Unexpected maintenance costs in our case were due to our new location in a different State, and are related mostly to weather, which can't be predicted long term. We have 150+ trees on our property which fall during storms or for no apparent reason, making removal costly and impossible to predict. We've had 4 incidents within the last year resulting in 13 trees that had to be removed. That wasn't a problem where me moved from. Neither was air conditioning maintenance for the house and cars because we didn't need air conditioning where we came from. Neither did we have damaging hail, tornados, or hurricanes.TN_Boy wrote: ↑Wed Aug 26, 2020 7:50 amI understand that health care costs can be very unpredictable, making those expenses difficult to manage.vested1 wrote: ↑Wed Aug 26, 2020 5:57 amSandtrap 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?
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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.
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).
Another factor that was unknown was the amount of property taxes we would be paying in our new State of SC. While State taxes are about $1,000 lower, we pay property taxes on the house, the cars, the boats, and the motors on those boats every year. Vehicle registration is every two years and boat registration is every three. You don't pay property tax on the boats or the motors unless you owned them on January 1st, so we didn't owe taxes on them last year, but just received our bill for this year for about $1,300. The amount was surprising to me this year, but won't be next year. As it turns our total property taxes are about $500 more per year here than we paid in Ca.
As a side note, SC has different vehicle registration costs than we are used to, with additional fees. There is a $250 one time fee to register an out of State vehicle in SC. You have to pay your property taxes on your cars before you can register them, and you have to have a valid SC driver's license to be able to pay property tax on your house. There is a high mileage discount, which I suppose is intended to lower your vehicle property tax because the value of the car is less with higher mileage. But to obtain that higher mileage you have to use the roads more, requiring more maintenance of the roads. The are also additional fees if you drive an electric or hybrid car, which seems odd. Insurance for cars and homes is more expensive here using the same company we had in Ca. Real estate transactions are more expensive here as you are required, as a buyer, to retain a RE lawyer. (about $2,500 added in our case above purchase price).
We're still in a learning curve here, but are hopefully nearing the end of it. I thought I had done all the research necessary before our move, but learned otherwise quickly. Regardless we made a good decision to move, not because we didn't like Ca, but because we have a much better home that's paid for in a great location. Some of the unknown costs surprised us though, which shows the value of having an adequate cushion of non-taxable $.