What is a Reasonable Retirement Cost of Living?

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rholt
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What is a Reasonable Retirement Cost of Living?

Post by rholt » Thu Dec 14, 2017 12:42 pm

I am 51 and plan on working until at least 62. Nevertheless, I do want to plan for retirement. So many of the retirement planning discussions revolve around one's annual cost of living in retirement. Anyone have any suggestion as to how I could guessstimate that figure now?

Our household expenses right now are not a useful guide. We have two kids in high school at peak "money pit" level. Actually - I assume they will be a money pit for the next 8 years or so. After that - I assume (hope) they will be off our income statement.

So - assume we are talking about a 62 year old debt free couple living in a somewhat high cost of living area (Northern Virginia). The couple is reasonably frugal, but enjoys giving gifts, some domestics and international travel, and a couple evenings out per week. Acknowledging that health care is a huge unknown - what is a reasonable number (in today's dollars) to use for planning purposes for annual cost of living? $150K? I just don't know.

Thanks,

livesoft
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Re: What is a Reasonable Retirement Cost of Living?

Post by livesoft » Thu Dec 14, 2017 12:45 pm

Just use what you spend now. If you end up spending less, then you will be pleasantly surprised. I guess I also have to ask why do you think you are spending so much on kids in high school? They should get some jobs in a retail food establishment where they get free meals, too. I know that's what I had to do when I was that age.

OK, your mortgage should be paid off by then, so subtract that expense.
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rholt
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Re: What is a Reasonable Retirement Cost of Living?

Post by rholt » Thu Dec 14, 2017 12:58 pm

livesoft wrote:
Thu Dec 14, 2017 12:45 pm
J I guess I also have to ask why do you think you are spending so much on kids in high school? They should get some jobs in a retail food establishment where they get free meals, too. I know that's what I had to do when I was that age.
This is Northern Virginia - kids aren't kids - they are an investment.
  • High School Tutors
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No time for that job at McDonalds - that isn't going to help you get into Harvard. They have to do something "enriching" (which usually doesn't pay).

I am half joking with all of this - but only half joking. When and where I grew up, teen expectations were more akin to what you described - but that feels a long time ago in a galaxy far away.

So - yes - I expect my expenses will be a LOT lower with the kids out of the picture.

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Re: What is a Reasonable Retirement Cost of Living?

Post by livesoft » Thu Dec 14, 2017 1:00 pm

I graduated from high school in Northern Virginia. I know it quite well. A 40+ hour a week job got me into a private elite university. That was an outstanding EC.
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rholt
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Re: What is a Reasonable Retirement Cost of Living?

Post by rholt » Thu Dec 14, 2017 1:07 pm

livesoft wrote:
Thu Dec 14, 2017 1:00 pm
I graduated from high school in Northern Virginia. I know it quite well. A 40+ hour a week job got me into a private elite university. That was an outstanding EC.
I don't doubt it was a great credential and it may have been quite common when you were a teenager. It is rare to the point of being nonexistent now - at least in Arlington.

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Re: What is a Reasonable Retirement Cost of Living?

Post by Jack FFR1846 » Thu Dec 14, 2017 1:10 pm

Post kid costs, I'm planning on $50k a year. Without kid costs, it's more than I presently spend. With kids cost, 3 times that. I'm in low cost Boston suburbs.

:shock:
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MikeWillRetire
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Re: What is a Reasonable Retirement Cost of Living?

Post by MikeWillRetire » Thu Dec 14, 2017 1:18 pm

I live just north of you in Maryland with two kids in college right now. I've been tracking my expenses for 5 years now. Before they started college, my expenses were $107k, including a mortgage, but not including income tax. Out of that, I attributed $27k to kids expenses.
With the mortgage paid off, and the kids independent, I am estimating that my retirement expenses will be $80k (before income taxes) if I stay in the DC metro area.

NextMil
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Re: What is a Reasonable Retirement Cost of Living?

Post by NextMil » Thu Dec 14, 2017 1:31 pm

Do you take 66 in? That may factor into your costs. :wink:

What I have read is everything from 70% of your current budget during your last working years to 100% of your budget pre-retirement. I would go with 100% personally.

I have also heard 25X annual expenses invested as a minimum.

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Re: What is a Reasonable Retirement Cost of Living?

Post by The Wizard » Thu Dec 14, 2017 2:04 pm

I prefer to call it Desired Retirement Income rather than Expenses.
I worked about five years after my youngest kid graduated college and was able to up my savings rate to around 30% of gross income then.

So when I retired in 2013, I targeted roughly the same "take-home pay" as in my final working years.
This has worked out well and allows me to travel more with all the free time now...
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smitcat
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Re: What is a Reasonable Retirement Cost of Living?

Post by smitcat » Thu Dec 14, 2017 2:29 pm

Problem is no two families retirement costs will be the same and the word 'reasonable' is relative.
We tracked our costs for many years and we see what we live on and how much went to or for the 'kids'.
So its quite easy to remove those costs, remove the mortgage costs and review the rest of the spreadsheet.
We will also be moving so we made adjustments for the differences in costs and taxes that our move represents.

After those adjustments we end up with what we consider our pre retirement reasonable costs.
But in retirement we wanted to have a larger ability to spend so we added that into the retirement budget.
FWIW - we still are well under $150K per year with a paid off home.

You really need a personalized budget based upon your history and/or plans.

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Re: What is a Reasonable Retirement Cost of Living?

Post by soccerrules » Thu Dec 14, 2017 2:53 pm

here is what I did.

Set up an account with Mint and then monitored my actual spending in certain categories over 3/6/9/12 months. Once you hit a year I would then re-evaluate each year and see what increases/decreases. Also with most of these programs you can export to Exel and then create a spreadsheet for "what'if's".

I am in the same boat. 1 off the payroll, 1 in college and 1 in HS.

Here are the area's that I see will have a reduction.
Mortgage - gone
Car payment - gone
Life Insurance - gone
College Expenses - gone (those paid from cash) - Rent, Food, Books, Utilities
Car Insurance - 1-2 cars , not 4-5.
Car Repairs (see above)
Cell Phone - 2, not 5
Kids Activities - sports, music, whatever
Food - feeding 2, not 3-5 + friends
Restaurants - ?? may go down/flat/up - less people
Work Related - Car expense, clothes, meals

Increase (for us)
Travel
Healthcare before 65 - i'm using $1,000/mo
Property Taxes
Home Insurance

I have found it fairly easy to get within i think a 5-10% margin for error and will refine it as we get closer. Using the spreadsheet and breaking down some of the expenses for a monthly average, did help.

I looked at the 1) Bare minimum budget ($40-50K) to a 2) Desired Budget( $90-100K)
Don't let your outflow exceed your income or your upkeep will be your downfall.

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HomerJ
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Re: What is a Reasonable Retirement Cost of Living?

Post by HomerJ » Thu Dec 14, 2017 2:56 pm

rholt wrote:
Thu Dec 14, 2017 12:42 pm
Our household expenses right now are not a useful guide.
Of course they are.
We have two kids in high school at peak "money pit" level.
So subtract them out. Or just assume you'll spend as much in retirement on trips and fun as you do on your kids today.

Will your house be paid off when you retire? There's a big number you might be able to subtract.

It's not that hard at your age, assuming you're going to live basically the same lifestyle in retirement.

Start with figuring out what you are spending now each year.

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HomerJ
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Re: What is a Reasonable Retirement Cost of Living?

Post by HomerJ » Thu Dec 14, 2017 2:58 pm

rholt wrote:
Thu Dec 14, 2017 1:07 pm
livesoft wrote:
Thu Dec 14, 2017 1:00 pm
I graduated from high school in Northern Virginia. I know it quite well. A 40+ hour a week job got me into a private elite university. That was an outstanding EC.
I don't doubt it was a great credential and it may have been quite common when you were a teenager. It is rare to the point of being nonexistent now - at least in Arlington.
Might be a way for your kids to stand out then (and build some character). Anyway, figure out what you're spending on them. You can round to the nearest ten thousand, which makes it super easy, and still useful.

flyfishing
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Re: What is a Reasonable Retirement Cost of Living?

Post by flyfishing » Thu Dec 14, 2017 3:13 pm

When the two "kids" grow up- get married and say each has two children then you have 8 to gift instead of two.. Family outings, holidays, birthdays, 529 plans, etc.. It may be a pleasure to enjoy doing all that- but don't underestimate the cost.

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GerryL
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Re: What is a Reasonable Retirement Cost of Living?

Post by GerryL » Thu Dec 14, 2017 3:31 pm

I will reiterate what others have pointed out above: A history of your own spending is much more useful than "what others spend" for figuring out your expenses in retirement. Subtract or reduce expenses that will disappear or decrease. Add in amounts for new expenses. Maybe add in 5-10% as a safety factor, at least for the early years.

If you are not routinely tracking your actual expenses already, you still have time to start. Several years worth of data will help you realistically (not perfectly) estimate your future spending. It will also reduce the stress of trying to imagine what life will be like when the paychecks stop.

I had 20+ years worth of spending data in Quicken when I approached retirement. That much detailed info enabled me to make estimates instead of just guesstimates. Three years into retirement, the practice helps me make sure I am not over shooting my plans. (In fact, I can see that I am not spending enough. A much better problem than worrying about running out of money.)

Not Law
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Re: What is a Reasonable Retirement Cost of Living?

Post by Not Law » Thu Dec 14, 2017 3:38 pm

What you currently spend less those costs that will be gone by the time you retire.

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onthecusp
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Re: What is a Reasonable Retirement Cost of Living?

Post by onthecusp » Thu Dec 14, 2017 4:10 pm

Absolutely a personal number, and for my part hard to estimate even just a year or two out. I'm look at a range from 90k to $120k. Low to high is basically dependent on controlling simple discretionary costs such as eating out at nice restaurants a lot vs. once a month, renegotiating cable / insurance / kicking the kids off the cell phone plan, luxury vacations every year vs. lower cost with better planning.

I could subtract $24k if we downsize from our current oversized house and got rid of the mortgage, probably more due to lower property taxes and stop pool maintenance.

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Re: What is a Reasonable Retirement Cost of Living?

Post by David Jay » Thu Dec 14, 2017 4:16 pm

My quick-and-dirty calculation is current take-home, minus mortgage, plus health care.

All the kids are out of college, so there are no offsets there. I think this is a comfortable number as we have nearly a thousand a month going into our checking account (above fixed expenses) that we spend as we choose.
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Re: What is a Reasonable Retirement Cost of Living?

Post by KlangFool » Thu Dec 14, 2017 4:27 pm

rholt wrote:
Thu Dec 14, 2017 12:42 pm

what is a reasonable number (in today's dollars) to use for planning purposes for annual cost of living? $150K? I just don't know.
rholt,

If you are spending 150K now, you should be able to retire on 150K per year. If you cannot afford to retire on 150K per year, why are you spending 150K per year now?

<<Our household expenses right now are not a useful guide. We have two kids in high school at peak "money pit" level. Actually - I assume they will be a money pit for the next 8 years or so. >>

Does that 8 years include their time at the Ivy league at about 60K to 80K per year?

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Conch55
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Re: What is a Reasonable Retirement Cost of Living?

Post by Conch55 » Thu Dec 14, 2017 4:38 pm

I tracked spending several years prior to early retirement 3 years ago and continue to track now. Since retirement our expenses have been lower than I predicted. I believe some of the reduction is related to the adjustment from earning to spending and concern about having enough for the long haul. Having said that, our expenses are roughly 20% lower now. Kids are gone, house is paid for, health is generally good.

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Re: What is a Reasonable Retirement Cost of Living?

Post by delamer » Thu Dec 14, 2017 4:39 pm

HomerJ wrote:
Thu Dec 14, 2017 2:56 pm
rholt wrote:
Thu Dec 14, 2017 12:42 pm
Our household expenses right now are not a useful guide.
Of course they are.
We have two kids in high school at peak "money pit" level.
So subtract them out. Or just assume you'll spend as much in retirement on trips and fun as you do on your kids today.

Will your house be paid off when you retire? There's a big number you might be able to subtract.

It's not that hard at your age, assuming you're going to live basically the same lifestyle in retirement.

Start with figuring out what you are spending now each year.
Agreed.

Also, do one retirement budget that covers basic needs (housing, transportation, food, healthcare, taxes) and a second that includes the basics plus discretionary spending like travel, gifts, luxury cars, or whatever else you'd like but could live without. If you can figure out how to cover the basics, your planning will be less anxiety-ridden.

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Re: What is a Reasonable Retirement Cost of Living?

Post by 1210sda » Thu Dec 14, 2017 7:37 pm

You're 51 and plan to retire in 11 years at age 62.

As has been already suggested, try to determine which expenses will drop off at (or by) retirement. Add up the ones that remain at retirement plus any new expenses that you anticipate. Then reduce that amount by your estimate of your social security benefit and pension if any. The remainder are your residual living expenses. (RLE)

Then, If you want a quick guesstimate of how much that will be in future value dollars, multiply your RLE by 130% to 140% to account for inflation. (1+3%)^11 You can then multiply that amount by 25 (or divide by 4%). This will guide you as to how much you need to have accumulated by age 62. (Example: Current RLE = 71,429 x 140% = $100,000 x 25 = $2,500,000 in FV dollars)

The closer you get to retirement, the more accurate your estimates. Keep track of everything every year from now until age 62.

1210

J295
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Re: What is a Reasonable Retirement Cost of Living?

Post by J295 » Thu Dec 14, 2017 9:39 pm

So variable based on personal situation.

Your best guess will probably be fairly close; but if you really want to know track your expenses for a couple of years.

Dottie57
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Re: What is a Reasonable Retirement Cost of Living?

Post by Dottie57 » Thu Dec 14, 2017 9:43 pm

I include net pay check amount - savings ( verified through checking account - wher all bills are paid from).
From that add medical premiums and income taxes.

It gets me pretty close.

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Re: What is a Reasonable Retirement Cost of Living?

Post by sailaway » Thu Dec 14, 2017 9:50 pm

You could figure out what you are paying for the kids now.

You also need to take into account what you hope to do in retirement.

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Re: What is a Reasonable Retirement Cost of Living?

Post by Watty » Thu Dec 14, 2017 11:48 pm

Your cost of living will also be different at different ages in retirement. For a couple the expenses will also change if one of them survives the other.

Be sure to include taxes in your calculations, I you expect to need $5,000 a month to spend then you need more income than that to have $5,000 a month left after paying taxes.
soccerrules wrote:
Thu Dec 14, 2017 2:53 pm
I looked at the 1) Bare minimum budget ($40-50K) to a 2) Desired Budget( $90-100K)
Jack FFR1846 wrote:
Thu Dec 14, 2017 1:10 pm
Post kid costs, I'm planning on $50k a year.
It will vary by area but if those numbers include;
a) having a paid off house
b) having started medicare

Then I agree that $50K a year is a reasonable goal for your core retirement expenses for a nice modest middle class lifestyle. Things like lots of travel or being in a nursing home would increase the expenses.

People can and do live on a lot less but in most parts of the country but if you are trying to set a goal you should shoot higher.

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Re: What is a Reasonable Retirement Cost of Living?

Post by spammagnet » Fri Dec 15, 2017 1:45 am

onthecusp wrote:
Thu Dec 14, 2017 4:10 pm
... kicking the kids off the cell phone plan ...
Our young adults are still on our plan. It's cheaper for them to pay us than to get a separate. I just send a payment request in Venmo when I get the bill. If DS's usage exceeds the plan, he gets to pay the entire over charge.

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BillyMot
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Re: What is a Reasonable Retirement Cost of Living?

Post by BillyMot » Fri Dec 15, 2017 3:22 am

Two "kids" must- get married and say each has two children then you have 8 to gift instead of two.. Family outings, holidays, birthdays, 529 plans, etc..

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Re: What is a Reasonable Retirement Cost of Living?

Post by Ready3Retire » Fri Dec 15, 2017 7:01 am

Since my pension and 401k withdrawals will be pre tax, I prefer to use gross/pre-tax for estimating a retirement income target. Since I won't be making 401k contributions or paying FICA when I'm retired, I'm using my current gross less 401K contributions and FICA. So if someone is grossing $151,400 while working, they'd have similar cashflow with a $120K pre-tax retirement income (gross less [$24k+$7.4K]). Seems to me like this is a conservative estimate * since it doesn't even account for those expenses that should go away (e.g. 2 cellphones ilo 3, 2 vehicles ilo 4, college costs that 529 doesn't cover, etc).

* My Megacorp employer charges me about $500 per month now for healthcare, and I'm elgible to use a slighly more expensive version of this until I turn 65.

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Re: What is a Reasonable Retirement Cost of Living?

Post by smitcat » Fri Dec 15, 2017 7:09 am

soccerrules wrote:
Thu Dec 14, 2017 2:53 pm
here is what I did.

Set up an account with Mint and then monitored my actual spending in certain categories over 3/6/9/12 months. Once you hit a year I would then re-evaluate each year and see what increases/decreases. Also with most of these programs you can export to Exel and then create a spreadsheet for "what'if's".

I am in the same boat. 1 off the payroll, 1 in college and 1 in HS.

Here are the area's that I see will have a reduction.
Mortgage - gone
Car payment - gone
Life Insurance - gone
College Expenses - gone (those paid from cash) - Rent, Food, Books, Utilities
Car Insurance - 1-2 cars , not 4-5.
Car Repairs (see above)
Cell Phone - 2, not 5
Kids Activities - sports, music, whatever
Food - feeding 2, not 3-5 + friends
Restaurants - ?? may go down/flat/up - less people
Work Related - Car expense, clothes, meals

Increase (for us)
Travel
Healthcare before 65 - i'm using $1,000/mo
Property Taxes
Home Insurance

I have found it fairly easy to get within i think a 5-10% margin for error and will refine it as we get closer. Using the spreadsheet and breaking down some of the expenses for a monthly average, did help.

I looked at the 1) Bare minimum budget ($40-50K) to a 2) Desired Budget( $90-100K)
We have tracked our costs for many years now and have very similar results in many of your categories as well as the totals at the bottom.
Are view has always been to look at the goals in 3 stages - enough, what we want, and our goal. Those have always come out similar to your bare minimum, desired , plus one more. Those numbers and ratios are also very similar, we are getting very close to executing the retirement plan now.

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Re: What is a Reasonable Retirement Cost of Living?

Post by The Wizard » Fri Dec 15, 2017 7:42 am

Ready3Retire wrote:
Fri Dec 15, 2017 7:01 am
Since my pension and 401k withdrawals will be pre tax, I prefer to use gross/pre-tax for estimating a retirement income target. Since I won't be making 401k contributions or paying FICA when I'm retired, I'm using my current gross less 401K contributions and FICA. So if someone is grossing $151,400 while working, they'd have similar cashflow with a $120K pre-tax retirement income (gross less [$24k+$7.4K]). Seems to me like this is a conservative estimate * since it doesn't even account for those expenses that should go away (e.g. 2 cellphones ilo 3, 2 vehicles ilo 4, college costs that 529 doesn't cover, etc).

* My Megacorp employer charges me about $500 per month now for healthcare, and I'm elgible to use a slighly more expensive version of this until I turn 65.
Right.
This was basically my approach: similar AGI in retirement, possibly with some adjustments due to health insurance, Roth IRA contributions, etc...
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Re: What is a Reasonable Retirement Cost of Living?

Post by btenny » Fri Dec 15, 2017 9:15 am

You can retire and live OK on $50k with a paid off home if you have low property tax and do not do expensive stuff in retirement. But most people need $80K to $120K to have a nice retirement where you travel some and help your kids occasionally and drive nice cars and do not skimp. At $150K and above you can take cruises and drive never cars and have second homes and play a lot.

Good Luck

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Re: What is a Reasonable Retirement Cost of Living?

Post by onthecusp » Mon Dec 18, 2017 11:42 am

spammagnet wrote:
Fri Dec 15, 2017 1:45 am
onthecusp wrote:
Thu Dec 14, 2017 4:10 pm
... kicking the kids off the cell phone plan ...
Our young adults are still on our plan. It's cheaper for them to pay us than to get a separate. I just send a payment request in Venmo when I get the bill. If DS's usage exceeds the plan, he gets to pay the entire over charge.
Yes, that could work. I am also concerned about the "drag" on any attempt to renegotiate or switch plans having to coordinate 4 users. The again I should probably work on the cable company first. I think there is low hanging fruit there.

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Re: What is a Reasonable Retirement Cost of Living?

Post by spammagnet » Mon Dec 18, 2017 12:51 pm

onthecusp wrote:
Mon Dec 18, 2017 11:42 am
... I am also concerned about the "drag" on any attempt to renegotiate or switch plans having to coordinate 4 users. ...
That's within your control. I may inform the kids we'll be going our separate ways when the current contract expires at the end of 2018. At that point their finances will be stable and they'll have had plenty of time to figure out what their next choice should be.

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Re: What is a Reasonable Retirement Cost of Living?

Post by CyclingDuo » Mon Dec 18, 2017 1:24 pm

rholt wrote:
Thu Dec 14, 2017 12:42 pm
I am 51 and plan on working until at least 62. Nevertheless, I do want to plan for retirement. So many of the retirement planning discussions revolve around one's annual cost of living in retirement. Anyone have any suggestion as to how I could guessstimate that figure now?

Our household expenses right now are not a useful guide. We have two kids in high school at peak "money pit" level. Actually - I assume they will be a money pit for the next 8 years or so. After that - I assume (hope) they will be off our income statement.

So - assume we are talking about a 62 year old debt free couple living in a somewhat high cost of living area (Northern Virginia). The couple is reasonably frugal, but enjoys giving gifts, some domestics and international travel, and a couple evenings out per week. Acknowledging that health care is a huge unknown - what is a reasonable number (in today's dollars) to use for planning purposes for annual cost of living? $150K? I just don't know.
We just emptied the nest this past Summer with our two. That leaves us still in the financial :shock: interlude period trying to figure it all out, but are noticing the major differences (lower grocery bills, lower utilities, lower automotive expenses, etc....). One still has another year of graduate school to go, so I think it is going to take a few more months if not up to a full year and a half to really have a good grasp on the cash flow changes. I agree that it is pretty much a wild aXX guess when you are 51 as to what your cash flow and expenses will actually be come age 62 due to the kids at home and upcoming college costs/expenses/needs. You can do all the math you want, but you'll come up with a wide range of what it will actually be like in 11 years.
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Re: What is a Reasonable Retirement Cost of Living?

Post by MathWizard » Mon Dec 18, 2017 1:46 pm

I'm figuring $57K base in a medium Cost of Living location.
This is based on spending over the last year, not counting vacations,
mortgage, house updates, term life, and college tuition, the latter will be gone when I retire,
except basic maintenance. We don't have to take expensive vacations, but if we
do we will need more than $57K.

Base for me means after health costs and taxes, but does include car replacement.
(I figure the amount after health care and taxes, because health costs change at 65, and
taxes change when I take SS (not all SS income is taxable), but I want the amount after these
two variable costs to be constant in real terms.

Before 65, I figure $8K/yr./person for health care, after 65. I figure $4K/yr./person.
I figure one of us will make it to 85, the other 100.

I figure the taxes based on current (2017) standard deduction/personal exemption/tax tables
both for state and federal.

On the income side, I figure SS at 75% of estimated benefits, and a 4% real return.

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Re: What is a Reasonable Retirement Cost of Living?

Post by spammagnet » Mon Dec 18, 2017 2:09 pm

CyclingDuo wrote:
Mon Dec 18, 2017 1:24 pm
We just emptied the nest this past Summer with our two. That leaves us still in the financial :shock: interlude period trying to figure it all out, but are noticing the major differences (lower grocery bills, lower utilities, lower automotive expenses, etc....). One still has another year of graduate school to go, so I think it is going to take a few more months if not up to a full year and a half to really have a good grasp on the cash flow changes. I agree that it is pretty much a wild aXX guess when you are 51 as to what your cash flow and expenses will actually be come age 62 due to the kids at home and upcoming college costs/expenses/needs. You can do all the math you want, but you'll come up with a wide range of what it will actually be like in 11 years.
Our last student graduated a couple of weeks ago and shoves off in late January. For the past year I've been categorizing expenses attributable to them separately, where practical. Things like car insurance, cell phones, medical co-pays, etc., are not difficult to determine. They weren't living at home except during holidays so groceries and utilities are a reasonable estimate of life without them.

Living expenses for DD, the last graduate, were easy to separate. We just gave her a stipend for living expenses and she was on her own. (Cost of grad school was on her.) DS's expenses also were clear because he lived on campus for his undergrad years and used a separate credit card.

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CyclingDuo
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Re: What is a Reasonable Retirement Cost of Living?

Post by CyclingDuo » Mon Dec 18, 2017 4:30 pm

spammagnet wrote:
Mon Dec 18, 2017 2:09 pm
CyclingDuo wrote:
Mon Dec 18, 2017 1:24 pm
We just emptied the nest this past Summer with our two. That leaves us still in the financial :shock: interlude period trying to figure it all out, but are noticing the major differences (lower grocery bills, lower utilities, lower automotive expenses, etc....). One still has another year of graduate school to go, so I think it is going to take a few more months if not up to a full year and a half to really have a good grasp on the cash flow changes. I agree that it is pretty much a wild aXX guess when you are 51 as to what your cash flow and expenses will actually be come age 62 due to the kids at home and upcoming college costs/expenses/needs. You can do all the math you want, but you'll come up with a wide range of what it will actually be like in 11 years.
Our last student graduated a couple of weeks ago and shoves off in late January. For the past year I've been categorizing expenses attributable to them separately, where practical. Things like car insurance, cell phones, medical co-pays, etc., are not difficult to determine. They weren't living at home except during holidays so groceries and utilities are a reasonable estimate of life without them.

Living expenses for DD, the last graduate, were easy to separate. We just gave her a stipend for living expenses and she was on her own. (Cost of grad school was on her.) DS's expenses also were clear because he lived on campus for his undergrad years and used a separate credit card.
Pretty sure we could sit down and figure it out more than we have. Maybe after I grade another 6 inch stack of final papers and final exams today and tomorrow I could dive in and try to separate it all later this week.

It's all those other things still hanging on that will eventually be part of the upcoming cord cutting: health insurance until they are both 26 remain under our plan, family phone plan still under our plan, Netflix, Amazon Prime, iTunes, flights home for holidays, and well....this is going to take some to unwind it all to finally get us to the part of our life where paying only for two rather than 4 is in full swing.
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spammagnet
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Re: What is a Reasonable Retirement Cost of Living?

Post by spammagnet » Mon Dec 18, 2017 5:15 pm

CyclingDuo wrote:
Mon Dec 18, 2017 4:30 pm
Pretty sure we could sit down and figure it out more than we have. Maybe after I grade another 6 inch stack of final papers and final exams today and tomorrow I could dive in and try to separate it all later this week.

It's all those other things still hanging on that will eventually be part of the upcoming cord cutting: health insurance until they are both 26 remain under our plan, family phone plan still under our plan, Netflix, Amazon Prime, iTunes, flights home for holidays, and well....this is going to take some to unwind it all to finally get us to the part of our life where paying only for two rather than 4 is in full swing.
DS is on his own health insurance, a meager policy provided free of charge by his school district (he's teaching). DD will remain on ours until age 26 or something better comes along. As we do with cell phones, I'll charge her the difference between couple w/o kids and couple w/ kids, and she'll be guarantor on her own out-of-pocket expenses. I validated the latter part with the insurance company. It may actually help us in the sense that we might hit family max out of pocket faster with her than without her.

I spun off DS's auto insurance shortly before he went solo, when we re-titled his car in his name. I put it on monthly premiums and paid the first few until cash was flowing. I'll do the same for DD after she's had some paychecks. I have advised both to pay in full when they can. I didn't because I didn't want to pay the whole thing myself.

Netflix and Amazon remain on our budget. We never buy any videos, watching only the free stuff. iTunes was always their personal responsibility, paid for with their own money. That may have included our allowance but we weren't profligate spenders, in that respect.

3feetpete
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Re: What is a Reasonable Retirement Cost of Living?

Post by 3feetpete » Mon Dec 18, 2017 5:53 pm

I used Mint app on phone to track cash flow for a year then adjusted up for taxes and health insurance which were taken out of pay and down for expenses that wouldn't continue (kids college etc) Found I could live pretty well in a high COL area on 70-80k Now 6 months into retirement and that is proving true

I highly recommend Mint for budgeting and tracking expenses but not for tracking investments Mint's security is good but In the event it gets hacked there is limited harm anyone can do with credit card and checking account info but I wouldn't want them to have my portfolio as well

StealthRabbit
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Re: What is a Reasonable Retirement Cost of Living?

Post by StealthRabbit » Mon Dec 18, 2017 6:25 pm

~$80k (2017) + inflation will work for most in a higher CoL area with a bent towards frugal living.

Retired pre-age 50
HC is the wild card, and we are now using a HC sharing network ($3k / yr), rather than fund A(?)CA $25k/yr premiums only.
Property taxes have spiraled and continue to grow at ~20%+ / yr) Currently $45/ day for a home I built for <$100k, so I re-buy it every 7 yrs via property taxes


We travel a lot (50%+) but as we age that will diminish / transfer to HC costs..
Food is considerably less... kids gone, and time to downsize our weight!

DrGoogle2017
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Re: What is a Reasonable Retirement Cost of Living?

Post by DrGoogle2017 » Mon Dec 18, 2017 11:29 pm

I kept track 2 years of actual spending amount in the last two years. I had one ki in college still.

daveydoo
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Re: What is a Reasonable Retirement Cost of Living?

Post by daveydoo » Tue Dec 19, 2017 1:37 am

1210sda wrote:
Thu Dec 14, 2017 7:37 pm

As has been already suggested, try to determine which expenses will drop off at (or by) retirement.
+1. Your data on your spending is gonna be way better than my data on your spending. Start using Mint and link all your "outflow" accounts -- checking and credit cards. Ignore the rest. You will get an amazingly (overwhelmingly) granular idea of where your money goes. Every Uber and every vending-machine snack at work. I review the transactions every few days on my phone and annotate ("tag") the ones that matter (tax-relevant, 529-relevant, etc.). I haven't done what you're asking about but will need to soon. Kind of afraid to see the answer, but we're (unsuccessfully) cash-flowing two kids through college so our "spending" is a fire-hose. :D
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

spammagnet
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Re: What is a Reasonable Retirement Cost of Living?

Post by spammagnet » Tue Dec 19, 2017 9:30 am

daveydoo wrote:
Tue Dec 19, 2017 1:37 am
... Kind of afraid to see the answer, but we're (unsuccessfully) cash-flowing two kids through college so our "spending" is a fire-hose.
Don't be. It can be enlightening. It may result in significant changes in certain respects but you can be highly motivated when the information you get is not what you expected and does not conform to your intent.

rholt
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Re: What is a Reasonable Retirement Cost of Living?

Post by rholt » Tue Dec 19, 2017 9:38 am

OP here - thanks for all the useful input. It sounds like people are telling me that I can't really answer this question without systematically tracking our expenses. Unfun - but I guess I will give it a try.

hoops777
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Re: What is a Reasonable Retirement Cost of Living?

Post by hoops777 » Tue Dec 19, 2017 4:30 pm

I just retired and live in the Bay Area which is certainly a hcol area.I have travelled quite a bit and I think day to day basic living expenses are not that much different between most cities once you eliminate housing.At 65 and 67 we are very comfortable at 50,000 to 60,000 depending upon travel costs.
150,000 you mentioned I cannot even imagine,but that is just me.
I can never understand why it seems so difficult for people to figure out their budgets.It is very obvious in today’s dollars what we spend on our basic bills and desired activities,but you certainly should not worry what others spend because they are not you.On a food thread yesterday,one couple spent $1800 a year and another spent $28,000!
K.I.S.S........so easy to say so difficult to do.

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Artful Dodger
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Re: What is a Reasonable Retirement Cost of Living?

Post by Artful Dodger » Tue Dec 19, 2017 5:08 pm

delamer wrote:
Thu Dec 14, 2017 4:39 pm
HomerJ wrote:
Thu Dec 14, 2017 2:56 pm
rholt wrote:
Thu Dec 14, 2017 12:42 pm
Our household expenses right now are not a useful guide.
Of course they are.
We have two kids in high school at peak "money pit" level.
So subtract them out. Or just assume you'll spend as much in retirement on trips and fun as you do on your kids today.

Will your house be paid off when you retire? There's a big number you might be able to subtract.

It's not that hard at your age, assuming you're going to live basically the same lifestyle in retirement.

Start with figuring out what you are spending now each year.
Agreed.

Also, do one retirement budget that covers basic needs (housing, transportation, food, healthcare, taxes) and a second that includes the basics plus discretionary spending like travel, gifts, luxury cars, or whatever else you'd like but could live without. If you can figure out how to cover the basics, your planning will be less anxiety-ridden.
Agree, as well. I use the Fidelity retirement planning software. You can put in a budget of current expenses (less kid's, mortgage, work related), and a discretionary spending amount. You also have to take into account future income taxes. I know $5500/month will cover what we need, and have $4800/month for discretionary. Those are after taxes paid.

CnC
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Re: What is a Reasonable Retirement Cost of Living?

Post by CnC » Tue Dec 19, 2017 5:14 pm

rholt wrote:
Thu Dec 14, 2017 12:58 pm
livesoft wrote:
Thu Dec 14, 2017 12:45 pm
J I guess I also have to ask why do you think you are spending so much on kids in high school? They should get some jobs in a retail food establishment where they get free meals, too. I know that's what I had to do when I was that age.
This is Northern Virginia - kids aren't kids - they are an investment.
  • High School Tutors
    SAT Tutors
    Elaborate Summer Experiences (e.g. backpacking in the Cascade Mountains)
    Sports Coaches
    Automobile Insurance
    Mobile Phones
No time for that job at McDonalds - that isn't going to help you get into Harvard. They have to do something "enriching" (which usually doesn't pay).

I am half joking with all of this - but only half joking. When and where I grew up, teen expectations were more akin to what you described - but that feels a long time ago in a galaxy far away.

So - yes - I expect my expenses will be a LOT lower with the kids out of the picture.
Well us in the rest of the country living outside of the DC bubble probably won't be able to help you out on reasonable expenses.

A average family with 2.1 kids live on around 55k a year. If you feel that you will be retired and spending 3x what an average American family of 4 spends when retired go for it.

Assume 2k adjusted for inflation a month for healthcare and 100% of your non child related expenses adjusted for inflation and you will be safe.

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