Retirees: When you cut spending, what do you cut?

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AtlasShrugged?
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Retirees: When you cut spending, what do you cut?

Post by AtlasShrugged? » Sat Jun 23, 2018 6:30 am

Bogleheads.....I am a fan of a number of different academics (Swedroe, Bernstein, Pfau, Kitces, etc). I recently ran across a post from kitces.com that discussed the effect of 'large, but temporary' spending cuts versus 'small, but permanent' spending cuts on safe withdrawal rates and portfolio survival. Not surprisingly, over the long term, small but permanent wins out. The link to this blog post is below.

https://www.kitces.com/blog/dynamic-ret ... justments/

After I read the post, I got to thinking....Well gee, what on earth would I cut? And there I sat. :happy

So....Bogleheads (especially those who are retirees), what spending cut strategy do you use (if any)? When you cut spending, what goes on your 'chopping block'....why that particular cut....and for how long is it chopped? Do you go for the large but temporary, or small but permanent approach. I am most interested in hearing from retirees who have actually made spending cut decisions, and understand your thought process as you turned over in your mind what was going to be cut, why it was cut, and what would make you 'reverse' the spending cut. I am also curious how age comes into play. Does 'what' you cut change as you age, and does your thought process change in deciding what to cut, and for how long?
“If you don't know, the thing to do is not to get scared, but to learn.”

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Re: Retirees: When you cut spending, what do you cut?

Post by cadreamer2015 » Sat Jun 23, 2018 6:38 am

We haven’t had to cut spending (yet?) in retirement, but here is what I think we’d cut back:
Travel - currently budget $22,500 per year for travel so that’s an obvious target
Eating out - could probably save several thousand $ per year by eating out much less often
Postpone postponable purchases - our budget has about $10,000 per year on long term lumpy purchases like new cars every 10 years, new computers every 5 years, etc. By postponing these purchases I’m sure we could save quite a bit if the income shortfall was temporary
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Re: Retirees: When you cut spending, what do you cut?

Post by carolinaman » Sat Jun 23, 2018 7:46 am

cadreamer2015 wrote:
Sat Jun 23, 2018 6:38 am
We haven’t had to cut spending (yet?) in retirement, but here is what I think we’d cut back:
Travel - currently budget $22,500 per year for travel so that’s an obvious target
Eating out - could probably save several thousand $ per year by eating out much less often
Postpone postponable purchases - our budget has about $10,000 per year on long term lumpy purchases like new cars every 10 years, new computers every 5 years, etc. By postponing these purchases I’m sure we could save quite a bit if the income shortfall was temporary
We are in similar position. 8 years into retirement and we are blessed that pension/SS still more than cover expenses. We are not frivolous with our spending which makes it harder to find easy spending cuts. We do eat out a lot although mostly at modestly priced restaurants. We do not travel a lot but this is obviously a discretionary expense. Gifts and family assistance could be reduced if necessary. Charitable is another category but that is a high priority for us. We spend very little on entertainment. We sold our Carolina Panther seats so no longer go to those games.

You can always tighten the belt if necessary but I think we have done a good job of managing our expenses which makes it harder to find low hanging fruit. I think if people take this approach, it will be less likely they will have to make spending cuts.

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Re: Retirees: When you cut spending, what do you cut?

Post by remomnyc » Sat Jun 23, 2018 8:00 am

I recently retired, so I haven't cut anything yet, but I have a list of expenses that I would cut if I needed to ($/yr).

Girls' Trip: $6k
Summer Camp for Kids: $6k
Private Lessons for the Kids: $8k
Cleaning Lady: $5.5k

There are others that could easily be cut, but with a 3.5% withdrawal rate, excluding future social security, I hope we would not have to go any deeper.

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Re: Retirees: When you cut spending, what do you cut?

Post by Nowizard » Sat Jun 23, 2018 8:13 am

Our goal was to be able to enjoy ourselves by not being overly frugal during our working years and to save/invest enough so that we could have options regarding spending more or less in retirement. Not everyone can achieve that goal, but it is one to consider within individual circumstances. In other words, do some cutting now but not too much. Learning to save/budget at an early age is very important but, unfortunately, requires early knowledge, basically of the "Miracle of compounding," employment history or discipline to achieve.

Tim

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Re: Retirees: When you cut spending, what do you cut?

Post by Sheepdog » Sat Jun 23, 2018 8:22 am

My period of "panic" came in October 2008 when I was retired and my investment income was dropping precipitously during that recession. If ever I was to feel that I have to control spending that was my time. I did not do any. I was already controlling spending to some degree in that most of my retirement income came from savings. I still had Social Security as my safety net. Controlling the investment collapse became what I had to do (reducing stock investments and maintaining safe savings from which to take spending needs). I did not cut any outgoing spending. No, it was not the time to reserve an around the world cruise or buy a new lake second home, but everyday spending was already not excessive.

Today, I have 3 years worth of normal withdrawals in my 'safe' accounts. If a recession (depression) lasted longer than that there would have to be some sort of spending cuts or I could take more withdrawals from the depressed savings. If it came to that, I would cut out what are really luxuries like vacations, higher priced restaurants, entertainment. sporting events. etc. I wouldn't consider buying anything unnecessary like a new auto....just be more frugal.

Now you've got me back in time with this thread. What would you cut if you had nothing to cut? I was a child of the Great Depression. My father lost his job in about 1935. He was fortunate to have had one prior to that. We lost our home. We moved into a persons basement. Men would come to the basement entrance, knock on the door and ask to do something to earn a sandwich and my Mom would, like take out the garbage. My older sister baby-sat me while my mother sold ice cream. My father did whatever he could, which was nothing until 1941. We ate no steaks. (Actually, my first steak that I ever had was about 1948 at age 15 after my mother and father felt they could be more extravagant) ...... living thru the depression caused them to be scared even during the War. In most of the Depression time, my Mom and Dad didn't cut spending. They had nothing to spend. There was no safety net. No unemployment. No jobs. Less food. Fat back, turnip greens and blackeye peas, grits filled our tummies.
What would you do if there was nothing to cut?
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invst65
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Re: Retirees: When you cut spending, what do you cut?

Post by invst65 » Sat Jun 23, 2018 8:49 am

I was probably spending around $3k per year on beer. Cutting it out not only helps the budget but has other benefits as well.

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Re: Retirees: When you cut spending, what do you cut?

Post by Bacchus01 » Sat Jun 23, 2018 8:55 am

I’m not retired, but just looking at our own spending today:

- we have $1400/mo in two car payments. Get two cheaper cars and also drop our insurance rates proabably easily saves us $1000+/mo
- dining out - we don’t do a lot of big meals out, but for our family of five there are a lot of Starbucks stops, Q’doba lunches, Subway....we could probably cut, no kidding, $500/mo here
- I could turn off the irrigation in summer, but water here is cheap and it probably would save $300/year
- Does the dog really need to eat $25 worth of Bully Sticks a week? That’s $600/year

There. I just cut nearly $20k/year and didn’t even try all that hard.

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Re: Retirees: When you cut spending, what do you cut?

Post by annielouise » Sat Jun 23, 2018 10:23 am

We are looking at a big income drop next year (turns out that DH was paid above market value, so new job - fingers crossed that there will be a new job - will pay a lot less). We are having trouble deciding what to cut. Going to one car, if the job is close enough, could save $700 or more a year in addition to the money from selling the car. Dropping LTC ($3400), some life insurance ($2000?), maybe umbrella ($250)? Cutting out gifts ($2000), charity ($500 not from DAF), activities ($500), eating out ($1200)? Travel is definitely gone, unless it's a family function/ funeral. Home updates won't happen. General spending is already on a list system since the layoff. (Add to a list, decide in a month if you still want, bargain shop. We haven't purchased anything but necessities in the past month.) The biggest cut will be to retirement savings, which has been about 50% of our income after tax.

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Re: Retirees: When you cut spending, what do you cut?

Post by WillRetire » Sat Jun 23, 2018 11:15 am

First level of cuts: luxury items. For us, that's eating out (we're good cooks, so this is an easy cut to make), vacations (we live where we love, so this too is easy to cut), home improvements & decorating

Second level of cuts: These are "wants", i.e. NOT necessities. For us, these cuts would be: sell second car, cancel cable TV, cancel entertainment subscriptions

Would do 2nd level of cuts only if extremely concerned about higher-than-expected expenses several years in a row.

As we age, the simple things in life matter more. Expensive disposable things we enjoy less.

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Re: Retirees: When you cut spending, what do you cut?

Post by GAAP » Sat Jun 23, 2018 11:24 am

I find it far simpler to use nominal withdrawals rather than real, whereby any inflationary increases are supported by the underlying portfolio.
To examine this, we first consider the same trigger thresholds as before (0%, -10%, and -20%), but now, instead of one time cuts, a retiree takes a 1% (real) cut that is permanent over their entire 30-year retirement horizon. In other words, if inflation was 3% for a given year, then if the market was down the prior year, the retiree would only take roughly a 2% increase in spending the next year.
This example really only describes a problem that exists if you are explicitly making inflation adjustments to your withdrawals. I think that is a bad idea if done without the context of the overall portfolio status.

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Re: Retirees: When you cut spending, what do you cut?

Post by 2015 » Sat Jun 23, 2018 1:02 pm

Nowizard wrote:
Sat Jun 23, 2018 8:13 am
Our goal was to be able to enjoy ourselves by not being overly frugal during our working years and to save/invest enough so that we could have options regarding spending more or less in retirement. Not everyone can achieve that goal, but it is one to consider within individual circumstances. In other words, do some cutting now but not too much. Learning to save/budget at an early age is very important but, unfortunately, requires early knowledge, basically of the "Miracle of compounding," employment history or discipline to achieve.

Tim
Exactly the strategy I employed because it matched my personality. No need to use a vague theory of need, willingness and ability to gauge my real life comfort with risk. I simply looked at the reality of my historical behavior and knew the greatest peace of mind would come from delaying some gratification in order to engage in what I called "investing in the future." This allowed me to retire somewhat early and reap the unintended White Swan (unexpected and secondary) consequences of these past retirement years being the best of my life.

I haven't had to cut expenses (to the contrary). As a result of a set and mostly forget 3 fund PF, minimized expense ratios, tax bracket optimization and LMP, I will be immune to future market actions. I'm basically paying no attention to my PF at all, except that I know it's higher than when I retired. Simplicity affords me the ability to ignore financial bloggers of all stripes, sales/marketing veiled as "financial information" from publications, academics, and investment firms, etc. I don't agonize over such things as the Perfect Asset Allocation or What Bonds Are Doing or Valuations Boogie Woogie as I know investing is strongly subject to narrative fallacy and precision with numbers tunnel vision. I retired to make this the most energizing act of my life, not to make financial mistakes as a result of overconfidence in a complex system continually affected by unknowable unknowns.

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Re: Retirees: When you cut spending, what do you cut?

Post by mickeyd » Sat Jun 23, 2018 1:09 pm

Like others here, I was frugal in my youth, as I paid attention during ECON 101. Because of that, I do not have to cut spending during the last half of life, in fact we are spending more.
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Re: Retirees: When you cut spending, what do you cut?

Post by Dottie57 » Sat Jun 23, 2018 1:15 pm

I don’t anticipate needing to cut, but the market may not be kind.

I would cut food budget.
Let house cleaners go.
Stop buying books and magazines - library instead.
No movies in theatre.
See bike to do errands in summer.
Cut Netflix- though this is relatively cheap.
Lower a.c. Use in summer - although this is a health issue for me - asthma with outside allergies.

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Re: Retirees: When you cut spending, what do you cut?

Post by delamer » Sat Jun 23, 2018 1:46 pm

Semi-retired, so we have not dealt with this issue.

There are some budget items over which you have little or no control in the short-run — property taxes, income taxes, health care costs.

Our biggest budget item over which we have any real control is food — both grocery and restaurant. So that is where I’d look for savings first. More coupons, more comparison shopping, fewer steaks, fewer prepared foods.

Next biggest item is cars. Both of our cars could be traded for less expensive models, amd we’d walk away with some cash. That would also lower insurance, fuel, and maintenance costs.

If the above changes were not sufficient, the next step would determining the trade-off between shelter and travel.

The issue would be whether we’d rather travel more and find less expensive shelter or travel less and keep our current house. I suspect there might be some disagreement on that one.

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Re: Retirees: When you cut spending, what do you cut?

Post by adamthesmythe » Sat Jun 23, 2018 1:52 pm

To begin with, I have arranged things so my fixed costs (mostly housing) are quite low.

Things to cut or defer: travel, any new electronics, vehicle replacement. Maybe more expensive stuff at the grocery store, more cooking at home with moderately priced ingredients. Value choices for drinks.

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Re: Retirees: When you cut spending, what do you cut?

Post by J295 » Sat Jun 23, 2018 4:49 pm

Retired. Now in our late 50s.

We plan to leave inheritances for our children, so we are mindful of expenses now as we were pre-– retirement.

We don’t anticipate ever having a need to cut, but who knows what the future holds.

Already cut.
Drive one vehicle, albeit a nice one a large Lexus SUV
No cable, although we do have Amazon prime and Netflix.

Would not like to cut, but could cut private golf course membership. We live on the course and I play or practice almost daily. We have been members over 20 years, although I am the only one that uses the course.

Very last to cut would be the money we spend on travel to see our children/grandchild, and the money we provide them when they come to visit us as we pay for all of their travel expenses

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Re: Retirees: When you cut spending, what do you cut?

Post by tuningfork » Sat Jun 23, 2018 10:40 pm

I've been retired for 5 years and haven't had to consider cutting spending yet. In fact, I'm trying to increase spending since my withdrawal rate is way below what many would consider a SWR.

If the economy tanks and I have to make cuts, I could easily cut back on food, travel and hobby expenses. I would probably suspend making Roth conversions to reduce my current year tax bills. Those are the biggies. I'm sure I could make small cutbacks in many other areas as well, but my life is pretty basic so those small cutbacks might not make a big difference.

I'm planning to delay SS until 70, but if things were dire enough I could start SS earlier.

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Re: Retirees: When you cut spending, what do you cut?

Post by Sandtrap » Sat Jun 23, 2018 10:55 pm

Sheepdog wrote:
Sat Jun 23, 2018 8:22 am
My period of "panic" came in October 2008 when I was retired and my investment income was dropping precipitously during that recession. If ever I was to feel that I have to control spending that was my time. I did not do any. I was already controlling spending to some degree in that most of my retirement income came from savings. I still had Social Security as my safety net. Controlling the investment collapse became what I had to do (reducing stock investments and maintaining safe savings from which to take spending needs). I did not cut any outgoing spending. No, it was not the time to reserve an around the world cruise or buy a new lake second home, but everyday spending was already not excessive.

Today, I have 3 years worth of normal withdrawals in my 'safe' accounts. If a recession (depression) lasted longer than that there would have to be some sort of spending cuts or I could take more withdrawals from the depressed savings. If it came to that, I would cut out what are really luxuries like vacations, higher priced restaurants, entertainment. sporting events. etc. I wouldn't consider buying anything unnecessary like a new auto....just be more frugal.

Now you've got me back in time with this thread. What would you cut if you had nothing to cut? I was a child of the Great Depression. My father lost his job in about 1935. He was fortunate to have had one prior to that. We lost our home. We moved into a persons basement. Men would come to the basement entrance, knock on the door and ask to do something to earn a sandwich and my Mom would, like take out the garbage. My older sister baby-sat me while my mother sold ice cream. My father did whatever he could, which was nothing until 1941. We ate no steaks. (Actually, my first steak that I ever had was about 1948 at age 15 after my mother and father felt they could be more extravagant) ...... living thru the depression caused them to be scared even during the War. In most of the Depression time, my Mom and Dad didn't cut spending. They had nothing to spend. There was no safety net. No unemployment. No jobs. Less food. Fat back, turnip greens and blackeye peas, grits filled our tummies.
What would you do if there was nothing to cut?
Real life reality check.
Appreciate it!

Hamburger helper without the hamburger. Tofu and Rice without the tofu.
Winter coats in the house to save money on heating. Clothes from Savers and S.A.
Our 2 boys (now grown) remember it well.

Thus, 5 years, at least, in "safe" accounts. We remain mostly frugal as before though without compromising happiness.
Take nothing for granted.
j
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Re: Retirees: When you cut spending, what do you cut?

Post by munemaker » Sat Jun 23, 2018 11:09 pm

Hopefully we will never have to cut, but if we did, it would be:
1) the Gulfstream V
2) the Porsche
3) vacation home in the Hamptons
4) dining out - Go to less expensive places or stop altogether
5) stop paying people to do things we can do ourselves: drivers, pool boy, lawn care, (certain) car maintenance, housecleaning, landscaping, etc.
6) cable tv and print newspaper - These would be gone tomorrow if DW would allow it.

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Re: Retirees: When you cut spending, what do you cut?

Post by AlohaJoe » Sat Jun 23, 2018 11:12 pm

In addition to the vacations & eating out frequently mentioned already...
  • Become vegetarian; stop eating meat
  • Stop drinking coffee & alcohol
  • Take in boarders. We have a spare room that could be rented out.
  • Sell the house (which is paid off and would net 10-20 years of expenses, depending on what the housing market is doing at the time) and move into something smaller/cheaper
  • Move kids to cheaper private school
  • Cancel yoga/gym membership
  • Cancel private language lessons
  • Stop hosting dinner parties
  • Fire the live-in maid
  • Stop gifting money to my brother to help pay off his mortgage faster
  • Stop monthly support for in-laws and have them move in with us instead
  • Stop charitable contributions
  • Stop the seemingly constant house/furniture/appliance upgrades that come with a wife & home ownership 8-)
  • Cancel/defer home maintenance. If the air conditioner breaks, learn to live with just a fan again.
  • Stop taking taxis/Grab all over town

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Re: Retirees: When you cut spending, what do you cut?

Post by LeisureLee » Sat Jun 23, 2018 11:15 pm

We haven't had to cut yet. Our plan is shorter and deeper - roughly, I'd like to keep our draw rate under 4.5% of current investment value, so I would try to cut above that.

On the planned cut list:
- Charitable Giving
- Vacation Budget
- Home Improvements (delay)
- Car Replacement (delay)
- Housekeeping

This would cut more than 25% of our budget. Of course, any Federal Tax and ACA premiums would drop as the income we withdrew dropped as well.

I feel extra safe (on top of the low default WR) knowing that we have a plan to cut quite a bit if we need to.

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Re: Retirees: When you cut spending, what do you cut?

Post by mouses » Sun Jun 24, 2018 7:03 am

Sheepdog wrote:
Sat Jun 23, 2018 8:22 am
Now you've got me back in time with this thread. What would you cut if you had nothing to cut? I was a child of the Great Depression. My father lost his job in about 1935. He was fortunate to have had one prior to that. We lost our home. We moved into a persons basement. Men would come to the basement entrance, knock on the door and ask to do something to earn a sandwich and my Mom would, like take out the garbage. My older sister baby-sat me while my mother sold ice cream. My father did whatever he could, which was nothing until 1941. We ate no steaks. (Actually, my first steak that I ever had was about 1948 at age 15 after my mother and father felt they could be more extravagant) ...... living thru the depression caused them to be scared even during the War. In most of the Depression time, my Mom and Dad didn't cut spending. They had nothing to spend. There was no safety net. No unemployment. No jobs. Less food. Fat back, turnip greens and blackeye peas, grits filled our tummies.
What would you do if there was nothing to cut?
My grandparents went through the Great Depression. My grandmother in later prosperous years was notorious among the grandkids for serving Campbell's tomato soup made with water not milk. I think enough of this has filtered down so that I never have lost the fear of living in my car or starving.

The last thing I would cut would be charitable giving, however.

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Re: Retirees: When you cut spending, what do you cut?

Post by The Wizard » Sun Jun 24, 2018 7:21 am

I was going to say in five years of retirement thus far, there's never been any need to cut spending, which is basically correct.
But yesterday, I decided on a month-long travel excursion which needs a deposit of several thousand dollars.
Together with other expenses in the next few weeks, this will leave my checking account in worse shape than I like it.
To alleviate this, I plan to withdraw $1000 in my settlement account that I was going to put into VTSAX next week.

One main goal for that account is to provide funds for my next new car purchase, so I'm effectively delaying that by a month or so...
Last edited by The Wizard on Sun Jun 24, 2018 7:34 am, edited 1 time in total.
Attempted new signature...

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Re: Retirees: When you cut spending, what do you cut?

Post by TheTimeLord » Sun Jun 24, 2018 7:31 am

It is going to vary by age and circumstance that caused the shortfall. Early in retirement I would be unwilling to give up travel but likely will to give up eating out, while later in life that likely would reverse. Help around the house could be cut early but may be a necessity later. Also, if the shortfall is cause be an unforeseen medical issue, it may naturally prevent you from doing to enjoying things you previously planned on. Or if the shortfall is to care for a parent, spouse or child then you would also have things like travel that would fall to the wayside. I really don't think there is a checklist beyond figuring out what you value and what you don't. People in the south probably value having someone mow their lawns in 100 degree heat, while people in milder climates may consider doing it themselves good exercise.

Think you need to find some folks who were fairly recently retired in 2000 or 2007 to really get the kind of answers you are looking for. If you retired after 2009 and have had to cut expenses at some point, it would seem to be for some other reason than BH portfolio returns.
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Re: Retirees: When you cut spending, what do you cut?

Post by scottinmet » Sun Jun 24, 2018 7:53 am

Great topic! I was looking at my budget spreadsheets the other day and if I absolutely had to I could cut about 35-40% from my annual expenses. I'm not a retiree, but I assume I would do similar things if it happened at that point.

I currently average about $50k per year in expenses, which includes health insurance. The easy stuff to cut out would be eating out less, dropping cable, driving less, and reducing the number of cell phones in my family. This would cut my annual expenses by about 6-8%.

After that, things get tougher. I would drop homeowners insurance, stop subsidizing my children's college expenses, car insurance and an elderly family member, no vacations, less entertainment and gifts, and drive my car until it breaks down.

I looked on the ACA exchange and it looks like I could get a silver plan for less than what I pay for my current health insurance. Granted, it's not as good as the plan I currently have, but beggars can't be choosers.

This would cut my annual expenses down to around $30k/year. I could probably go even further than that if I had to but the pain would be pretty great. A job at McDonalds would probably be less painful. :happy

Given that I currently have enough investments to cover this modest living, I do feel a bit relieved wrt my financial status. I'm not anywhere near the boglehead stratosphere, but it's good enough for me!

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Re: Retirees: When you cut spending, what do you cut?

Post by Church Lady » Sun Jun 24, 2018 9:24 am

IF I had to cut back a little bit, I'd eat out less, drop lawn service, and drop Internet.

If I had to cut back a LOT, I'd sell up and move to Florida.
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.

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Re: Retirees: When you cut spending, what do you cut?

Post by munemaker » Sun Jun 24, 2018 10:04 am

mouses wrote:
Sun Jun 24, 2018 7:03 am

The last thing I would cut would be charitable giving, however.
To me, it is similar to the instructions they give in a commercial aircraft...When the oxygen masks drop, take care of your own oxygen supply first, and then help those around you.

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Re: Retirees: When you cut spending, what do you cut?

Post by munemaker » Sun Jun 24, 2018 10:06 am

scottinmet wrote:
Sun Jun 24, 2018 7:53 am

I looked on the ACA exchange and it looks like I could get a silver plan for less than what I pay for my current health insurance. Granted, it's not as good as the plan I currently have, but beggars can't be choosers.
Pretty sure going to the exchange is not an option if you are offered health insurance at work.

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Re: Retirees: When you cut spending, what do you cut?

Post by delamer » Sun Jun 24, 2018 11:09 am

munemaker wrote:
Sun Jun 24, 2018 10:06 am
scottinmet wrote:
Sun Jun 24, 2018 7:53 am

I looked on the ACA exchange and it looks like I could get a silver plan for less than what I pay for my current health insurance. Granted, it's not as good as the plan I currently have, but beggars can't be choosers.
Pretty sure going to the exchange is not an option if you are offered health insurance at work.

That is incorrect. Anyone can buy through the exchange, if they are under 65. The issue is whether you are entitled to any premium subsidy if you do.

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Re: Retirees: When you cut spending, what do you cut?

Post by rgs92 » Sun Jun 24, 2018 11:26 am

I cut out all vacations.
I came to realize that the main pleasure of them was just not having to go to work and being able to sleep late and stay up late.
And when I calculated the honest daily cost living in my house costs (PITI+utilities+maintenance) I couldn't justify not being home every day.

For me, it was a completely indefensible extravagance. YMMV of course.
(I don't want to judge anyone's needs/wants/priorities, so please don't flame me for this controversial perspective. This is just how I value things.)

And also, when travelling, I found myself eating the wrong things (or too much), not exercising enough, and this disrupted my usual healthy living routine.
I'm kind of a creature of habit, and I need consistency to avoid doing the right things.

And after a vacation, the expense is just gone; 100% depreciation (except for some memories of course).

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Re: Retirees: When you cut spending, what do you cut?

Post by moehoward » Sun Jun 24, 2018 12:16 pm

Everybody seems to be cutting the good stuff. We went down to one small very used car and we rent. With the extra money we travel and drink nice wine. We mostly Uber and rent mid-sized cars for any road trip. Our lifestyle is not for everyone but you can rent anything. We traveled for 6 months all over the world staying mostly at AirBnB (or similar) at an average of about $90-100/Night. Doing simple math we could travel for a year and spend $36K on furnished lodging. When you subtract utilities, maintenance, internet, taxes, etc, its not that much money.

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Re: Retirees: When you cut spending, what do you cut?

Post by SQRT » Sun Jun 24, 2018 12:37 pm

Retired in 2006. Cut back somewhat in 2008/2009 when my net worth dropped by about 75%. But by the time my cuts were effective the problem went away.

Everybody will cut differently, but obviously the discretionary, large items first. In our case it was travel. Obviously, you don’t make any large discretionary purchases, like new car, boat, or house. Probably you would do it in stages depending on the severity of the issue. Having enough liquidity is key. I had plenty at the time so wasn’t really a crises although if things hadn’t corrected quickly I would have had to make more significant adjustments.

Actually, it’s fairly self evident, no?

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Re: Retirees: When you cut spending, what do you cut?

Post by SQRT » Sun Jun 24, 2018 12:38 pm

Retired in 2006. Cut back somewhat in 2008/2009 when my net worth dropped by about 75%. But by the time my cuts were effective the problem went away.

Everybody will cut differently, but obviously the discretionary, large items first. In our case it was travel. Obviously, you don’t make any large discretionary purchases, like new car, boat, or house. Probably you would do it in stages depending on the severity of the issue. Having enough liquidity is key. I had plenty at the time so wasn’t really a crises although if things hadn’t corrected quickly I would have had to make more significant adjustments.

Actually, it’s fairly self evident, no?

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Re: Retirees: When you cut spending, what do you cut?

Post by Earl Lemongrab » Sun Jun 24, 2018 12:55 pm

Edit: I have decided that discussion of this was causing too many problems and derailing the thread. I will not be replying to any posts regarding this.

I'm of the opinion that if you have to cut your chosen lifestyle, then you failed. You didn't save enough or you didn't handle the investments properly.
Last edited by Earl Lemongrab on Mon Jun 25, 2018 7:46 pm, edited 1 time in total.

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Re: Retirees: When you cut spending, what do you cut?

Post by delamer » Sun Jun 24, 2018 12:57 pm

SQRT wrote:
Sun Jun 24, 2018 12:37 pm
Retired in 2006. Cut back somewhat in 2008/2009 when my net worth dropped by about 75%. But by the time my cuts were effective the problem went away.

Everybody will cut differently, but obviously the discretionary, large items first. In our case it was travel. Obviously, you don’t make any large discretionary purchases, like new car, boat, or house. Probably you would do it in stages depending on the severity of the issue. Having enough liquidity is key. I had plenty at the time so wasn’t really a crises although if things hadn’t corrected quickly I would have had to make more significant adjustments.

Actually, it’s fairly self evident, no?
I am not so sure.

In the short run, yes, you cut back on discretionary items to pay the bills.

But if it is a long-run income problem, then you have the option of reducing non-discretionary costs (like housing) in order to be able to spend on discretionary items (like travel) that you put a high value on.

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Re: Retirees: When you cut spending, what do you cut?

Post by delamer » Sun Jun 24, 2018 1:00 pm

Earl Lemongrab wrote:
Sun Jun 24, 2018 12:55 pm
I'm of the opinion that if you have to cut your chosen lifestyle, then you failed. You didn't save enough or you didn't handle the investments properly.
Say that I have a grandchild born with special needs and I decide to help my child pay for therapy bills to the tune of $1,000/month.

To pay the $1,000, I have to cut out the international travel that I was doing previously.

So I have failed?

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Re: Retirees: When you cut spending, what do you cut?

Post by FrugalInvestor » Sun Jun 24, 2018 1:10 pm

When we early retired in 2003 we calculated our 'base' budget and our 'target' budget. The base budget was not 'bare bones.' It still included a reasonable amount of local eating out, entertainment, new clothing, home and car maintenance, etc. But it included no travel, home remodel projects, vehicle replacement, or other luxuries all of which were included in the 'target' budget. The 'base' budget came in handy during the 2008-2009 downturn as we immediately reverted to it and stuck to it until we were comfortable the situation had changed (we purchased a new car in the spring of 2011).

Our situation has changed since 2003. After moving in 2014 to a new home in a new state we developed new 'base' and 'target' budgets consistent with our new situation. Fortunately the 'target' has been sufficient so far. Although we don't track adherence to our budget from day-to-day, we put a year's budgeted funds into our money market account in early January so throughout the year we can look at how much we've spent compared to the portion of the year that has passed and get a good idea of where we stand.

In our case, the cuts are both small and large. All are hopefully temporary but most could be permanent to at least some degree. Our motivation for moving to the 'base' budget is a significant negative change in financial circumstances ('08-'09 being a good example). Should a negative change be prolonged we could certainly remain on the 'base' budget for a long period of time and even cut it further if absolutely necessary.
Last edited by FrugalInvestor on Sun Jun 24, 2018 1:18 pm, edited 1 time in total.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

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Re: Retirees: When you cut spending, what do you cut?

Post by Earl Lemongrab » Sun Jun 24, 2018 1:11 pm

delamer wrote:
Sun Jun 24, 2018 1:00 pm
Earl Lemongrab wrote:
Sun Jun 24, 2018 12:55 pm
I'm of the opinion that if you have to cut your chosen lifestyle, then you failed. You didn't save enough or you didn't handle the investments properly.
Say that I have a grandchild born with special needs and I decide to help my child pay for therapy bills to the tune of $1,000/month.

To pay the $1,000, I have to cut out the international travel that I was doing previously.

So I have failed?
Yes.

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Re: Retirees: When you cut spending, what do you cut?

Post by SQRT » Sun Jun 24, 2018 1:11 pm

Earl Lemongrab wrote:
Sun Jun 24, 2018 12:55 pm
I'm of the opinion that if you have to cut your chosen lifestyle, then you failed. You didn't save enough or you didn't handle the investments properly.
Maybe, but perhaps a tad harsh? There are a wide range of future events that might make cutbacks (or increases in spending) advisable. Sequence of returns risks are hard to mitigate before the fact. I guess If you are a 2% SWR type of guy you will very likely never have to cut back. But at the cost of a permanent reduction in lifestyle. I would view that as a poor trade off and could characterize that as a failure?
Last edited by SQRT on Sun Jun 24, 2018 1:14 pm, edited 2 times in total.

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Re: Retirees: When you cut spending, what do you cut?

Post by mouses » Sun Jun 24, 2018 1:12 pm

Earl Lemongrab wrote:
Sun Jun 24, 2018 12:55 pm
I'm of the opinion that if you have to cut your chosen lifestyle, then you failed. You didn't save enough or you didn't handle the investments properly.
The country and world is full of people who live in poverty through no fault of their own. I worry about money, but I also realize I am incredibly lucky.

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Re: Retirees: When you cut spending, what do you cut?

Post by delamer » Sun Jun 24, 2018 1:14 pm

Earl Lemongrab wrote:
Sun Jun 24, 2018 1:11 pm
delamer wrote:
Sun Jun 24, 2018 1:00 pm
Earl Lemongrab wrote:
Sun Jun 24, 2018 12:55 pm
I'm of the opinion that if you have to cut your chosen lifestyle, then you failed. You didn't save enough or you didn't handle the investments properly.
Say that I have a grandchild born with special needs and I decide to help my child pay for therapy bills to the tune of $1,000/month.

To pay the $1,000, I have to cut out the international travel that I was doing previously.

So I have failed?
Yes.
I do not know how old you are, but you are very fortunate to have become an adult and never have been kicked in the teeth by life.

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Re: Retirees: When you cut spending, what do you cut?

Post by Earl Lemongrab » Sun Jun 24, 2018 1:15 pm

mouses wrote:
Sun Jun 24, 2018 1:12 pm
Earl Lemongrab wrote:
Sun Jun 24, 2018 12:55 pm
I'm of the opinion that if you have to cut your chosen lifestyle, then you failed. You didn't save enough or you didn't handle the investments properly.
The country and world is full of people who live in poverty through no fault of their own. I worry about money, but I also realize I am incredibly lucky.
That's wonderful, but I don't understand the relevance. I'm assuming people who voluntarily retired after deciding that they had saved enought.

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Re: Retirees: When you cut spending, what do you cut?

Post by btenny » Sun Jun 24, 2018 1:16 pm

I retired in late 1998 at a young age. We did not have a lot of money. I suspected we were headed for a Dot Com stock market crash. So I went from 65% stocks to 50% or so stocks and stayed there until 2003ish. I kept my spending down until about 2005 when I was sure of my retirement income and my downsizing was completed and our health insurance and basic spending needs were secure. Then we increased our spending by adding world travel adventures and a second home (rental to start) and a third car and a boat over the years. We have had a ball. As we get even older I am sure we will cut back on some of this extra spending. I also know that if I needed to I could cut out all this extra spending and go back to a basic quiet retirement and still be 100% secure. The key in my case was to set up my retirement to allow options.

So I am pretty sure most people on here could do the same and cut back on a lot of spending. This cutting back is why many recessions go from a minor dip to a major down turn. People cut back spending because they are worried about money.

Good Luck.

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Re: Retirees: When you cut spending, what do you cut?

Post by Earl Lemongrab » Sun Jun 24, 2018 1:17 pm

delamer wrote:
Sun Jun 24, 2018 1:14 pm
I do not know how old you are, but you are very fortunate to have become an adult and never have been kicked in the teeth by life.
61. I don't understand the point. If you don't have a substantial part of your retirement savings that is available for the unexpected then you failed to plan properly. It sounds like you're the one who thinks nothing will go wrong. I think things might well.

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Re: Retirees: When you cut spending, what do you cut?

Post by Miriam2 » Sun Jun 24, 2018 1:17 pm

Sheepdog wrote: My period of "panic" came in October 2008 when I was retired and my investment income was dropping precipitously during that recession. If ever I was to feel that I have to control spending that was my time. I did not do any. I was already controlling spending to some degree in that most of my retirement income came from savings. I still had Social Security as my safety net. Controlling the investment collapse became what I had to do (reducing stock investments and maintaining safe savings from which to take spending needs). I did not cut any outgoing spending. No, it was not the time to reserve an around the world cruise or buy a new lake second home, but everyday spending was already not excessive.

Today, I have 3 years worth of normal withdrawals in my 'safe' accounts. If a recession (depression) lasted longer than that there would have to be some sort of spending cuts or I could take more withdrawals from the depressed savings. If it came to that, I would cut out what are really luxuries like vacations, higher priced restaurants, entertainment. sporting events. etc. I wouldn't consider buying anything unnecessary like a new auto....just be more frugal.

Now you've got me back in time with this thread. What would you cut if you had nothing to cut? I was a child of the Great Depression. My father lost his job in about 1935. He was fortunate to have had one prior to that. We lost our home. We moved into a persons basement. Men would come to the basement entrance, knock on the door and ask to do something to earn a sandwich and my Mom would, like take out the garbage. My older sister baby-sat me while my mother sold ice cream. My father did whatever he could, which was nothing until 1941. We ate no steaks. (Actually, my first steak that I ever had was about 1948 at age 15 after my mother and father felt they could be more extravagant) ...... living thru the depression caused them to be scared even during the War. In most of the Depression time, my Mom and Dad didn't cut spending. They had nothing to spend. There was no safety net. No unemployment. No jobs. Less food. Fat back, turnip greens and blackeye peas, grits filled our tummies.
What would you do if there was nothing to cut?
Sheepdog! Thank you for sharing your personal stories.
I noticed - sheepdogs are never cut :D

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Re: Retirees: When you cut spending, what do you cut?

Post by Earl Lemongrab » Sun Jun 24, 2018 1:26 pm

I'm sorry if I ruffled any feathers. I have my opinion on the matter. If you want to "yell" at me about it, I will read your posts with interest but will not respond any further. I don't wish to derail the thread any more than present.

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Re: Retirees: When you cut spending, what do you cut?

Post by delamer » Sun Jun 24, 2018 1:29 pm

Earl Lemongrab wrote:
Sun Jun 24, 2018 1:17 pm
delamer wrote:
Sun Jun 24, 2018 1:14 pm
I do not know how old you are, but you are very fortunate to have become an adult and never have been kicked in the teeth by life.
61. I don't understand the point. If you don't have a substantial part of your retirement savings that is available for the unexpected then you failed to plan properly. It sounds like you're the one who thinks nothing will go wrong. I think things might well.

No, I think life is too unpredictable to plan for every contingency — or multiple contingencies hitting at the same time.

Therefore, people shouldn’t be considered to have “failed” when they are hit with a tsunami.

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Re: Retirees: When you cut spending, what do you cut?

Post by smitcat » Sun Jun 24, 2018 1:47 pm

Earl Lemongrab wrote:
Sun Jun 24, 2018 12:55 pm
I'm of the opinion that if you have to cut your chosen lifestyle, then you failed. You didn't save enough or you didn't handle the investments properly.
Easily solved - just set your lifestyle goals low enough and you are there.

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Re: Retirees: When you cut spending, what do you cut?

Post by Earl Lemongrab » Sun Jun 24, 2018 1:51 pm

smitcat wrote:
Sun Jun 24, 2018 1:47 pm
Earl Lemongrab wrote:
Sun Jun 24, 2018 12:55 pm
I'm of the opinion that if you have to cut your chosen lifestyle, then you failed. You didn't save enough or you didn't handle the investments properly.
Easily solved - just set your lifestyle goals low enough and you are there.
A quick clarification, my statement should have been, ". . . if you have to cut your chosen lifestyle before or after retirement . . . "

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