Poll of the retirees among us--spending in retirement

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cresive
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Poll of the retirees among us--spending in retirement

Post by cresive »

Hello,

I have a question for the retired, especially those well into their retirement. I was re-reading some notes on spending in retirement and I came across a Kitces article from 2018 that tracked retirement spending by households led by people of different ages. The study was done in the USA and broke down spending by 5-year increments.

The data ran something like this:

Age / Spending
60 y.o. / $94,000
65 y.o. / $85,000
70 y.o. / $76,000
75 y.o. / $71,000
80 y.o. / $65,000

While the numbers will change, the overall premise is that 80 y.o. retirees typically spend about 2/3 the amount of a person early in retirement. I suspect this spending increases from 80 y.o. on due to medical expenses. However, I wanted to poll our group to see if this reduction is present in a smaller, more focused group. For those well into retirement, has anyone tracked their spending levels? Does it roughly approximate the above +/- inflation?

I am really curious about the data.

Thanks,
Ben
Chuck107
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Re: Poll of the retirees among us--spending in retirement

Post by Chuck107 »

.....
Last edited by Chuck107 on Mon Oct 05, 2020 8:03 am, edited 1 time in total.
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jebmke
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Re: Poll of the retirees among us--spending in retirement

Post by jebmke »

I've been retired since 2007. Spending fluctuates considerably. Main items that move the needle are income taxes and large "capital" spending items like home improvements or major system replacement (heat pump).
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MikeG62
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Re: Poll of the retirees among us--spending in retirement

Post by MikeG62 »

In our 5th year of retirement, but too young to provide actual data to validate (or refute) the data provided in the Kitces article. Having said that, I think this trend requires a retired person/couple to have a decent amount of discretionary spend in the earlier part of retirement. There are many here who value spending as little as possible. For this cohort, I think the spending pattern set out by Kitces would be less likely to be experienced.

FWIW, my projections assume that as we age and travel less, that spending decline will be offset by higher health care related costs. I think that is very conservative (as our discretionary spend is a very large % of our total spend) and expect we will likely experience the same pattern as set out in the article.
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delamer
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Re: Poll of the retirees among us--spending in retirement

Post by delamer »

Can you provide a link to the Kitces article?
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Sandtrap
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Re: Poll of the retirees among us--spending in retirement

Post by Sandtrap »

Baseline retirement expenses are generally consistent year to year.
Large lumpy expenses for property additions and renovations, misc. random expenses, spread out over years add to that.
None of this is so predictable or quantifiable to be able to fit on a spreadsheet or curve. Thus "lumpy".

How is this data actionable to a fellow retiree, also with unique financial circumstances, etc?
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Re: Poll of the retirees among us--spending in retirement

Post by Dottie57 »

Retirement started in 2018 at age 61. Spending same each year.

My mom and dad started at about 80k. At mom’s death mom she was spending about 45k due to decline in assets.
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Watty
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Re: Poll of the retirees among us--spending in retirement

Post by Watty »

You might want to edit your post to add a link to the article you were referring too.

There are a couple of problem with your numbers.

The median US household income is only about $60K so those numbers are likely way high if you are trying to figure out average spending.

Getting on Medicare at 65 likely accounts for most of the drop between 60 and 65 so you might want to take the age 60 out of your analysis.

Between the ages of 60 and 80 it is likely that a lot of people will have been widowed so the household expenses would go down from supporting two people to just one.

That said I have seen relatives that had their expenses drop as they got older since even though they were in relatively good health they slowed down a lot by about their mid 70s. At that point didn't want to do much travel and even things like an evening out was a rare event.
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Re: Poll of the retirees among us--spending in retirement

Post by jebmke »

Sandtrap wrote: Tue Aug 25, 2020 8:49 am Baseline retirement expenses are generally consistent year to year.
Large lumpy expenses for property additions and renovations, misc. random expenses, spread out over years add to that.
None of this is so predictable or quantifiable to be able to fit on a spreadsheet or curve. Thus "lumpy".

How is this data actionable to a fellow retiree, also with unique financial circumstances, etc?
j :happy
I think it is to the extent that it helps remind potential retirees that expenses aren't flat or even gently rising due to inflation. They jump up and down. My high year was 50% more than my low year and 25% more than my average year. Often you see expense forecasts that don't account for the large items, whether discretionary or non-discretionary.
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Re: Poll of the retirees among us--spending in retirement

Post by flyingaway »

60 y.o. / $94,000, average annual retirement spending in 2018? That number is close to the fatFIRE number.

I guess I have to work for a few more years.
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Re: Poll of the retirees among us--spending in retirement

Post by cresive »

delamer wrote: Tue Aug 25, 2020 8:48 am Can you provide a link to the Kitces article?
Sorry,
I was going off my notes, and don't have the original article. I will search for it.
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Re: Poll of the retirees among us--spending in retirement

Post by cresive »

Dottie57 wrote: Tue Aug 25, 2020 8:55 am Retirement started in 2018 at age 61. Spending same each year.

My mom and dad started at about 80k. At mom’s death mom she was spending about 45k due to decline in assets.
I wonder if that is a major driving force for decreased spending. If I remember the article correctly, the cohort was not affected by declining assets, but I will have to find it and make sure.

Ben
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cresive
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Re: Poll of the retirees among us--spending in retirement

Post by cresive »

flyingaway wrote: Tue Aug 25, 2020 9:22 am 60 y.o. / $94,000, average annual retirement spending in 2018? That number is close to the fatFIRE number.

I guess I have to work for a few more years.
These were the numbers in the article. I hesitated to put them in, as I didn't want to get caught up in the weeds. I think Kitce picked a cohort that was not limited in assets. Thus, declining assets was not the driving factor for decreased spending. The decrease was due to retirees slowing down and spending less due to cheaper travel, dining out, etc.

Ben
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Re: Poll of the retirees among us--spending in retirement

Post by 7eight9 »

Link to article --- Using Age Banding To Estimate How Spending Will Decline In Retirement
https://www.kitces.com/blog/age-banding ... -category/
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Re: Poll of the retirees among us--spending in retirement

Post by cresive »

delamer wrote: Tue Aug 25, 2020 8:48 am Can you provide a link to the Kitces article?
I can't guarantee this is the original article, but it has similar information. This article has additional information, such as health care driving up spending after retirees age past 80 y.o.

https://www.kitces.com/blog/age-banding ... -category/
dbr
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Re: Poll of the retirees among us--spending in retirement

Post by dbr »

Our spending has increased at 2.3%/year. The spending is also variable with a coefficient of variation (ratio of standard deviation to mean) of about 15% and a range in annual spending of about 50% of the average. Coefficient of variation is for those who do statistics and range is for a simple intuitive report. (I have not tested the distribution of spending for normality :twisted: )
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Re: Poll of the retirees among us--spending in retirement

Post by dbr »

In general there has to be a big difference in the spending trend at different levels of income. I know people whose spending is by definition their income. In one case that income is inflation indexed income streams so the spending changes are exactly zero in real dollars.

I have known people who are so wealthy and try to spend so little that their spending has gone down as they get more obsessed with spending and also less able to make use of money. That changes when they become seriously ill or infirm. As a fraction of assets the spending is zero anyway.

I know people where the overwhelmingly dominant impact on spending is end of life care. That causes the spending to triple or quadruple for a few years. In general the onset of health issues will have a large impact even not at end of life.

Spending is significantly affected by changes in family status. Among those is how much support is one giving to children and changes upon death of a spouse or divorce.

I would suggest that spending in retirement is so variable from one person to the next that a better analysis will follow from making personal estimates than from consulting trends.
wanderer
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Re: Poll of the retirees among us--spending in retirement

Post by wanderer »

The "stages" of retirement spending models seems reasonable, as is discussed in this BH Wiki, and perhaps others.
https://www.bogleheads.org/wiki/Models_ ... %20rows%20

We are retired 7 years and still in the "go-go" years. Spending is up to us. We have friends who are a bit older drifting into the "go-slow" years. My parents experienced all three stages with 5+ "no-go" years and significantly higher health/support spending (assisted living and nursing homes).

DW's parents went from retirement to a short "go-go" period to a sudden loss of a spouse and then a prolonged "no-go" period due to serious health issues.

I think that preparing for a range of options (especially health-wise), is more important than trying to find the perfect aggregate "curve".
TN_Boy
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Re: Poll of the retirees among us--spending in retirement

Post by TN_Boy »

Chuck107 wrote: Tue Aug 25, 2020 8:38 am Age 66, retired for 16 yrs.

Spending has been the same each year.
Are you adjusting for inflation?

I.e. if you spent $60k in nominal dollars in 2004, and also spent $60k in nominal dollars in 2019 your spending dropped substantially.

60k in 2019 dollars is about 44k in 2004 dollars.

[Edited to add] In these posts where people report how their spending changed (or did not) over a longer period of time, almost no-one adjusts for inflation when posting their numbers.
fourwheelcycle
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Re: Poll of the retirees among us--spending in retirement

Post by fourwheelcycle »

I have been aware or in charge of my father's finances from age 80 to 98. In nominal dollars, his annual expenses, excluding taxes, were about $90K in his early 80s, when my mother was still alive, they vacationed together, bought new cars, and purchased new things for their house, including furniture, furnaces, and small lawn tractors. By his early 90s, after my mother had died and my father had almost completely stopped traveling, or buying new cars or items for the house, his annual expenses dropped to around $50K. Now he has sold his home and moved to a three meals per day assisted living facility; his expenses before taxes are up to about $75K.
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Re: Poll of the retirees among us--spending in retirement

Post by Gnirk »

Retired since Jan 1, 2007. Base spending is about the same taking inflation into account, except for property tax increases. Other spending fluctuates...replace furnace/AC; minor home and yard improvements; new cars; travel.

Our travel expenses have decreased considerably the past three years because of DH health. Yard maintenance expenses have increased considerably because of the same.(we have a huge, landscaped yard).
Chuck107
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Re: Poll of the retirees among us--spending in retirement

Post by Chuck107 »

.....
Last edited by Chuck107 on Mon Oct 05, 2020 8:02 am, edited 1 time in total.
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PSM
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Re: Poll of the retirees among us--spending in retirement

Post by PSM »

Age 64/wife 64. Retired at 61. We were fortunate to have above average asset level, including
cash on hand from inheritances. First three years included major expenditures like paying off mortgage,
replacing our two cars (which we hope will last 10++ years), major gifts to daughter, replacing some
computers and smartphones, etc.

Going into this pandemic year 2020, we had positioned ourselves well with investments and income,
including the ability to manage MAGI to receive the maximum premium tax credits with an ACA health
plan (0 premiums and silver plan cost sharing reductions). 0 taxes.

I have always tracked spending with Quicken. 2020, with its reduction in our travel and other entertainment
expenses has showed us that we can enjoy our lives at home with a lot less spending than I envisioned
pre-retirement. YTD we have spent about $47000, which includes about $15000 in long term care insurance
premiums, property tax, term life premiums and charity. I suppose we will have a total for 2020 around $60000-70000.

Going forward, the biggest expense will become taxes. We have large amounts parked in retirement accounts which
we have not started to use much. We face the tax bomb of RMD’s at age 72. When we both get on Medicare, we will
need a strategy of Roth conversions and/or withdrawals to begin paying our potentially huge tax bill. We will also
have higher health care bills with the new premiums for Medicare parts B and D, plus a Medicare supplement plan.

How much we resume travel is to be decided, as well as resuming attendance at large gatherings like sports events
and theater.

As we look way off into the future, we want to make sure that we will have “enough” to transition to a continuing
care retirement community plus larger medical expenses, which are minimal now.

Currently, we have about 30% in stock-related investments, 25% in cash, 45% bonds. We benefited a lot from
the market gains of the past few years and are able to have a withdrawal rate of 3% or less. As the economy
improves in the next few years, we may go back up to 40% in stocks to have a chance at more charity and
benefits for heirs.

Bottom line, and lessons I have learned:
1. We can spend a lot less in retirement than originally planned when compared to our working years. No
commuting, work clothes, FICA taxes, retirement savings, restaurant lunches, etc.
2. The ACA has been a big $$ saver pre-Medicare if one can manage MAGI.
3. We expect cars will last a lot longer than the turnover we had before, with lower maintenance costs too.
4. Having a mortgage paid off is great for peace of mind, cash flow and interest savings.
5. We will need to decide on Roth conversions, and whether or not accepting those 5 year constraints for
each conversion really is better than making withdrawals and investing them in our taxable account. RMD
tax bomb is on the horizon.
6. The entertainment and dining options at home these days are much better than we ever imagined
pre-retirement. We enjoy cooking nice meals, watching movies and taking walks in our neighborhood.

I enjoy the investing and finance insights of a variety of sources, including you here at bogleheads, the
folks at Morningstar, and David Stein’s “Money for the Rest of Us” podcast and membership.
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xplorer
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Re: Poll of the retirees among us--spending in retirement

Post by xplorer »

We retired at age 48 in 1999 and through 2010 or avg spending (unadjusted for inflation) was 66k p/y. Largest expense was medical (22% p/y). We were following very conservative safe withdrawal rates. The next decade was much like the first. Avg annual spending of 67k with largest expense still medical at 24%. The current decade included additional income from pensions and social security and saw our avg annual spending for 2019 rise to 118k p/y. Interestingly our single largest expense remained medical at 15% p/y (again all numbers are not adjusted for inflation). Additional social security will kick in next year. I foresee during the fourth decade (God willing) our annual avg spending will likely increase again as we stay active and no catastrophe befalls our great country. Not sure any of this helps test the Kitches theory. I final note, the above does not include major capital investments/outlays for home or auto purchases.
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Re: Poll of the retirees among us--spending in retirement

Post by carolinaman »

Age 75 (soon to be 76), retired almost 10 years. Our personal expenses have dropped in recent years as we do not travel as much, eat out less often, dropped our season tickets to the Carolina Panthers and a few other entertainment related things.

As others have said, expenses can be lumpy with periodic major expenses for home maintenance of our 47 year old home. Tree removal, septic tank repair, HVAC, etc. We keep our home well maintained but it can get expensive.

The other lumpy expense we have is gifts and assistance to children. Our oldest granddaughter went out of state to college and we paid $20,000 over 4 years to help her. We are looking at a similar expense for youngest granddaughter in 2 years. We also helped our son some. Both of our children are in pretty good shape but we will give gladly when we see a need.

We both have very good health insurance which so far has covered almost all of our medical and prescription expenses. Even with relatively good health, that would have been a major expense without good coverage (mine is covered 100% by my former employer, except for deductibles).

We are blessed to be in good financial shape with 2 pensions, SS and our investments. Because of that, we give a lot more to charity and needy causes than we ever did while working.
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Re: Poll of the retirees among us--spending in retirement

Post by flaccidsteele »

cresive wrote: Tue Aug 25, 2020 8:35 am Hello,

I have a question for the retired, especially those well into their retirement. I was re-reading some notes on spending in retirement and I came across a Kitces article from 2018 that tracked retirement spending by households led by people of different ages. The study was done in the USA and broke down spending by 5-year increments.

The data ran something like this:

Age / Spending
60 y.o. / $94,000
65 y.o. / $85,000
70 y.o. / $76,000
75 y.o. / $71,000
80 y.o. / $65,000

While the numbers will change, the overall premise is that 80 y.o. retirees typically spend about 2/3 the amount of a person early in retirement. I suspect this spending increases from 80 y.o. on due to medical expenses. However, I wanted to poll our group to see if this reduction is present in a smaller, more focused group. For those well into retirement, has anyone tracked their spending levels? Does it roughly approximate the above +/- inflation?

I am really curious about the data.

Thanks,
Ben
Did the study discuss whether retirees spent less as they aged because they had less or because they did less?
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
dbr
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Re: Poll of the retirees among us--spending in retirement

Post by dbr »

flaccidsteele wrote: Tue Aug 25, 2020 11:18 am

Did the study discuss whether retirees spent less as they aged because they had less or because they did less?
I don't have the documentation, but I have read results that suggest people spend less because they have less and other studies that claim the effect is caused by less expensive lifestyle with age. I would guess both things happen in different cases possibly correlated with some factor about the people.

I already mentioned the person I know whose spending increases exactly with the CPI because he has inflation indexed income and spends all of it and he has no assets.
iamblessed
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Re: Poll of the retirees among us--spending in retirement

Post by iamblessed »

I think that unless you reduce travel or downsize your home spending will be about the same.
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Re: Poll of the retirees among us--spending in retirement

Post by Barsoom »

cresive wrote: Tue Aug 25, 2020 9:35 am
delamer wrote: Tue Aug 25, 2020 8:48 am Can you provide a link to the Kitces article?
I can't guarantee this is the original article, but it has similar information. This article has additional information, such as health care driving up spending after retirees age past 80 y.o.

https://www.kitces.com/blog/age-banding ... -category/
Here is a graph of the different retirement spending patterns that I extracted from the I-ORP program. In this graph, the spending patterns are relative to a constant or Traditional Spend Model:

Image

-B
UpperNwGuy
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Re: Poll of the retirees among us--spending in retirement

Post by UpperNwGuy »

My spending decreased when I retired because:
— no more retirement contributions
— significantly reduced dining and entertainment costs
— significantly reduced clothing and dry cleaning costs
— significantly reduced automobile and gasoline costs

Other spending decreases not directly tied to retirement but happening at the same time:
— the last child graduated from college, so no more college tuition
— reduced life insurance

Some of these savings were offset by:
— increased travel
— increased spending on personal training and other fitness activities

As I get into my late 70s and early 80s, I expect travel and fitness costs to diminish. As I reduce my possessions and downsize my home, I expect housing costs to decline.
Wanderingwheelz
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Re: Poll of the retirees among us--spending in retirement

Post by Wanderingwheelz »

Right now my wife and I are spending less than the 80 year olds and we’re only in our 40s, but most of us are spending less than what we typically do, this year.

The point is, so many things can change In life that it’s hard to know how to plan. You just have to do fine best and adjust as you go along.
deikel
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Re: Poll of the retirees among us--spending in retirement

Post by deikel »

if COVID was any indication in March/April/May/June, then your expenses should drop by a lot if you restrict your movements at higher age (less travel) and stay at home (less entertainment outside the house) and puttering around the house is your only consumption of time

30% drop in my case, so that drop for the over 70-75 crowd seems sensical to me
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MathWizard
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Re: Poll of the retirees among us--spending in retirement

Post by MathWizard »

I do expect spending to look like a "smile",
10 years of go-go higher spending getting all the big trips that we have delayed due to kids and work,
10 years of go slow as we will have all the big trips taken, and don't want to be away from home as much,
final years of non-go low expenses as we stay home and tell the kids to come see us, followed by high end of life expenses.

A note on using these figures though:

These are not the same people, so this is not a profile of the average spending for a defined group of people.

The aged 60 numbers would be skewed by those who felt that they could retire at 60.
You would see very few poor people among them, so spending would be higher.

Also, in my projections, the spending before age 65 is much higher because:
1) Health care insurance is much more expensive pre-medicare
2) I have to pull from tax deferred to pay for this, so I have to pay more taxes, and pay taxes on that extra.
Comparing before age 60 to after, I estimate that I will need to spend $10K more on health ins. and the additional
fed,state, and local income taxes on the health ins.
3) After age 65, the St Ded. goes up $2600 for a married couple, so I will pay less in taxes. (This comes off my top rate.)

Also, once I take SS, not all that income will be taxed, so I have to spend less for taxes.
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Re: Poll of the retirees among us--spending in retirement

Post by Sheepdog »

Retired 10/1998 age 65

Spending averages after that in 4 year increment averages
1999-2002 56,285
2003-2006 57,806
2007-2010 60,879
2011-2014 68,923
2015-2019 70,977 (note this avg is the last 5 years)
Well, so much for Kitces' article. It shows that you are who you are. We aren't the same.
Where we spent more for vacations in the earlier years, we spend more on medical and dental these days, but other spending has been very similar (same house maintenance, food, auto purchases, restaurants, entertainment, and so forth.)

On thinking about this, there is a change for us in that we gave away more the last 5 years than then. I include donations and gifts in my spending averages, so take that into account. (Example: We gave away $3,954 in 2000 and we gave away $12.780 in 2019.)
Woof
Last edited by Sheepdog on Tue Aug 25, 2020 1:12 pm, edited 1 time in total.
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phxjcc
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Re: Poll of the retirees among us--spending in retirement

Post by phxjcc »

Watty wrote: Tue Aug 25, 2020 9:08 am You might want to edit your post to add a link to the article you were referring too.

There are a couple of problem with your numbers.

The median US household income is only about $60K so those numbers are likely way high if you are trying to figure out average spending.

Getting on Medicare at 65 likely accounts for most of the drop between 60 and 65 so you might want to take the age 60 out of your analysis.

Between the ages of 60 and 80 it is likely that a lot of people will have been widowed so the household expenses would go down from supporting two people to just one.

That said I have seen relatives that had their expenses drop as they got older since even though they were in relatively good health they slowed down a lot by about their mid 70s. At that point didn't want to do much travel and even things like an evening out was a rare event.
Here is my cite.
https://www.google.com/amp/s/www.newret ... %3Famp%3D1

It is now up to someone else to rationalize the 50% difference.

Thank you, and I’ll take my answer off the air.
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Re: Poll of the retirees among us--spending in retirement

Post by TN_Boy »

Sheepdog wrote: Tue Aug 25, 2020 12:43 pm Retired 10/1998 age 65

Spending averages after that in 4 year increment averages
1999-2002 56,285
2003-2006 57,806
2007-2010 60,879
2011-2014 68,923
2015-2019 70,977 (note this avg is the last 5 years)
Well, so much for Kitces' article. It shows that you are who you are. We aren't the same.
Where we spent more for vacations in the earlier years, we spend more on medical and dental these days, but other spending has been very similar (same house maintenance, food, auto purchases, restaurants, entertainment, and so forth.)
On thinking about this, there is a change for us in that we gave away more the last 5 years than then. I include donations and gifts in my spending averages, so take that into account.)
Woof
Are your numbers adjusted for inflation?
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Sheepdog
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Re: Poll of the retirees among us--spending in retirement

Post by Sheepdog »

TN_Boy wrote: Tue Aug 25, 2020 1:04 pm

Are your numbers adjusted for inflation?
No, of course not. Most of us keep track of current spending and not try to change that to some other period dollar value. I can say our standard of living hasn't changed much. My inflation has been much less than the CPI....much less. I don't buy new houses,I live in the same house and since I do all maintenance myself, the cost is not high per year.I don't buy the latest electronic gadgets so that does not come into account. I pay less taxes. I travel less. , We eat out more today though. We spend much less on taxes... much less.

Example. in 2000 we spent $9,774 on vacation expenses. We spent nothing in 2019
Gasoline in 2000 we spent $1,261 and $1,056 last year.
Income taxes in 2000 was $5.270, but $663 last year.
yes, I know groceries are up. $4,024 in 2000 vs $6,698 in 2019 and restaurant expenses were $1,729 in 2000 and were $3,461 last year

woof woof
Time is the school in which we learn, time is the fire in which we burn.~ Delmore Schwartz
Chuck107
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Re: Poll of the retirees among us--spending in retirement

Post by Chuck107 »

.....
Last edited by Chuck107 on Mon Oct 05, 2020 8:01 am, edited 1 time in total.
Alas, I find moderation of this forum too restrictive for my tastes, farewell.
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CyclingDuo
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Re: Poll of the retirees among us--spending in retirement

Post by CyclingDuo »

cresive wrote: Tue Aug 25, 2020 8:35 am Hello,

I have a question for the retired, especially those well into their retirement. I was re-reading some notes on spending in retirement and I came across a Kitces article from 2018 that tracked retirement spending by households led by people of different ages. The study was done in the USA and broke down spending by 5-year increments.

The data ran something like this:

Age / Spending
60 y.o. / $94,000
65 y.o. / $85,000
70 y.o. / $76,000
75 y.o. / $71,000
80 y.o. / $65,000

While the numbers will change, the overall premise is that 80 y.o. retirees typically spend about 2/3 the amount of a person early in retirement. I suspect this spending increases from 80 y.o. on due to medical expenses. However, I wanted to poll our group to see if this reduction is present in a smaller, more focused group. For those well into retirement, has anyone tracked their spending levels? Does it roughly approximate the above +/- inflation?

I am really curious about the data.

Thanks,
Ben
It's most often known as the Spending Smile in retirement. The tail end over age 80 rises again as health and medical issues, LTC (long term care), etc... come into play.

https://www.kitces.com/blog/estimating- ... ing-smile/

Go Go Years -----> Slow Go Years ------> No Go Years

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel
ncbill
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Re: Poll of the retirees among us--spending in retirement

Post by ncbill »

Yep...go-go to slow go to no go.

The most successful retiree I've known was my great uncle...retired from a major bank in his early 50s with the gold-plated pension, traveled the world with his wife for the next decade or so, then was restricted to the USA for the next few years, then restricted to his cottage at the CCRC for his last years (died in his early 70s)

And this was a man who was used to travel...spent most of WWII working for the OSS in various "missions" across Southeast Asia & mainland China.

But by age 70 his body was done, despite his lifetime of regular physical activity.
Last edited by ncbill on Thu Aug 27, 2020 8:48 am, edited 1 time in total.
TN_Boy
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Re: Poll of the retirees among us--spending in retirement

Post by TN_Boy »

Sheepdog wrote: Tue Aug 25, 2020 1:39 pm
TN_Boy wrote: Tue Aug 25, 2020 1:04 pm

Are your numbers adjusted for inflation?
No, of course not. Most of us keep track of current spending and not try to change that to some other period dollar value. I can say our standard of living hasn't changed much. My inflation has been much less than the CPI....much less. I don't buy new houses,I live in the same house and since I do all maintenance myself, the cost is not high per year.I don't buy the latest electronic gadgets so that does not come into account. I pay less taxes. I travel less. , We eat out more today though. We spend much less on taxes... much less.

Example. in 2000 we spent $9,774 on vacation expenses. We spent nothing in 2019
Gasoline in 2000 we spent $1,261 and $1,056 last year.
Income taxes in 2000 was $5.270, but $663 last year.
yes, I know groceries are up. $4,024 in 2000 vs $6,698 in 2019 and restaurant expenses were $1,729 in 2000 and were $3,461 last year

woof woof
I know we've had this debate before, and I can't figure out why you resist the math :-). Do you not believe the inflation calculators?

You said "Well, so much for Kitces' article. It shows that you are who you are. We aren't the same."

Before I went back and I believe I found that corrected for inflation, using your own numbers, that your spending in real terms matched the model talked about in Kitce's article.

The studies Kitce's refers to use real dollars. Since obviously, $100 in 2020 doesn't buy as much as $100 in (for example) 2000 did. Thus reporting spending in nominal terms and comparing those numbers to the results in the studies which used real dollars is obviously wrong; comparing apples to oranges.

Note that I don't believe the studies are claiming that people are lowering their standard of living. I think the studies are just saying that for whatever reason, spending tends to go down.

As your data shows. For example, $56,285 in 1999 is $87,536.01 in today's dollars. Your standard of living may not have changed, but your spending is down.
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GerryL
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Re: Poll of the retirees among us--spending in retirement

Post by GerryL »

71yo and >6 years into retirement.
I have a spending "target" that was used to evaluate my retirement plan. (It does not include taxes and goes up each year for inflation.) So far I have never actually hit the target, and I keep a running tab of how much I fall short each year. That will be useful if I want to surpass the target one year.

My plan is to spend at or close to my target throughout retirement, although this year I will be way short because ... no travel. I may up my target in a few years if it looks like that would be safe, i.e., little to no likelihood that I will run out of money.

When I can no longer travel, I will likely up my charitable giving. So, "dollars going out" will probably stay fairly steady throughout the years.
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JohnYaker
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Re: Poll of the retirees among us--spending in retirement

Post by JohnYaker »

.
My wife and I retired in 2007 at age 52, so now 13 years into it. Our spending has gone up over time as our assets increased, but our spending needs have pretty much stayed the same. Still active, so travel is big expense.

The one thing I under-estimated in pre-retirement planning was the cost of relocating to enjoy a completely different lifestyle. We ended up buying a farm overseas that was more expensive than planned, then building a more expensive house on it.

Some peoples' spending is limited by affordability, which might be why the originally-cited article shows a decline in spending. For those who can afford more spending, my guess is it stays the same, perhaps shifting from fun stuff to medical in later years.
SQRT
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Re: Poll of the retirees among us--spending in retirement

Post by SQRT »

JohnYaker wrote: Wed Aug 26, 2020 12:25 am .
My wife and I retired in 2007 at age 52, so now 13 years into it. Our spending has gone up over time as our assets increased, but our spending needs have pretty much stayed the same. Still active, so travel is big expense.

The one thing I under-estimated in pre-retirement planning was the cost of relocating to enjoy a completely different lifestyle. We ended up buying a farm overseas that was more expensive than planned, then building a more expensive house on it.

Some peoples' spending is limited by affordability, which might be why the originally-cited article shows a decline in spending. For those who can afford more spending, my guess is it stays the same, perhaps shifting from fun stuff to medical in later years.
Similar story. Retired for 14 years currently 70. Spending is trending up and mostly relates to purchasing personal use vacation types properties, exotic travel, gifting to family. real estate Reno’s. As our means have increased so has our spending. So far seem to be able to productively, and enjoyably spend more. I can see a slow down in my ‘80’s (assuming good health continues) so I’m trying to get as much in now as I can, within reason of course on things we value.
vested1
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Re: Poll of the retirees among us--spending in retirement

Post by vested1 »

Sandtrap wrote: Tue Aug 25, 2020 8:49 am Baseline retirement expenses are generally consistent year to year.
Large lumpy expenses for property additions and renovations, misc. random expenses, spread out over years add to that.
None of this is so predictable or quantifiable to be able to fit on a spreadsheet or curve. Thus "lumpy".

How is this data actionable to a fellow retiree, also with unique financial circumstances, etc?
j :happy
I agree, although this may be the first time I've questioned whether a topic is actionable or not. Most, if not all of the responses have been anecdotal, which is understandable given the subject.

We sold our house last year and bought another one in the mid 6 figures. Am I supposed to exclude that expenditure? The elimination of our previous mortgage lowered our expenses dramatically, as did the relocation to a LCOL State. How do I factor that in to a trend that is applicable to anyone else in such a generalized bucket of "retired people"? How would that look on a graph?

We use a variable withdrawal strategy, spending more when the markets are up generally, with the exception being this year when our withdrawals from savings have been zero. If we don't need to spend it, we don't. If we want to spend it on extras we make sure it falls within the parameters of our plan.

During our first year of retirement we withdrew over 8%, but we had large one time expenditures and had gained twice that in investments. In 2019 our withdrawal rate was 2.9%, none of it on daily expenses or bills, but for a one time single expenditure. The markets were soaring in 2019, but our VPW plan didn't require that we withdraw more. We just didn't need it.

There are factors that make an estimate of future spending almost impossible to do accurately, such as unexpected home/vehicle maintenance events, medical emergencies, and changes to health insurance costs that you have no control over. Our insurance costs increased dramatically with the onset of Medicare, yet we are in the same health condition that we were in before the onset of Medicare. That was unexpected. For others the opposite is usually true.

I don't itemize every item and track them year-to-year, like Sheepdog does. While I admire his commitment, I don't have the curiosity needed to do so. I keep track of the percentage of withdrawal from savings and how that impacts the retirement plan we made that will sustain and may even increase our savings during retirement. So far so good.

It may sound crass, but I don't care too much what others do, how much they've saved, or how much they spend. I need to take care of myself and my wife and hopefully leave something for our kids.

On the subject of adjusting for inflation, the combined effects of delaying SS and investment growth should eliminate that concern.
bigskyguy
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Re: Poll of the retirees among us--spending in retirement

Post by bigskyguy »

David Blanchette published an article in I believe the Journal of Financial planning in 2014 on this very topic that is data based and gave birth to the concept of the Retirement smile.” He demonstrated that while the spending pattern of higher expenses early in retirement, dropping in mid retirement, only to accelerate in later retirement was consistent across income levels, there were variabilities In the degrees of spending variation over time depending upon income levels. There is a nice review of Blanchett’s work By Wade Pfau at retirementresearscher.com that would likely be worth your time.
TN_Boy
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Re: Poll of the retirees among us--spending in retirement

Post by TN_Boy »

vested1 wrote: Wed Aug 26, 2020 5:57 am
Sandtrap wrote: Tue Aug 25, 2020 8:49 am Baseline retirement expenses are generally consistent year to year.
Large lumpy expenses for property additions and renovations, misc. random expenses, spread out over years add to that.
None of this is so predictable or quantifiable to be able to fit on a spreadsheet or curve. Thus "lumpy".

How is this data actionable to a fellow retiree, also with unique financial circumstances, etc?
j :happy

stuff snipped ...

There are factors that make an estimate of future spending almost impossible to do accurately, such as unexpected home/vehicle maintenance events, medical emergencies, and changes to health insurance costs that you have no control over. Our insurance costs increased dramatically with the onset of Medicare, yet we are in the same health condition that we were in before the onset of Medicare. That was unexpected. For others the opposite is usually true.
I understand that health care costs can be very unpredictable, making those expenses difficult to manage.

But I quibble a bit with this comment "such as unexpected home/vehicle maintenance events." Okay, obviously the exact timing and amount of such costs vary. When doing retirement planning, we went back 10 years and estimated overall spending during those years. During that timeframe we bought two cars, had a major home repair, and did a moderate home renovation. Plus other "non-routine" costs. Our spending estimate going forward was the average of those 10 years, which of course included those "unexpected" expenses.

Estimating expenses retroactively is not extremely hard if you have the right tracking. I have a spreadsheet showing inflows/outflows to investments and I have our tax returns. So I could look and see that net income after all taxes and retirement contributions was $X. I could see that we contributed $Y to taxable investments. I reckon we spent the rest ..... that assumes one is not simply putting debt on credit cards etc. Anyway, doing that gave us confidence in spending across multiple years at a high level. What we've not had are any medical cost shocks.

And of course you would then, in a retirement scenario, estimate taxes (for most people their tax situation changes a lot when retired .... no more payroll tax, often lower income taxes, etc).
bltn
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Re: Poll of the retirees among us--spending in retirement

Post by bltn »

iamblessed wrote: Tue Aug 25, 2020 11:37 am I think that unless you reduce travel or downsize your home spending will be about the same.
There are other aspects of less spending as one ages. We find that we are going out to eat less, and when we do, we have less interest in expensive “gourmet” restaurants. We also have less interest inexpensive gifts at birthdays and Christmas.
I am considering spending a little more on my next car. But I may change my mind!
Material things become less important, and relationships more important. And this is at a time when we can afford more than ever. Ironic.
Nowizard
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Re: Poll of the retirees among us--spending in retirement

Post by Nowizard »

Retired for 13 years. Spending has increased, primarily related to interactions with children such as renting a condo near one, gift-giving, etc. The increased spending is discretionary and could change quickly if required.

Tim
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WoodSpinner
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Re: Poll of the retirees among us--spending in retirement

Post by WoodSpinner »

PSM wrote: Tue Aug 25, 2020 10:33 am
Going forward, the biggest expense will become taxes. We have large amounts parked in retirement accounts which
we have not started to use much. We face the tax bomb of RMD’s at age 72. When we both get on Medicare, we will
need a strategy of Roth conversions and/or withdrawals to begin paying our potentially huge tax bill. We will also
have higher health care bills with the new premiums for Medicare parts B and D, plus a Medicare supplement plan.
Wondering if you have compared your short term savings via ACA (and soon to be IRMAA) against long term tax costs of not converting earlier?

WoodSpinner
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