downsize has worked perfectly. Plus in addition to zero yard and maintenance work, not cleaning four bathrooms, five bedrooms, the basement, garage is a dream come true. You couldn't pay me enough to sell this condo and buy a house again.

Living on two defined benefit plans and with only federal taxes deducted we really have more now than we did while working, i.e. large house, kids, paycheck deductions, savings etc. My wife and I worked for two different school systems and fortunately mine continued paying for the same medical, dental and drug benefits as current teachers have. Really, we are still able to save a lot even though we're not trying.
So, we just do, go and buy whatever we want and are still spending less.

3. The spending has gone from most if it spent on raising three daughters though college and marriage, saving for retirement to, just spending on ourselves and gifts to daughters and grandchildren. Those gifts are a lot less than the previous stages cost. We have taken a few Elderhostel trips and have enjoyed those.

4. At sixty, I'm still doing the things I love to do such as running and hiking. So the things that I love most are virtually free. My wife, however, loves to travel so I expect we will have to start flying more. We both started going to the doctor for yearly check-ups so we are already spending something on health care. Sooner or later that is bound to go up even with health care insurance. We'll also be giving away more.

5. I'm reluctant to spend large amounts of money because of the declining stock market even though it wouldn't require any withdrawals. Considering how short my life is at this age, probably a stupid thing to do.

Follow-up: We have 100% and it sure feels great not having to change anything we don't want to change. This is both pre-tax and post-tax.
"I made my money by selling too soon." | Bernard M. Baruch

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alvinsch
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Re: Retiree Spending Survey

Post by alvinsch » Sun Oct 26, 2008 1:29 pm

Rick Ferri wrote: 1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.
6) What is the percentage of income you found that you needed in retirement in relation to the income you were earning before retirement?
1. 6.5 years

2. A bit more than expected but waited to retire until portfolio was large enough to support that level of spending even if equities dropped 50%. Looks like that's where we are but we had 6.5 "fat" years where we only spent 2/3 of what our withdrawal level would have supported so we have a nice buffer built up.

3. As expected our spending did jump after early retirement because we both suddenly had time to spend money instead of working all the time. So far our spending has probably gone up slightly faster than inflation but not excessively so.

4. That's a tough one. We've started to cut back some on travel but not because of the money but rather because travel is becoming less and less fun with all the hassles. Can't remember the last time we actually had a "clean" international vacation where some flight wasn't canceled. We also spend a lot of money on our horses which eventually will wind down some as we become more concerned about our health (i.e. we've stopped jumping them).

5. We haven't overtly changed our spending plans but in true diehard fashion I'm sure its having a psychological impact in that we're a little bit slower to "blow" money. Also we've thought about moving to a place with acreage so we could eventually retire our horses there but those plans will be on hold until market recovers.

6. Like others have mentioned, relating to income is pretty irrelevant because we were saving such a large portion of our income. I'd guess our spending jumped maybe 20% over what we were spending when we were both still working.

- Al

rwwoods
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Post by rwwoods » Sun Oct 26, 2008 2:10 pm

My wife and I have been retired for 5 yrs. I took Social Security at 62, but the wife is waiting until she is 66. I have a very small pension and the rest of our income is from investments.

Our basic expenses, other than medical, have generally been rising at the inflation rate. Medical was a real cost problem since we both retired. The cost of the group medical plan became outragious. Now that I am on Medicare and my wife has a more cost effective plan, the cost is now manageable. Medical insurance is the most important issue facing early retirees.

We are able to spend more money on eating out and for vacations than we originally planned, but its because other expenses have been lower than expected.

Because of present market conditions, next year's budget will be the same as this year with no adjustments for inflation.

We need about 65% of or combined pre-retirement income.
"I'm not so much concerned about the return on my money as the return of my money" - Will Rogers

Youngblood
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Re: Retiree Spending Survey

Post by Youngblood » Sun Oct 26, 2008 2:54 pm

alvinsch wrote:

4. That's a tough one. We've started to cut back some on travel but not because of the money but rather because travel is becoming less and less fun with all the hassles.


- Al
That seems to be the path we're taking too Al.

Plus, it just seems as though one of us gets sick every time we fly.

Youngblood
"I made my money by selling too soon." | Bernard M. Baruch

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Post by ruralavalon » Sun Oct 26, 2008 3:33 pm

celia wrote:I agree with Sheepdog. I'm not retired yet, but when we both retire in 2 years, the following expenses will disappear: saving for retirement, mortgage, college for kids. They are each about 15-20% of our income now, so I don't think you should look at retirement expenses as a per cent of your previous income. If you want to compare your expenses when retired with your expenses before retired, that makes more sense.
I agree. When I retire in 1 - 2 years, major expenses will change substantially, such as: (1) 401k contribution of ~ 15% of income; (2) medical insurance, of ~ 16% of income; (3) self-employment tax of ~ 12% of income; etc..

I just don't know what the etc. will amount to, as we have never really operated on a budget. Knowing what to expect in terms of percentage of pre-retirement expenses would be a great help in planning.

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retiremant spending

Post by normsie » Sun Oct 26, 2008 3:37 pm

hello rick,

i retired 11 years ago.

my spending is about the same each year. sometimes more for a trip.i anticipate that it will go down in the future .it will go down since the market implosion has me scard.my balanced portfolio has lost about 22% in total value.

my spending habits are fairly simple.i just don't buy what i don't need.

my biggest concerns are rising health care and the need for long term care.i did not purcahse a long term policy because it appeared i had enough assetts to cover that need.it is iffy now and unless i live a long time and the market recovers,i'll have to be very careful.

JerseyJim
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Retirement Spending

Post by JerseyJim » Sun Oct 26, 2008 5:06 pm

1. I retired 3 years ago at age 55 with a defined benefit pension and a subsidized medical plan.
2. My expenses are about the same as I expected other than this year when I had a bathroom renovated and an upcoming wedding this Saturday for my daughter.
3. My major spending increase has been due to medical expenses.
4. I expect my expenses to be fairly constant (inflation adjusted) before decreasing in about 10 years.
5. I’m keeping an eye more on discretionary items but have not made any major spending changes yet.
6. My retirement expenses are approximately 75% of pre-retirement income.

JerseyJim

netsak
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Post by netsak » Sun Oct 26, 2008 7:03 pm

1. 13 years. Great pension after 35 years. Have not spent much investment income so far.
2. Spending more. Retired from midwest to SW FL. Everyday costs are skyrocketing.
3. Spending increasing with further inflation.
4. Expect future spending to increase with more inflation, old age health issues and expected tax increases. Property taxes (school) are out of control.
5. No changes expected because of current market downturn. Started pulling back on equities earlier in the year and finally out of equities alltogether last month. We escaped 2008 with a negative return of 13%.
Simply refused to let the market dictate our style of living.
6. 85/90% pre-tax and that is a guess. .

netsak

ronr
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Post by ronr » Sun Oct 26, 2008 9:29 pm

1) How long you have been retired.
2) If you are spending more or less than you anticipated.
3) How your spending has changed over the years.
4) How you anticipate your spending will change in the future.
5) If the current market downturn has changed your spending plans, and if so, how.
I've been retired about 10 years.

I'm spending about what we planned prior to retiring.

When I set up our post-retirement budget years ago, I looked at the average of what we had spent over three years 1995-1997 and made adjustments that I thought were appropriate for being retired (i.e. more for travel, vacation and health care; less (none) for retirement savings). Some of the expenses increase with inflation, but others (for example, home mortgage costs) do not. All this was factored into our future spending plans, and we've run pretty close.

My income comes from a variety of sources, including some office rentals, a disability policy, stock market investments, and (now) Social Security.

With the current downturn (polite term for crash) in my stock holdings, we've decreased our total spending by about 10-15%. We've done this by focusing on our discretionary spending -- we eat out less; buy fewer "toys"; are more aware of prices when shopping; economize on vacations. I recently joined a gym for $20/month instead of buying a home Elliptical Trainer for $1700.

None of these "sacrifices" have been difficult, and we could cut back more if necessary.

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CABob
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Re: Retiree Spending Survey

Post by CABob » Sun Oct 26, 2008 10:53 pm

1. Age 69, retired 6 years ago, wife retired about 1.5 years after I.
2. Perhaps spending a bit less than I anticipated.
3. Spending has been about constant plus inflation.
4. I expect spending to continue approximately same barring major health issues.
5. Have not changed spending with current market except may delay some home improvements.
Add on Q. I haven't figured it precisely, but, estimate that income is about 65% of pre-retirement pre-tax.

Interesting survey, Rick. If you summarize this into some usable form I would like to see it.

Bob

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Post by Enzo IX » Sun Oct 26, 2008 11:19 pm

Mr. Ferri,

Thanks for contributing to the board.

1. About 6 years. 47 yrs old.

2. About what I anticipated, healthcare premiums more than I thought, going up alot faster than the Gov't inflation rates. Over doubled with reduced benefits to boot.

3. Stayed about the same, always been real frugal except for vehicles, recently been spending more on recreation. Doing some hobbies that in the not to distant future won't be able to physically do.

4 Status Quo, maybe spend more time and money traveling while I still can.

5. Yes, definately still spending on the above, but I'm just spending on basics no fluff, for example I was considering trading a car for another for a difference of 10k, in any other year it would be a non event but I said no and put this on hold until further notice. Same with a new motocross bike for 7k, just gonna have to do with the old one for now. All available cashflow going to buying equities right now.

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Post by unclemick » Mon Oct 27, 2008 10:08 am

Rick Ferri wrote:Thank you for the great comments and insights so far.

It has always been my belief that retiree spending tend to increase slightly in the early years with more travel and home improvement type projects, then stabilizes at a fixed rate, and finally begins to fall later in retirement when health becomes an issue. The survey and the comments above and help reinforce my belief in a curved spending pattern.

It appears from the poll numbers that, on average, annual spending tends to reflect a fixed amount in mid-retirement rather than following an upward spending pattern (over 50% of respondents chose fixed, confirmed by comments in the text). About 30% of respondents said that their spending has go up each year with inflation, and one person so far stated that their spending has increased greater than inflation although that could the same person who wrote that their wise investment decisions have allowed them to spend more. The remaining 15% stated that spending is currently going down. The comments suggest that spending decreases when health issues dictate that a retiree remain close to home.

The information above also questions the wisdom of financial planning models that assume retiree spending increases each year with the inflation regardless of the stage of retirement, and then assumes a person wants to pass on to heirs the remaining inflation adjusted principal. Although I did not ask if it was the intent of retirees to pass on inflation adjusted principal to heirs, a fixed spending amount with slightly decreasing spending in later years implies that heirs would get all the principal plus some.

The responses to this survey show that that progressive spending amount based on inflation is not an accurate assessment of how retirees actually spend money. A curved spending pattern tend to occurs starting from a fixed rate or a slightly upward rate leading to a fixed rate, and then eventually lowering in later years when health issues increase. These issues lead me to believe that the progressive spending models used in most financial planning software may overstate the amount retirees actually need to achieve their objectives. The financial planning industry should review and address these issues to more accurately match retirement assets and portfolio asset allocation with realistic retirement spending patterns. (Note: I am not a financial planner and am not a member of any financial planning organization. However, I am a portfolio manager who works with financial planners, and I have seen some very unrealistic numbers used in financial plans.)

Thanks again to those who have taken the survey and have posted comments. If you are a retiree and have have not yet posted, please feel free to offer your observations and advice. We all learn from you, and your insight is greatly appreciated.

Rick Ferri
Your assesment strikes me as fairly accurate - 1995-2005 we used to have a once a month lunch/guest speaker for retirees from my company with the mix changing as some people got older(not me :lol: ).

Travel/local volunteering/ then less due to health/etc. Not exact for everyone - but now that I think about it - sort of along the lines you posted.

heh heh heh - 8)

inve$t0r
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Any ideas for me?

Post by inve$t0r » Mon Oct 27, 2008 10:42 am

Retired in my 40s, 6 years ago. I was widowed young, no kids, so my plan was to spend it down to zero. I asked my Vanguard financial planner to come up with a spending plan (with a declining balance) that will get me to zero by age 90 or whatever. But VG seem to be stuck on capital preservation. Meanwhile, I've been too chicken to spend as much as I should.

Ron
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Post by Ron » Mon Oct 27, 2008 12:35 pm

I didn't reply to the vote, since I've only been retired a bit over a year and my wife is still "gainfully employed :lol: ".

However we do mainain "separate budgets", with mine covering the basics of life (e.g. home expenses, health insurance, taxes, food, insurance, etc.)

My wife's income is excusively "hers" primarily to fill her desire to "travel the world".

Anyway, based upon my (real expenses), I've adjusted for inflation, but have not increased my base budget projection.

Of course, my wife :roll: had us travel to the Netherlands (this spring, for the Tulips, and of course the red light district of Amstedam 8) ), along with two weeks out to the west coast), and she's just confirmed our trip "down under" next June.

T.G. she pays for her trips (I certainly could not afford it :wink: )...

- Ron

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prentis
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Re: Retiree Spending Survey

Post by prentis » Mon Oct 27, 2008 1:16 pm

1. 4 years but my wife is still working part time.
2. My wife and I are spending pretty much what we planned, which is on the order of 80% (post tax) of my income upon retirement. We paid off the mortgage and of course no longer contribute to the 401K so that really reduces our monthly outlay. Except for not having commuting expenses and not needing a white collar wardrobe any more everything else we spend is pretty much the same.
3. We for the most part don't think too much about how we spend. We aren't very big on retail therapy in the first place. But I do review our past year expenses at year end to see where the money is going and if we need to make any changes but so far it is business as usual.
4. Probably. See number 5.
5. We use Henry Hebler's www.analyzenow.com computer models to tell us our sustainable spend rate for the coming year based on current assets and life expectancies, autopilot style. With the shrinking of our IRA due to the downturn I expect when we run the numbers we will have to cut back for a while. Time will tell.
A good landing is one that you can walk away from.

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Rick Ferri
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Post by Rick Ferri » Mon Oct 27, 2008 2:06 pm

prentis,

Thanks for the link. The Free Pre Retirement Planner is the basic model type that does not to take into consideration spending changes during retirement. It assumes you will continue to spend the same amount every year until death, adjusted for inflation, regardless of what happens to you or the markets, with the sole exception of selling your home. That does not appear to be a realistic scenario.

A better approach is to assume there are three phases in retirement, with a person selecting the number of years they anticipate being in each stage:

1) Active retirees - expenses are going up each year with inflation.
2) Less active retirees - expenses flatten to a fixed amount.
3) Inactive retirees - expenses decline due to health or other factors.

I would like to see financial planners start to look at retirement spending in three phases when considering the amount a person needs at retirement. This approach would also better match annual cash flows to annual liabilities, and may allow people the opportunity to take out a little more early in retirement because they will be taking out less in the later stage.

Rick Ferri

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