Retirement: What expenses did you reduce?

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renue74
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Retirement: What expenses did you reduce?

Post by renue74 » Fri Mar 29, 2019 7:24 am

I just read a thread about retirement spending and noticed somebody noted they reduced expenses at retirement.

But what do you reduce? Sure, if you have a long commute, you may reduce your fuel bill by a little. Or if you dry clean or have to buy clothes.

But really, is it that big of expense to be a working stiff vs. a retired person?

retiredjg
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Re: Retirement: What expenses did you reduce?

Post by retiredjg » Fri Mar 29, 2019 7:32 am

I think one of the largest reductions might be what is put away for retirement. Then there are the various small taxes and fees that come out of your paycheck but not out of your income when in retirement.

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MikeWillRetire
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Re: Retirement: What expenses did you reduce?

Post by MikeWillRetire » Fri Mar 29, 2019 7:33 am

No more mortgage payment. No more life insurance. And all of the expenses that go with raising children.

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augryphon
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Re: Retirement: What expenses did you reduce?

Post by augryphon » Fri Mar 29, 2019 7:36 am

SS and Medicare taxes are reduced to zero
Workplace retirement savings, ie 401k, reduced to zero
Taxable income is likely less, so less income tax

Those alone make a big hit

smitcat
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Re: Retirement: What expenses did you reduce?

Post by smitcat » Fri Mar 29, 2019 7:37 am

Big expenses that get reduced or eliminated:
- retirement savings
- payroll taxes
- income taxes
Those 3 represent a huge % for us.
Others not so large:
- commuting costs (gas, ,tools, parking, maintenance, etc)
- Work support (food , clothes, subscriptions, etc)

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Re: Retirement: What expenses did you reduce?

Post by radiowave » Fri Mar 29, 2019 7:49 am

I'm looking at saving about $1k/yr in fuel related to commuting and about $2k/yr in lunch and other job related expenses.
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MikeG62
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Re: Retirement: What expenses did you reduce?

Post by MikeG62 » Fri Mar 29, 2019 8:01 am

renue74 wrote:
Fri Mar 29, 2019 7:24 am
I just read a thread about retirement spending and noticed somebody noted they reduced expenses at retirement.

But what do you reduce? Sure, if you have a long commute, you may reduce your fuel bill by a little. Or if you dry clean or have to buy clothes.

But really, is it that big of expense to be a working stiff vs. a retired person?
In our fourth year of early retirement. Only minor expense reductions in a few categories for us in retirement (lunches out, gas, dry cleaning). These are truly rounding errors, and become irrelevant once you start looking at the big expenses that increase significantly (health care and travel and entertainment to name two big ones).

I've said it on here many times. We lived well below our means (by far from frugally) while I as working and we now live up to the level of our means in retirement. We spend more (considerably more) now than before.
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dodecahedron
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Re: Retirement: What expenses did you reduce?

Post by dodecahedron » Fri Mar 29, 2019 8:02 am

Health insurance premium: Medicare premiums (including $0 premium Medicare Advantage PPO) are much lower than premiums I was paying before age 65.

Out-of-pocket medical: had a very high deductible policy with an extremely high OOP max before, now just have modest copays with a much lower OOP max

Contributions to HSA (no longer eligible due to Medicare coverage)

neilpilot
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Re: Retirement: What expenses did you reduce?

Post by neilpilot » Fri Mar 29, 2019 8:15 am

If annual mileage has dropped significantly notify your auto insurer. They may reduce your premiums.

Some professional societies change your membership to emeritus when you retire, but you have to ask. I maintain membership at $10/year in an organization that changed over $120 while I was working.

Barsoom
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Re: Retirement: What expenses did you reduce?

Post by Barsoom » Fri Mar 29, 2019 8:23 am

I'm retiring over the summer and have been thinking about this. Just looking at the immediate costs without considering the new costs of hobbies, travel, etc...

Off the top of my head:

1. No more FICA payroll deductions. That's about $11,000/year for me.
2. No more savings into the 401(k). I'm decumulating now.
3. No more life insurance premiums. That was to protect my family if I died and they lost my income. My portfolio is my income now.
4. No more commute costs. I commute by bus at $12/day round-trip. That's about $3,100/year.
5. No more eating out for lunch. I spend between $10-$15 eating out each day (I was never a brown-bagger). That's another $4,000/yr, but offset that with eating at home from increased grocery bills (still cheaper than eating out).

Offset that with additional costs:

1. Increased health care premiums as a retiree.
2. Potentially getting long-term care insurance that replaces current life insurance.

I will probably replace my salary with retirement distribution, so I'm not sure what the net effect on taxes will be. It will likely be a wash, maybe slightly lower if the tax basis is different (tax deferred, tax advantaged sources).

-B
Last edited by Barsoom on Fri Mar 29, 2019 8:25 am, edited 1 time in total.

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dodecahedron
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Re: Retirement: What expenses did you reduce?

Post by dodecahedron » Fri Mar 29, 2019 8:24 am

Public transit is now 50% off now that I am over 65. By federal law, this is true everywhere in the country.

Since I try to be green and use it regularly, this has reduced my transportation costs.

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Re: Retirement: What expenses did you reduce?

Post by nisiprius » Fri Mar 29, 2019 8:29 am

Besides those already mentioned, we cut back from two cars to one. We were quite surprised at how painless that has turned out to be. We had started out assuming we would need to spend some noticeable amount renting cars occasionally. This wouldn't necessarily to the same for everyone, among other things we fairly good public transportation options.

I'm much too lazy to try to calculate the effect of senior discounts, but there is a little bit there. 50% discount on public transportation is worth something. And seniors don't pay overdue fines at the public library.

Of course that's offset by the increasing cost of replacing lost umbrellas and pocket knives, and the increasing number of times you say "I'm too old to fly basic economy."

Oh, I replaced my Amazon books link in my "favorites" with the catalog search in my local public library. What with the ability to request interlibrary loans over the web, and the library just the right distance for a walk, the ability to renew books several times, and, ahem, the aforementioned fact that seniors don't pay fines for overdue books, I am spending several hundred dollars a year less on books.
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Re: Retirement: What expenses did you reduce?

Post by HomeStretch » Fri Mar 29, 2019 8:59 am

For income/expense tracking purposes, I group our line items under 5 main categories:
1. Income- W2/SE/misc gross earnings
2. Savings-investment income, 401k/IRA contributions, etc
3. College costs
4. Payroll/Income Taxes
5. Living Expenses- house (no mortgage), auto, food, T&E, healthcare, etc.

At retirement #1-4 will mostly go away. SS and RMDs will be added.

#5 Living Expenses should initially go up and then down:
1. Up to age 65 -
- Work/commuting expenses go away.
- Healthcare costs increase significantly ($15k - $30k depending on whether we receive ACA subsidies) due to move to ACA plan from employer-subsidized premiums and mostly pretax OOP expenses for our premium share, copay etc. No more employer dental or vision plans.
- Life insurance coverage is dropped.
- No significant change to housing or auto costs (outside of eliminating commuting costs) as will be in same house and retain 2 cars.
- T&E will increase for travel and other leisure activities.

2. After age 65 -
- healthcare costs will go down initially significantly due to Medicare but later in life (+ possible LTC) most likely go up.
- Housing costs if we don’t move will go up as we need maintenance help; our town has a “means test” so no property tax reductions.
- House/auto costs can be reduced significantly if we move/downsize and/or go to 0-1 cars.

littlebird
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Re: Retirement: What expenses did you reduce?

Post by littlebird » Fri Mar 29, 2019 9:41 am

In addition to all the above, including getting rid of the second car, we moved from a VHCoL area to a MCoL one. In this area we forgo lawns and all their attendant expenses in favor of gravel and desert plants. Maintenance now consists of twice yearly light trimming of shrubs, thinning out of trees and blowing away a few deciduous leafs. Maybe $300 with mature trees, less with young ones. Another area of saving is that we wear pretty much the same -very casual- lightweight clothes all year around; no heavy coats, sweaters, boots,etc.

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Re: Retirement: What expenses did you reduce?

Post by carolinaman » Fri Mar 29, 2019 9:51 am

It can be a mixed bag for retirees regarding expenses. Work related expenses go away (commute, lunch, clothes, etc.) and no more FICA, 401k, insurance, etc. However, some expenses may increase like travel, hobbies, leisure time activities, and so forth. Now that we have more time on our hands, we can do things that cost money. A new retiree may actually spend more in retirement, at least for a while. A big potential cost in retirement is health care.

All of these costs can vary, possibly a lot, from one retiree to another. Everyone needs to assess their situation. Expenses can also vary in the different stages of retiree. There is the so called "go go" years of retirement when we are young and healthy enough to travel and do all sorts of leisure activities. In our later years we may incur far more health care expenses, assisted living etc, and be in a situation where we have to have people do more things for us, which has associated costs, often large costs.

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Re: Retirement: What expenses did you reduce?

Post by bertilak » Fri Mar 29, 2019 10:00 am

smitcat wrote:
Fri Mar 29, 2019 7:37 am
Big expenses that get reduced or eliminated:
- retirement savings
- payroll taxes
- income taxes
Those 3 represent a huge % for us.
Others not so large:
- commuting costs (gas, ,tools, parking, maintenance, etc)
- Work support (food , clothes, subscriptions, etc)
I could have written this list myself except for one thing. Income taxes stayed about the same because my income stayed about the same. SS+Pension almost matched lost salary, so only small tax savings there.

One other big savings was not related to retirement but occured at about the same time -- I paid off my mortgage. This reduced tax deductions but was still a large net gain.
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Re: Retirement: What expenses did you reduce?

Post by mountainsoft » Fri Mar 29, 2019 10:04 am

renue74 wrote:
Fri Mar 29, 2019 7:24 am
But what do you reduce? Sure, if you have a long commute, you may reduce your fuel bill by a little. Or if you dry clean or have to buy clothes.
But really, is it that big of expense to be a working stiff vs. a retired person?
We still have a bit over four years before we retire, but here are some of our costs that will go away once we retire:

- Social Security Tax (about $3400/yr)
- Medicare Tax (about $795/yr)
- Union Dues (about $675/yr)
- Industrial Insurance (about $15/yr)
- Life Insurance (about $320/yr)
- Spouse Life Insurance (about $280/yr)
- Parking Fee (about $265/yr)
- Employee Pension Plan (about $3775/yr)
- Personal IRA (about $7000/yr)
- Spouse IRA (about $7000/yr)
- Personal Savings (about $3000/yr)

We will spend less on gas, vehicle maintenance, and qualify for slightly lower car insurance rates (fewer miles traveled per year).

We will probably spend less on clothing, and miscellaneous expenses like coffee or lunches out.

If we can keep our income under $40K per year we will qualify for about a 40% reduction in our property taxes (saving about $2000 per year).

Also, eliminating the expenses above means we will need less income, which means we will pay less in federal income taxes.

On the other hand, we will spend more on healthcare, and probably more on travel than we do now.

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Re: Retirement: What expenses did you reduce?

Post by surfstar » Fri Mar 29, 2019 10:20 am

Weird - I wouldn't consider SS, FICA, etc taxes and 457/401k deductions as "savings". For retirement we are planning based on what we spend money on, with our take home pay - the above items never hit our bank account and aren't counted as "earnings" that need replacement.

We aren't planning based on our gross pay - so I see no reason to call those items a reduction in expenses. Mental accounting variables I guess.

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Re: Retirement: What expenses did you reduce?

Post by sport » Fri Mar 29, 2019 10:21 am

In addition to all the items mentioned above, we keep our cars longer. When we were putting on the commuting miles, we bought a new car every three years (and kept the old one for another three years as a second car). Our two cars are now 6 years old and 9 years old and we have no immediate plans to replace either one.

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Re: Retirement: What expenses did you reduce?

Post by Flobes » Fri Mar 29, 2019 10:37 am

dodecahedron wrote:
Fri Mar 29, 2019 8:24 am
Public transit is now 50% off now that I am over 65. By federal law, this is true everywhere in the country.

Since I try to be green and use it regularly, this has reduced my transportation costs.
Our public transit is free for those over 65!

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Re: Retirement: What expenses did you reduce?

Post by Ron » Fri Mar 29, 2019 10:42 am

surfstar wrote:
Fri Mar 29, 2019 10:20 am
Weird - I wouldn't consider SS, FICA, etc taxes and 457/401k deductions as "savings". For retirement we are planning based on what we spend money on, with our take home pay - the above items never hit our bank account and aren't counted as "earnings" that need replacement.

We aren't planning based on our gross pay - so I see no reason to call those items a reduction in expenses. Mental accounting variables I guess.
Agreed...

For us, we have not reduced our final working years net income. That gets rid of those pesky taxes/investment contributions/etc. that a lot of folks consider a reduction. For us, they weren't a reduction since they were never ours to spend in the first place.

I'm coming up on my 12 year retirement anniversary on May 1; my wife will reach her seventh anniversary the end of April.

During our retirement, we have not reduced our spending at all. In fact, we spend a bit more, as measured by dollars, since we have to account for our PROI (personal rate of inflation) from the date we each retired.

Also, we did not define our retirement budget in two columns - that is, wants vs. needs. For us, if we could not have lived the life we each had before retirement, we would have remained in the workforce.

FWIW,

- Ron

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Re: Retirement: What expenses did you reduce?

Post by Dottie57 » Fri Mar 29, 2019 10:51 am

augryphon wrote:
Fri Mar 29, 2019 7:36 am
SS and Medicare taxes are reduced to zero
Workplace retirement savings, ie 401k, reduced to zero
Taxable income is likely less, so less income tax

Those alone make a big hit
These.

Also

Less clothing.
Less eating out - more time to cook.
Let housecleaners go.
Less gas for car.

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Re: Retirement: What expenses did you reduce?

Post by Jordan4FI » Fri Mar 29, 2019 11:01 am

If you retire in the right area, you can toss away a car all together.. and who needs tons of clothes.. a few tshirts, pants, shorts and one or two dress up type outfits for events. And if you move for retirement you can possibly get rid of heat or cooling costs.. And if you retire abroad, you just cut all costs in half in many locations..

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Re: Retirement: What expenses did you reduce?

Post by smitcat » Fri Mar 29, 2019 11:08 am

bertilak wrote:
Fri Mar 29, 2019 10:00 am
smitcat wrote:
Fri Mar 29, 2019 7:37 am
Big expenses that get reduced or eliminated:
- retirement savings
- payroll taxes
- income taxes
Those 3 represent a huge % for us.
Others not so large:
- commuting costs (gas, ,tools, parking, maintenance, etc)
- Work support (food , clothes, subscriptions, etc)
I could have written this list myself except for one thing. Income taxes stayed about the same because my income stayed about the same. SS+Pension almost matched lost salary, so only small tax savings there.

One other big savings was not related to retirement but occured at about the same time -- I paid off my mortgage. This reduced tax deductions but was still a large net gain.
That is why everyone's list is so personal and different - and everyone can take all of these categories and see what applies to them but they cannot take someone else's 'answer' at is. For us the big 3 (payroll tx, income txs savings) represent more than 80% of our income so the 'savings' from them are very much most of the answer.

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Re: Retirement: What expenses did you reduce?

Post by midareff » Fri Mar 29, 2019 11:09 am

SS and Medicare taxes are reduced to zero
Workplace retirement savings, ie 401k and Roth reduced to zero as no employment income.
Car insurance, maintenance and gas commensurate with reduced miles driven.
Clothes.
Weekday lunches out.

OTOH.. increased expenses:
Leisure activities such as travel (way up), movies, concerts, dinners out w/ wife.
Various cable and media services.
More 12 and 15 year old Single Malt.

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Re: Retirement: What expenses did you reduce?

Post by smitcat » Fri Mar 29, 2019 11:10 am

surfstar wrote:
Fri Mar 29, 2019 10:20 am
Weird - I wouldn't consider SS, FICA, etc taxes and 457/401k deductions as "savings". For retirement we are planning based on what we spend money on, with our take home pay - the above items never hit our bank account and aren't counted as "earnings" that need replacement.

We aren't planning based on our gross pay - so I see no reason to call those items a reduction in expenses. Mental accounting variables I guess.
"Weird - I wouldn't consider SS, FICA, etc taxes and 457/401k deductions as "savings""
Agreed - but that is what the OP was requesting I believe.

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Re: Retirement: What expenses did you reduce?

Post by bhsince87 » Fri Mar 29, 2019 11:14 am

There are a few areas I'm seeing some reduced costs.

Food/groceries: I've got more time to cook, and to prepare larger batches to freeze or can for later use. No more lunches with the gang at work or quick take out dinners on busy evenings.

I've also signed up for the rewards programs at several local grocery stores. I don't usually clip coupons (but might), but I do use e-coupons all the time. Very convenient! I also shop the weekly specials. IMO, that's where the bigger savings come from. I also shop off-hours now, and am not rushed. I don't mind shopping at two or three different stores in a week.

The other is in services, such as snow plowing, plumbing, etc. I do it myself now. Of course, I expect that will flip flop eventually as we get older.

That being said, that's practically down in the noise, and probably offset by increases in other areas: more hobby spending, higher utilities, etc.

But bottom line, I fully intended to spend MORE in retirement. If I had to cut back drastically, I would have kept working.
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dcop
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Re: Retirement: What expenses did you reduce?

Post by dcop » Fri Mar 29, 2019 11:22 am

Moved to Mazatlan Mexico. Rent is 75% less. No more state tax. I have a car but rarely need it. Groceries much less and better produce.

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Re: Retirement: What expenses did you reduce?

Post by cherijoh » Fri Mar 29, 2019 11:28 am

neilpilot wrote:
Fri Mar 29, 2019 8:15 am
If annual mileage has dropped significantly notify your auto insurer. They may reduce your premiums.
If you had a long commute you also may not need to buy a new car as often. Unless you start doing more travel by car (e.g., long weekend trips, etc.)

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Re: Retirement: What expenses did you reduce?

Post by WhiteMaxima » Fri Mar 29, 2019 11:28 am

dcop wrote:
Fri Mar 29, 2019 11:22 am
Moved to Mazatlan Mexico. Rent is 75% less. No more state tax. I have a car but rarely need it. Groceries much less and better produce.
Is it safe there?

dcop
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Re: Retirement: What expenses did you reduce?

Post by dcop » Fri Mar 29, 2019 11:32 am

Very Safe. Great weather year round, people are more sociable so easy to make friends. Mexico is an awesome place to live albeit not for everyone.

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Re: Retirement: What expenses did you reduce?

Post by delamer » Fri Mar 29, 2019 11:41 am

My husband spends about $3500/year on commuting via public transportation, and that doesn’t include the cost of driving to and from the train.

So that will be gone in retirement. Other than commuting, payroll taxes, 401(k) contributions, and a little bit of dry cleaning, no other costs directly connected to his job will disappear

For a lot of people, expenses go down in retirement due to retirement coinciding with other significant financial events — like mortgages gone and kids out of the house. So expenses go down which allows people to retire. But the expenses don’t disappear because of retirement.

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Re: Retirement: What expenses did you reduce?

Post by 2015 » Fri Mar 29, 2019 11:49 am

Saved a lots of money losing the daily cafe mocha habit as a result of no longer having to anesthesize myself from working.

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Re: Retirement: What expenses did you reduce?

Post by Frisco Kid » Fri Mar 29, 2019 11:51 am

For us we reduced retirement savings and watch what we buy (wants). 2019 is our gap year before we start SS. Other than that nothing else.

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Re: Retirement: What expenses did you reduce?

Post by marielake » Fri Mar 29, 2019 11:56 am

I had the same question prior to retiring. I came up with clothing, commuting and lunch/coffee. I eat out more now than ever, so restaurant tab has not declined.

A better way to look at is net income. I had so much deducted from my paycheck (medical savings, 403B, commuting, medical insurance, FICA). Without all those deductions my net is $1,000 higher per month (on SS and pension). That was a pleasant surprise.

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Re: Retirement: What expenses did you reduce?

Post by bertilak » Fri Mar 29, 2019 12:06 pm

marielake wrote:
Fri Mar 29, 2019 11:56 am
I had the same question prior to retiring. I came up with clothing, commuting and lunch/coffee. I eat out more now than ever, so restaurant tab has not declined.

A better way to look at is net income. I had so much deducted from my paycheck (medical savings, 403B, commuting, medical insurance, FICA). Without all those deductions my net is $1,000 higher per month (on SS and pension). That was a pleasant surprise.
I remember way back when (2010) when I was doing back-of-the-envelope calculations to see what retirement would be like I forgot to take elimination of FICA and 401(K) payroll deductions into account and had a few hours of angst! And it WAS a pleasant surprise/relief when I realized my mistake.
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dm200
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Re: Retirement: What expenses did you reduce?

Post by dm200 » Fri Mar 29, 2019 12:16 pm

renue74 wrote:
Fri Mar 29, 2019 7:24 am
I just read a thread about retirement spending and noticed somebody noted they reduced expenses at retirement.
But what do you reduce? Sure, if you have a long commute, you may reduce your fuel bill by a little. Or if you dry clean or have to buy clothes.
But really, is it that big of expense to be a working stiff vs. a retired person?
I "semi-retired" and work 20 hours a week.

I work just a few miles from home - so my car mileage is still quite low. Lower miles on cars (we have two) means lower fuel costs and lower car insurance premiums.

We do not take as many long car trips now, not because of retirement, but because child(ren) out of the house and their grandparents all deceased.

For a few years before age 65, we paid a LOT for health insurance - individual policies - for a few years we did not have employer insurance. Dropped quite a bit when Obamacare came it - for my wife. BUT I went on medicare five years before she was eligible. Health insurance costs have dropped a lot for us with our Medicare plan.

Because we have "modest" income and not a lot of assets beyond equity in our home, my wife and I qualify (depending on exact income each year) for exemption or deferral of real estate taxes (about $6,000 a year now).

In retirement or semi-retirement, you don't need to save for retirement.

We have not done so, but for many retired friends and acquaintances, their expenditures on vacation, travel and entertainment have gone up a lot.

Our son is now "self supporting" - and married ;)

mtmingus
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Re: Retirement: What expenses did you reduce?

Post by mtmingus » Fri Mar 29, 2019 12:19 pm

While med + dental insurances are deductions in paychecks - you don’t fund these from your net pays. Now in retirement you need to fund these from your new “net”.

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Re: Retirement: What expenses did you reduce?

Post by mountainsoft » Fri Mar 29, 2019 12:22 pm

surfstar wrote:
Fri Mar 29, 2019 10:20 am
Weird - I wouldn't consider SS, FICA, etc taxes and 457/401k deductions as "savings". For retirement we are planning based on what we spend money on, with our take home pay - the above items never hit our bank account and aren't counted as "earnings" that need replacement.
We aren't planning based on our gross pay - so I see no reason to call those items a reduction in expenses. Mental accounting variables I guess.
I see your point, however you ARE still spending money you earned on those items, they just come out of your check automatically instead of having to pay them yourself. I don't see those expenses any different than bills like electric, phone, garbage, internet, car license, etc. What difference does it make if you pay them out of gross pay or net pay? It's still money you don't get to keep for yourself.

When someone asks you how much you make, do you tell them your net take home pay, or the gross amount you earned?

Also, there are expenses like healthcare and income taxes that currently come out of your gross pay. You will still have these expenses after retirement but now they'll come out of your net retirement income.

In the end it doesn't really matter whether you are comparing gross income or net income, as long as you account for all expenses. Personally, I prefer to compare ALL of the money I earn with ALL of the expenses I have. Whether I pay those expenses before I get my check or after doesn't really matter.

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Re: Retirement: What expenses did you reduce?

Post by dm200 » Fri Mar 29, 2019 12:27 pm

When 65 or over, you pay less in both state and federal income taxes.

rich126
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Re: Retirement: What expenses did you reduce?

Post by rich126 » Fri Mar 29, 2019 12:31 pm

surfstar wrote:
Fri Mar 29, 2019 10:20 am
Weird - I wouldn't consider SS, FICA, etc taxes and 457/401k deductions as "savings". For retirement we are planning based on what we spend money on, with our take home pay - the above items never hit our bank account and aren't counted as "earnings" that need replacement.

We aren't planning based on our gross pay - so I see no reason to call those items a reduction in expenses. Mental accounting variables I guess.
As I was reading this thread that was my thought as well. I plan on trying to get close to my take home pay in retirement since that is the money that I actually have in my bank account. And then I subtract out the mortgage since that will be paid off shortly.

As far as real savings go things like gas, and any work related expenses (e.g., if you have to dress up, etc.) would usually be reduced. The others I'm not sure.

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Re: Retirement: What expenses did you reduce?

Post by neilpilot » Fri Mar 29, 2019 12:35 pm

dm200 wrote:
Fri Mar 29, 2019 12:27 pm
When 65 or over, you pay less in both state and federal income taxes.
Don't you think that depends on the state? That's certainly not true for me.

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Re: Retirement: What expenses did you reduce?

Post by dm200 » Fri Mar 29, 2019 12:41 pm

neilpilot wrote:
Fri Mar 29, 2019 12:35 pm
dm200 wrote:
Fri Mar 29, 2019 12:27 pm
When 65 or over, you pay less in both state and federal income taxes.
Don't you think that depends on the state? That's certainly not true for me.
OK - yes, perhaps. You get the extra exemption for federal income tax. Perhaps not all states have that.

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Re: Retirement: What expenses did you reduce?

Post by dm200 » Fri Mar 29, 2019 12:44 pm

rich126 wrote:
Fri Mar 29, 2019 12:31 pm
surfstar wrote:
Fri Mar 29, 2019 10:20 am
Weird - I wouldn't consider SS, FICA, etc taxes and 457/401k deductions as "savings". For retirement we are planning based on what we spend money on, with our take home pay - the above items never hit our bank account and aren't counted as "earnings" that need replacement.
We aren't planning based on our gross pay - so I see no reason to call those items a reduction in expenses. Mental accounting variables I guess.
As I was reading this thread that was my thought as well. I plan on trying to get close to my take home pay in retirement since that is the money that I actually have in my bank account. And then I subtract out the mortgage since that will be paid off shortly.
As far as real savings go things like gas, and any work related expenses (e.g., if you have to dress up, etc.) would usually be reduced. The others I'm not sure.
In addition, since we drive a lot fewer miles every month, we can be (and are) satisfied with two older vehicles. Many retired couples we know have cut back from two vehicles to one - but, in our case, that would lead to much more marital "friction".

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Re: Retirement: What expenses did you reduce?

Post by mountainsoft » Fri Mar 29, 2019 12:45 pm

rich126 wrote:
Fri Mar 29, 2019 12:31 pm
I plan on trying to get close to my take home pay in retirement since that is the money that I actually have in my bank account. And then I subtract out the mortgage since that will be paid off shortly.
Then ADD those items you currently pay before receiving your take home pay: Taxes, Healthcare, Life Insurance, etc.

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Re: Retirement: What expenses did you reduce?

Post by RetiredAL » Fri Mar 29, 2019 1:15 pm

Similar to what others saw and stated.

I started with my working net take home $ , then matched our net SS and plus net of IRA withdrawals as the replacement inflow factoring in medicare supplemental insurance $ which was pretax before. No retirement pay, I took the lump sum and rolled that into a IRA. Our gross is now about 35% less than before. Way less taxes, no savings put away, ECT.

We've only seen only a minor change in spending. The IRA withdrawal rate is 2.1%.

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Re: Retirement: What expenses did you reduce?

Post by mountainsoft » Fri Mar 29, 2019 1:26 pm

dm200 wrote:
Fri Mar 29, 2019 12:44 pm
we can be (and are) satisfied with two older vehicles. Many retired couples we know have cut back from two vehicles to one - but, in our case, that would lead to much more marital "friction".
We live in a rural area so two cars are kind of a must, even if we only end up driving one. Cars break down from time to time, even if it's something as simple as a dead battery on a cold morning. We need the second vehicle to go get parts, run errands while the first vehicle is down, etc. Things would be a lot more complicated if we only had one vehicle.

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Re: Retirement: What expenses did you reduce?

Post by dm200 » Fri Mar 29, 2019 1:36 pm

mountainsoft wrote:
Fri Mar 29, 2019 1:26 pm
dm200 wrote:
Fri Mar 29, 2019 12:44 pm
we can be (and are) satisfied with two older vehicles. Many retired couples we know have cut back from two vehicles to one - but, in our case, that would lead to much more marital "friction".
We live in a rural area so two cars are kind of a must, even if we only end up driving one. Cars break down from time to time, even if it's something as simple as a dead battery on a cold morning. We need the second vehicle to go get parts, run errands while the first vehicle is down, etc. Things would be a lot more complicated if we only had one vehicle.
I think that if we had only one vehicle, it would probably need to be a later model. With two, we can live ok with older ones.

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Re: Retirement: What expenses did you reduce?

Post by 22twain » Fri Mar 29, 2019 2:28 pm

Our only major expense that decreased because of retirement was taxes. Our last normal year of working was 2010, when we paid about $24K in federal and state income tax. They didn't drop all at once because we didn't simply "flip a switch" to retire, but instead gradually "dimmed the lights." The last 3-4 years we've paid about $2K in taxes per year. However, the decrease is only temporary. This year DW starts Social Security and RMDs, so taxes will go up again. In a few years, when I do the same, they'll be back at about $24K again.

We were small-town college teachers so we had minimal work-related expenses. No fancy clothes or expensive lunches. We live within walking distance of the college, so commuting expenses were minimal. No savings there!

We paid off our mortgage a few years before the retirement process began. That wasn't a big decease in expenses because this is a VLCOL area where housing is cheap. The mortgage payments were never more than about 10% of our combined salaries. Our house now makes up about 5% of our net worth.

We never had kids to leave the nest, so no decrease in expenses there.

Overall, after taxes settle down, our total expenses will be somewhat higher than when we were were working full time. Mainly because of Medicare premiums, plus probably more traveling, hobbies, etc. It won't be a huge amount higher.
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Re: Retirement: What expenses did you reduce?

Post by dm200 » Fri Mar 29, 2019 2:55 pm

Overall, after taxes settle down, our total expenses will be somewhat higher than when we were were working full time. Mainly because of Medicare premiums, plus probably more traveling, hobbies, etc. It won't be a huge amount higher.


Yes - a wide variance among retirees - depending on all the facts, circumstances and details.

Another, not uncommon, situation among retirees is taking on the support of grandchildren. Doing that can really throw off your planned retirement finances!

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