Actual budget vs predicted once retired!

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Topic Author
HDM1004
Posts: 8
Joined: Thu Sep 30, 2021 9:33 am

Actual budget vs predicted once retired!

Post by HDM1004 »

Good Morning,

Tried searching this and didn't come up with much.

We are close to retirement. About two years away. Both 54. I drive my wife crazy trying to figure out a budget for us.

We will have no debt and be living in Tenn. I believe our essential budget will be about $28,000.

Just looking for someone that has actual experience with this. Did you estimate correctly? (over/under) Any surprises?

Thank you.
jebmke
Posts: 13727
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Actual budget vs predicted once retired!

Post by jebmke »

The data I have kept for the last 9 years (nothing before that) came in almost exactly on budget - I was surprised. A lot of variation year by year and that doesn't include income taxes which can vary widely -- I didn't budget explicitly for income taxes. I don't track details but I'm sure we are significantly off at the detail level. Some way up, some way down.
When you discover that you are riding a dead horse, the best strategy is to dismount.
sailaway
Posts: 3853
Joined: Fri May 12, 2017 1:11 pm

Re: Actual budget vs predicted once retired!

Post by sailaway »

Are you asking people to compare their essential budget to their actual budget or their overall projections to actual?
Last edited by sailaway on Tue Oct 12, 2021 9:09 am, edited 1 time in total.
jebmke
Posts: 13727
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Actual budget vs predicted once retired!

Post by jebmke »

"Essential" is a very nebulous term - I don't try to break out anything but "capital" and "income taxes" since those are large and sporadic.
When you discover that you are riding a dead horse, the best strategy is to dismount.
Topic Author
HDM1004
Posts: 8
Joined: Thu Sep 30, 2021 9:33 am

Re: Actual budget vs predicted once retired!

Post by HDM1004 »

Yes, just your projected vs actual.I know everyone has a different essential expenses.
MNSooner
Posts: 28
Joined: Sun Jul 05, 2015 5:46 am

Re: Actual budget vs predicted once retired!

Post by MNSooner »

Our actual spending is quite a bit higher than our pre-retirement calculations. This is largely because of the human tendency to make bare bones estimates when working, in order to make retirement success seem more likely.

It is the difference between minimum (think Henry David Thoreau) expenses and what actually transpires when you have more than a Walden income.
SQRT
Posts: 1781
Joined: Sat Feb 05, 2011 9:44 am

Re: Actual budget vs predicted once retired!

Post by SQRT »

Good question. Prior to retirement 15 years ago I had a projected budget for retirement that in total was pretty close to actual. The issue was that the components ended up being quite different. Our spending is fairly large in comparison to most here and accordingly includes mostly discretionary items. For example we spent more on travel the first few years than expected. I thought we would buy a place in Florida but instead got a place in the mountains as well as the dessert. Obviously, our retirement spending decisions were taken in the context of available funds which gave a lot of latitude. Most people would be more constrained, I think.

Seems to me that the basic nondiscretionary expenses would be pretty easy to plan for? If one decides to relocate or otherwise drastically change their lifestyle, it would be more of an issue for sure.

Note this thread should probably be in “personal finance, not investing”. Unusual that I saw it as I don’t usually read the investing threads.
tibbitts
Posts: 15340
Joined: Tue Feb 27, 2007 6:50 pm

Re: Actual budget vs predicted once retired!

Post by tibbitts »

HDM1004 wrote: Tue Oct 12, 2021 8:56 am We are close to retirement. About two years away. Both 54. I drive my wife crazy trying to figure out a budget for us.
My guess is that what's driving her crazy is that, since this is the Bogleheads forum after all, you probably have $10M saved and are even mentioning $28k in the conversation.

I have actual experience with retiring. I never tried to figure out a budget except to have some idea of what I thought I could spend in total - a SWR kind of number. I would assume that all large expenditures are paid over time, even if they aren't, so for example a replacement vehicle would be $500/mo or whatever. So I would consider that as "essential" expense, not some separate capital item which seems to be what you're doing. And that illustrates the futility of planning: the $500/mo you planned two years ago is now $750/mo or whatever, for the same vehicle. On the other hand your $20k/year for travel two years ago is now $3. I didn't see either of those coming. So I would stop planning and just see what happens, preferably before adding divorce costs to your $28k in essential expenses.

The one expense I could and should have planned for but didn't: Roth conversions. They just weren't on my radar, but should have been. Well, they were, just not on the scale I anticipated. I spent more on them in my first year of retirement alone than I ever earned (gross, before taxes - even throwing in employee benefits) during any year of my career.
bubbly
Posts: 170
Joined: Tue Jun 16, 2015 4:21 pm

Re: Actual budget vs predicted once retired!

Post by bubbly »

I am quite far from retirement, but I figured to add a 15-20% fudge factor/buffer to my numbers just to account for any tendency to underestimate expenses or any unforeseen cirumstances.
ChinchillaWhiplash
Posts: 1253
Joined: Sat Jan 20, 2018 5:40 pm
Location: Land of Hypoxia

Re: Actual budget vs predicted once retired!

Post by ChinchillaWhiplash »

Don’t forget to factor in big ticket items that would not be purchased yearly. Figure out how often these would be needed and their cost and divide cost by those years. Add that amount to your regular yearly expenses. This will give you a more accurate assessment of your spending needs.
radiowave
Posts: 2755
Joined: Thu Apr 30, 2015 5:01 pm

Re: Actual budget vs predicted once retired!

Post by radiowave »

For us, health insurance costs were hardest to predict. while working, insurance is taken out of paycheck, now we pay spouse 1.5 yrs to Medicare and me on Medicare which works out to abt 12k/yr. Overall budget has been about as expected except for inflationary costs, e.g. paying almost $4.00/gal for fuel, grocery prices going up, etc. Our target budget for the 2 of us is 50-60k/yr and we are on target for 2021 so far.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
tibbitts
Posts: 15340
Joined: Tue Feb 27, 2007 6:50 pm

Re: Actual budget vs predicted once retired!

Post by tibbitts »

radiowave wrote: Tue Oct 12, 2021 10:03 am For us, health insurance costs were hardest to predict. while working, insurance is taken out of paycheck, now we pay spouse 1.5 yrs to Medicare and me on Medicare which works out to abt 12k/yr. Overall budget has been about as expected except for inflationary costs, e.g. paying almost $4.00/gal for fuel, grocery prices going up, etc. Our target budget for the 2 of us is 50-60k/yr and we are on target for 2021 so far.
At first glance I thought, wow, my employer picks up health insurance to Medicare, then the cost of a supplement, so I'm good. But while the 100% up to Medicare is awesome, I'm going to get clobbered by the cost of Medicare at 65, as will most Bogleheads. So without the employer's help a couple can be paying $12k/yr or more post-Medicare just as easily as before Medicare.
JS-Elcano
Posts: 375
Joined: Wed Jun 10, 2020 7:29 pm

Re: Actual budget vs predicted once retired!

Post by JS-Elcano »

I am not retired yet, but I am planning to spend as much money in retirement as I do now. I really don't see why it would be less.

I will have my house paid off, but I will travel more and spend more for health insurance at least until Medicare. Therefore I subtract my mortgage payment from my current annual spend, then add in 25k for travel and 8k for ACA. That's my number that I want to get at in my retirement year.

Once I start traveling less (hopefully not until my mid-80s) I will use that extra travel money for daily comforts of living and doing more things locally, such as dining out and concerts.

It's hard for me to imagine not being able to spend the money I have (like some people here describe), so I am not worried about having too much. I can always give it away to nephews and nieces and other good causes. My worry is that I might have too little. Having to make do with 28k/year would give me heart attack in the MCOL where I live and with what I am envisioning for my retirement.
dbr
Posts: 37369
Joined: Sun Mar 04, 2007 9:50 am

Re: Actual budget vs predicted once retired!

Post by dbr »

We found ourselves spending way, way more on helping other people than we thought we would. Of course if we couldn't have afforded it we couldn't/wouldn't have done it. Good investment returns and low inflation helped make things possible that didn't necessarily have to be.

If you mean just standard costs, I would say we were close.

In general what you spend is highly negotiable with reality, so you do what you can or have to do.

All this 17 years retired.
User avatar
LadyGeek
Site Admin
Posts: 76635
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Actual budget vs predicted once retired!

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (budget).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Topic Author
HDM1004
Posts: 8
Joined: Thu Sep 30, 2021 9:33 am

Re: Actual budget vs predicted once retired!

Post by HDM1004 »

Great to know most are on track! I guess years of planning keep most of us headed in the right direction.
The $28,000 is the minimum we would need to get by. Our SWR is around $75,000.

We have lived off $90,000 comfortably for many years with a $36,000 a year mortgage that will be gone when we retire.

I will do a Roth conversion at some point.
I understand medical expenses are hard to predict and can swing quite a bit.

I feel better! Thanks.
PaunchyPirate
Posts: 602
Joined: Sun Nov 30, 2014 7:58 pm

Re: Actual budget vs predicted once retired!

Post by PaunchyPirate »

My actual spending is right about on target for what I was expecting when I retired 3 years ago. But I'm not surprised, as I methodically tracked my spending for 2 years prior to retirement to get a good idea what it actually was.
joverby
Posts: 80
Joined: Sat Sep 18, 2021 7:14 pm

Re: Actual budget vs predicted once retired!

Post by joverby »

dbr wrote: Tue Oct 12, 2021 11:28 am
what you spend is highly negotiable with reality
Isn't that the truth.
vas
Posts: 255
Joined: Thu Mar 06, 2014 12:51 pm

Re: Actual budget vs predicted once retired!

Post by vas »

PaunchyPirate wrote: Tue Oct 12, 2021 1:13 pm My actual spending is right about on target for what I was expecting when I retired 3 years ago. But I'm not surprised, as I methodically tracked my spending for 2 years prior to retirement to get a good idea what it actually was.
Did you happen to use any particular tools for tracking your budget? I just started my tracking process using MINT and I'm looking forward to getting a better understanding of my spending. I've just never budgeted the small stuff. Always had a handle on investments, bills, etc. and a vague monthly allowance as a guideline. But with irregular income (salary, ESPP, RSU, bonus, increased paychecks on Q4 due to SS tax maxing out, 401K maxing out) its hard to pin down the actual spending. Any surprises or takeaways after tracking for a couple years?
There is nothing you can't prove if your outlook is sufficiently limited
User avatar
David Jay
Posts: 11814
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Actual budget vs predicted once retired!

Post by David Jay »

I used the most simple method - I used my take-home pay. We live in a low cost-of-living area and we have a paid-off mortgage. I already paid 25% of my health care, plus deductions for taxes and retirement. We had about $500 a month in discretionary funds in my take-home pay.

I find (with a near-zero cost ACA "bronze" plan) that we have about $1000 in discretionary funds in retirement, so removing the cost of commuting and insurance has given us about $500 a month more than we lived on in my final working years.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
flyingaway
Posts: 3576
Joined: Fri Jan 17, 2014 10:19 am

Re: Actual budget vs predicted once retired!

Post by flyingaway »

If you have a reasonable budget covering everything you need, then you can stick to the budget in your retirement. On the other hand, if you want to blow that budget and you have the money to do so, then you can also do that, and revise your budget for the future years.
mrc
Posts: 1558
Joined: Sun Jan 10, 2016 6:39 am

Re: Actual budget vs predicted once retired!

Post by mrc »

I tracked actual expenses for several years before we both stopped working. I stopped working two years before DW so we had one income for a while longer. I didn't use X% of salary, or take home pay, or any other rule of thumb b/c what mattered was our spending.

Be sure to count things as expenses that leave your accounts (e.g., checks, EFTs, credit card payments, plus items withheld from your paycheck such as health insurance premiums, medicare premiums, etc., that will continue in retirement). You may need to adjust healthcare premiums if you move to the private market. Lastly, don't count transfers to retirement or other savings b/c those aren't expenses.

The adjustments for no longer working (e.g., dry cleaning, gas for commute) are minimal in the grand scheme of things so I ignored that too. If you plan on spending more (e.g., to travel or build another home), estimate that and add it into your current spending.

I lumped big-ticket items (new A/C, new desktop PC, replacement car, surprise vet bill, tree removal and trimming) into the expenses as well. Even if you don't intend to buy another item for a long time, or ever that has a large price tag, stuff happens and you'll spend on something else.

In the nearly three years since we both stopped working, our actual spending has been a tad less that projected, with only a small portion due to COVID restrictions. We had a couple large expenses pop up, and we didn't worry about it because those large items are built in.
By the time you know enough to choose a good financial adviser, you don't need one. | bogleheads.org is my advisor: The ER is 0.0% and the advice always solid.
BogleFan510
Posts: 759
Joined: Tue Aug 04, 2020 2:13 pm

Re: Actual budget vs predicted once retired!

Post by BogleFan510 »

Downloading the annual inflows and outflows of your checking acct can be very helpful to analyze, especially if all your credit cards are paid off in full automatically. Subtract any investment outflows and you pretty much can see annual expenses. Even cash usually shows as ATM withdraws.

Weve looked at ours and spending has been pretty consistent.
AnnetteLouisan
Posts: 661
Joined: Sat Sep 18, 2021 10:16 pm
Location: New York, NY

Re: Actual budget vs predicted once retired!

Post by AnnetteLouisan »

for a comprehensive listing of what-ifs in retirement, Suze Orman’s “Why I Hate the FIRE Movement” on Paula Poundstone‘s podcast. It’s not necessary to be an Orman fan or a FIRE devotee to benefit from hearing her list of unexpected items that can torpedo retirement, early or otherwise.
Last edited by AnnetteLouisan on Fri Oct 15, 2021 2:10 pm, edited 1 time in total.
User avatar
JoeRetire
Posts: 9644
Joined: Tue Jan 16, 2018 2:44 pm

Re: Actual budget vs predicted once retired!

Post by JoeRetire »

HDM1004 wrote: Tue Oct 12, 2021 8:56 am We will have no debt and be living in Tenn. I believe our essential budget will be about $28,000.
What does "essential budget" mean?

We planned for $100,000/year.
We've never spent that much. So far, it's more typically around $65,000. We could spend less if it was necessary for some reason.

When our west coast grandchild is born next month, we may spend more on travel. But we may never get to $100,000. We'll see.
Just remember: it's not a lie if you believe it.
KlangFool
Posts: 22422
Joined: Sat Oct 11, 2008 12:35 pm

Re: Actual budget vs predicted once retired!

Post by KlangFool »

HDM1004 wrote: Tue Oct 12, 2021 8:56 am Good Morning,

Tried searching this and didn't come up with much.

We are close to retirement. About two years away. Both 54. I drive my wife crazy trying to figure out a budget for us.

We will have no debt and be living in Tenn. I believe our essential budget will be about $28,000.

Just looking for someone that has actual experience with this. Did you estimate correctly? (over/under) Any surprises?

Thank you.
HDM1004,

1) How could you retire early if you cannot control your expense?

2) If you can control your expense, why do you need a budget?

<< I believe our essential budget will be about $28,000>>

3) Does that includes medical and dental insurance? That would be your big items in retirement.

<<Did you estimate correctly? (over/under) Any surprises? >>

4) I had been unemployed for more than 1 year a few times. So, I had plenty of practice living without income. I know how to control my expense when I have no income.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
RetiredAL
Posts: 1635
Joined: Tue Jun 06, 2017 12:09 am
Location: SF Bay Area

Re: Actual budget vs predicted once retired!

Post by RetiredAL »

JS-Elcano wrote: Tue Oct 12, 2021 11:24 am I am not retired yet, but I am planning to spend as much money in retirement as I do now. I really don't see why it would be less.
That is basically what I did. As I approached retirement, knew I needed to replace my "take home pay" with a few adjustments.

DW had been a stay-at-home Mom and only worked intermittently part-time the few years between last kid out and my retirement. Any significant income she earned would have been taxed at 24% Fed + 9% state + 6.5% SS, and since we were on track financially, there was no push to go towards full-time non-professional lessor paid job. She already had the SS credits needed for Medicare and Spousal SS was going to be way above her own SS.

Adjustments:Minuses
My Roth contribution - DW's came from our taxable account that was largely funded by her inheritance.
Car payment (ending)
State Taxes on SS - No state Tax
Fed Taxes - Reduced Fed AGI; SS; Roth contributions

Adjustments:Pluses:
Medicare costs

That summation came in at a few $K less than my take-home. To achieve take-home pay replacement, in addition to our SS, I needed to withdraw approx 2% from my deferred retirement accounts - 401K and Pension Lump. Done! We be good! Our Roth $ (both DW and me) is not in our spending plan.

The only large ticket item hanging at retirement was our roof replacement, which we had $ set-aside for in our taxable account. We overspent on the roof and had to take some additional from the retirement accounts, but by that time those deferred accounts had grown to the point where we just barely got above 2% that year.
MathWizard
Posts: 5057
Joined: Tue Jul 26, 2011 1:35 pm

Re: Actual budget vs predicted once retired!

Post by MathWizard »

I assume that you mean $28K per year.

I find that quite low. Does the $28K include Health care?

Is the $28K after SS benefits or pension?
capran
Posts: 252
Joined: Thu Feb 18, 2016 10:45 am

Re: Actual budget vs predicted once retired!

Post by capran »

Besides 2 that others commented (health insurance for 2: $12,000 yr, and Income taxes due to tIRA to Roth conversions) I would add travel. While working we always had summers off and live aboard a boat, so that was figured into our expected budget. But we also started spending two months in Mexico in the winter as well as 4 to 6 weeks of land travel in the fall. Mexico adds between 6 and 8 thousand, and fall travel is about 4,000. And since you are retiring quite young, once you are 59 1/2 I do recommend you figure out your fixed income (pensions, Social Security) and the age at which those begin and then figure out what other income including RMD's will be at 72 and beyond. Do tIRA to Roth conversions to at least bring you up to the level of income you expect at 70, especially if you are close to the maximum income to avoid the IRMAA surcharge threshold.
User avatar
Toons
Posts: 14207
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Actual budget vs predicted once retired!

Post by Toons »

We live in Tn
Retired
no debt
We spend what we want
but
we find
50k is more than enough.
Unless I decide to purchase a new vehicle


:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
PaunchyPirate
Posts: 602
Joined: Sun Nov 30, 2014 7:58 pm

Re: Actual budget vs predicted once retired!

Post by PaunchyPirate »

vas wrote: Tue Oct 12, 2021 1:26 pm
PaunchyPirate wrote: Tue Oct 12, 2021 1:13 pm My actual spending is right about on target for what I was expecting when I retired 3 years ago. But I'm not surprised, as I methodically tracked my spending for 2 years prior to retirement to get a good idea what it actually was.
Did you happen to use any particular tools for tracking your budget? I just started my tracking process using MINT and I'm looking forward to getting a better understanding of my spending. I've just never budgeted the small stuff. Always had a handle on investments, bills, etc. and a vague monthly allowance as a guideline. But with irregular income (salary, ESPP, RSU, bonus, increased paychecks on Q4 due to SS tax maxing out, 401K maxing out) its hard to pin down the actual spending. Any surprises or takeaways after tracking for a couple years?
I am a longtime Quicken user. I used Quicken’s expense categorization feature and started using Credit cards for virtually all spending — even the $1 Diet Coke at 7-11. So I electronically download the transactions pretty much daily, tweak the categories if necessary, and that gives me my spending. I continue to do this 3 years into retirement. I don’t set up a budget. I buy anything I want, But, I monitor my overall spending on a daily basis.
SQRT
Posts: 1781
Joined: Sat Feb 05, 2011 9:44 am

Re: Actual budget vs predicted once retired!

Post by SQRT »

JS-Elcano wrote: Tue Oct 12, 2021 11:24 am I am not retired yet, but I am planning to spend as much money in retirement as I do now. I really don't see why it would be less.
Well, good for you. Most people spend what they think they can afford. Some will spend less in retirement because that’s what they can afford and it’s enough for them.
fposte
Posts: 1952
Joined: Mon Sep 02, 2013 1:32 pm

Re: Actual budget vs predicted once retired!

Post by fposte »

Just retired at 58, made a retirement budget with the expectation of more discretionary spending since I won't be contributing to retirement accounts. However, I'm not yet doing big traveling or eating out so I'm coming in under budget. I will revisit after a year. For me, it's very important to have discretionary/fun categories identified in the budget, not just essentials, otherwise I'm less likely to do the things I retired to do.

I just amended the same Excel spreadsheet I used to create my budget while working; then I use the Best Budget app to track expenses as I go.
JS-Elcano
Posts: 375
Joined: Wed Jun 10, 2020 7:29 pm

Re: Actual budget vs predicted once retired!

Post by JS-Elcano »

SQRT wrote: Tue Oct 12, 2021 5:18 pm
JS-Elcano wrote: Tue Oct 12, 2021 11:24 am I am not retired yet, but I am planning to spend as much money in retirement as I do now. I really don't see why it would be less.
Well, good for you. Most people spend what they think they can afford. Some will spend less in retirement because that’s what they can afford and it’s enough for them.
Maybe this came across differently than I had intended, but I have by no means a large portfolio and hope to have just over 2 million in 10 years when I hope to retire. Of course, eventually we all make it work with how much we have and if we have to retire earlier than planned it is probably less and we will still find a way to make it work. Millions of people do this every day.

I am single without children; maybe that is why I don't expect my expenses to change much in retirement. I don't have a high income by any standards now and save what I possibly can in my pretax retirement accounts and RothIRA. I also started late with saving significant amounts since I went to graduate school and have a career with a lower entry salary. Traveling and a hobby associated with that are my passion and I am looking forward to doing more of that when I retire. I am hoping to be able to retire at 59 with a sufficient portfolio to cover these expenses. If I can't I'll work a little longer and continue with my hobby as I can fit it into my life while still working, which is possible but limited.
UpperNwGuy
Posts: 6322
Joined: Sun Oct 08, 2017 7:16 pm

Re: Actual budget vs predicted once retired!

Post by UpperNwGuy »

About six months before I retired I set up a spreadsheet. The first column of numbers was my pre-retirement monthly budget. The second column was my estimated retirement budget. I kept refining that second column as the retirement date approached, and I continued to refine it through my first eight months of retirement. Turns out my early estimates were pretty accurate.
Wannaretireearly
Posts: 2016
Joined: Wed Mar 31, 2010 4:39 pm

Re: Actual budget vs predicted once retired!

Post by Wannaretireearly »

MNSooner wrote: Tue Oct 12, 2021 9:13 am Our actual spending is quite a bit higher than our pre-retirement calculations. This is largely because of the human tendency to make bare bones estimates when working, in order to make retirement success seem more likely.

It is the difference between minimum (think Henry David Thoreau) expenses and what actually transpires when you have more than a Walden income.
Great thread. How are you able to handle this in retirement? Sounds like you had plenty of extra $ on top of 'normal' 25/33X type calculations, if your X was underestimated.
Death and taxes. Only one is under your control!
TravelforFun
Posts: 2366
Joined: Tue Dec 04, 2012 11:05 pm

Re: Actual budget vs predicted once retired!

Post by TravelforFun »

HDM1004 wrote: Tue Oct 12, 2021 8:56 am Good Morning,

Tried searching this and didn't come up with much.

We are close to retirement. About two years away. Both 54. I drive my wife crazy trying to figure out a budget for us.

We will have no debt and be living in Tenn. I believe our essential budget will be about $28,000.

Just looking for someone that has actual experience with this. Did you estimate correctly? (over/under) Any surprises?

Thank you.
Retired two years ago and I've blown my budget every month but luckily, the market gain last and this year has more than covered the overruns.

It's ok to spend more in the go-go years and less in the no-go years.

TravelforFun
MikeG62
Posts: 3823
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Actual budget vs predicted once retired!

Post by MikeG62 »

HDM1004 wrote: Tue Oct 12, 2021 8:56 am Good Morning,

Tried searching this and didn't come up with much.

We are close to retirement. About two years away. Both 54. I drive my wife crazy trying to figure out a budget for us.

We will have no debt and be living in Tenn. I believe our essential budget will be about $28,000.

Just looking for someone that has actual experience with this. Did you estimate correctly? (over/under) Any surprises?

Thank you.
If your budget is based upon your actual spend in the years prior to retirement (and if you accurately make adjustments for expenses that will go away and new expenses that will arise) then you should be fine. I would not do this based upon "a belief", but on a detailed analysis of what you've actually been spending.

For us (6th year of retirement), my projected budget was quite accurate. Biggest challenge was budgeting for T&E and other one-off expenses. However, we've yet to spend more than that line item in our budget (despite significant T&E and even some very large unexpected expenses - like a $25K septic field replacement in 2019). I also don't budget based upon "essentials". I budget to live our life to the fullest now that we've retired. I would not have retired if we were unable to do that. Retiring to sit at home and pinch pennies is not how we do it.
Real Knowledge Comes Only From Experience
MNSooner
Posts: 28
Joined: Sun Jul 05, 2015 5:46 am

Re: Actual budget vs predicted once retirment

Post by MNSooner »

Wannaretireearly wrote: Wed Oct 13, 2021 12:12 am
MNSooner wrote: Tue Oct 12, 2021 9:13 am Our actual spending is quite a bit higher than our pre-retirement calculations. This is largely because of the human tendency to make bare bones estimates when working, in order to make retirement success seem more likely.

It is the difference between minimum (think Henry David Thoreau) expenses and what actually transpires when you have more than a Walden income.
Great thread. How are you able to handle this in retirement? Sounds like you had plenty of extra $ on top of 'normal' 25/33X type calculations, if your X was underestimated.
We built a cushion into our savings/investments, and we were lucky enough to have good returns on the stock market. So in spite of exceeding my minimal “Walden” calculations, we actually have more money now than when we retired. I suppose that if it had been a 2008-2009 scenario, we would have been much more careful with every dollar spent.

IMO the ability to adjust discretionary spending according to what the market throws at us is a big part of a successful retirement.
User avatar
JDCarpenter
Posts: 1613
Joined: Tue Sep 09, 2014 2:42 pm

Re: Actual budget vs predicted once retired!

Post by JDCarpenter »

Retired a bit more than 4 years, also live in TN. We modeled our projected spending based on our quicken records. Basically same as for when we were working (other savings made up for health expense increases).

Those projections were/are accurate for our non-travel and non-Roth conversion expenses.

Of course, our travel expenses are alone greater than our projected/modeled expenses; and the Roth taxes add up....

Luckily, we expected that. Our modeled expenses are relatively small.
Edit Signature
jwfails
Posts: 85
Joined: Mon Oct 26, 2015 7:49 am
Location: Texas

Re: Actual budget vs predicted once retired!

Post by jwfails »

We budget $60k a year. Third year of retirement. We lived on a budget while working, retirement is no different. Paid off house, no car payments, no recurring debt payments. Our biggest yearly expenditures are property taxes, health care cost, groceries and travel. We pay everything possible on one credit card and use that as a gauge on our monthly spending. We have both always been frugal so not spending is not a problem. We have a problem letting ourselves spend more on non-essentials. This year we splurged on E-bikes, didn’t budget that.

Biggest surprise is we now spend more on groceries as we buy better quality and healthier options.
Wannaretireearly
Posts: 2016
Joined: Wed Mar 31, 2010 4:39 pm

Re: Actual budget vs predicted once retirment

Post by Wannaretireearly »

MNSooner wrote: Thu Oct 14, 2021 4:52 pm
Wannaretireearly wrote: Wed Oct 13, 2021 12:12 am
MNSooner wrote: Tue Oct 12, 2021 9:13 am Our actual spending is quite a bit higher than our pre-retirement calculations. This is largely because of the human tendency to make bare bones estimates when working, in order to make retirement success seem more likely.

It is the difference between minimum (think Henry David Thoreau) expenses and what actually transpires when you have more than a Walden income.
Great thread. How are you able to handle this in retirement? Sounds like you had plenty of extra $ on top of 'normal' 25/33X type calculations, if your X was underestimated.
We built a cushion into our savings/investments, and we were lucky enough to have good returns on the stock market. So in spite of exceeding my minimal “Walden” calculations, we actually have more money now than when we retired. I suppose that if it had been a 2008-2009 scenario, we would have been much more careful with every dollar spent.

IMO the ability to adjust discretionary spending according to what the market throws at us is a big part of a successful retirement.
Like it, thanks for the response. I guess when you have the ability (and comfort factor/willingness) to adjust based on the market, likely means an annuity is not needed.
Death and taxes. Only one is under your control!
tibbitts
Posts: 15340
Joined: Tue Feb 27, 2007 6:50 pm

Re: Actual budget vs predicted once retired!

Post by tibbitts »

jwfails wrote: Fri Oct 15, 2021 9:51 am We budget $60k a year. Third year of retirement. We lived on a budget while working, retirement is no different. Paid off house, no car payments, no recurring debt payments. Our biggest yearly expenditures are property taxes, health care cost, groceries and travel. We pay everything possible on one credit card and use that as a gauge on our monthly spending. We have both always been frugal so not spending is not a problem. We have a problem letting ourselves spend more on non-essentials. This year we splurged on E-bikes, didn’t budget that.

Biggest surprise is we now spend more on groceries as we buy better quality and healthier options.
I don't think it's possible to say "no car payments" or "no house payments." For example, you might actually be paying $6k/yr per car, $12k/yr for a house, etc. The amounts will vary somewhat of course, but aren't discretionary (well, unless you decide not to drive, or convince your kids to let you move in with them rent-free.) You may not be putting out cash for them every year, but if you have a budget like $60k/yr without those expenses, you have to account for all those "one time" $20-50k-ish expenses somehow.
sailaway
Posts: 3853
Joined: Fri May 12, 2017 1:11 pm

Re: Actual budget vs predicted once retired!

Post by sailaway »

tibbitts wrote: Fri Oct 15, 2021 11:09 am
jwfails wrote: Fri Oct 15, 2021 9:51 am We budget $60k a year. Third year of retirement. We lived on a budget while working, retirement is no different. Paid off house, no car payments, no recurring debt payments. Our biggest yearly expenditures are property taxes, health care cost, groceries and travel. We pay everything possible on one credit card and use that as a gauge on our monthly spending. We have both always been frugal so not spending is not a problem. We have a problem letting ourselves spend more on non-essentials. This year we splurged on E-bikes, didn’t budget that.

Biggest surprise is we now spend more on groceries as we buy better quality and healthier options.
I don't think it's possible to say "no car payments" or "no house payments." For example, you might actually be paying $6k/yr per car, $12k/yr for a house, etc. The amounts will vary somewhat of course, but aren't discretionary (well, unless you decide not to drive, or convince your kids to let you move in with them rent-free.) You may not be putting out cash for them every year, but if you have a budget like $60k/yr without those expenses, you have to account for all those "one time" $20-50k-ish expenses somehow.
At one point, they presumably had those same expenses plus the actual house and car loan payments.
sherwink
Posts: 247
Joined: Mon May 28, 2007 9:48 am

Re: Actual budget vs predicted once retired!

Post by sherwink »

If you're brutally honest in building your budget, you'll be amazed at how accurate it plays out in your spending life.
tibbitts
Posts: 15340
Joined: Tue Feb 27, 2007 6:50 pm

Re: Actual budget vs predicted once retired!

Post by tibbitts »

sailaway wrote: Fri Oct 15, 2021 11:13 am
tibbitts wrote: Fri Oct 15, 2021 11:09 am
jwfails wrote: Fri Oct 15, 2021 9:51 am We budget $60k a year. Third year of retirement. We lived on a budget while working, retirement is no different. Paid off house, no car payments, no recurring debt payments. Our biggest yearly expenditures are property taxes, health care cost, groceries and travel. We pay everything possible on one credit card and use that as a gauge on our monthly spending. We have both always been frugal so not spending is not a problem. We have a problem letting ourselves spend more on non-essentials. This year we splurged on E-bikes, didn’t budget that.

Biggest surprise is we now spend more on groceries as we buy better quality and healthier options.
I don't think it's possible to say "no car payments" or "no house payments." For example, you might actually be paying $6k/yr per car, $12k/yr for a house, etc. The amounts will vary somewhat of course, but aren't discretionary (well, unless you decide not to drive, or convince your kids to let you move in with them rent-free.) You may not be putting out cash for them every year, but if you have a budget like $60k/yr without those expenses, you have to account for all those "one time" $20-50k-ish expenses somehow.
At one point, they presumably had those same expenses plus the actual house and car loan payments.
Definitely; I'm just saying they might have had three or four times more expenses then, but not zero now.
gamboolman
Posts: 192
Joined: Mon Feb 17, 2014 7:32 am

Re: Actual budget vs predicted once retired!

Post by gamboolman »

HDM1004,

You say “ I believe our essential budget will be about $28,000.”

Please don’t be offended, but the way I interpret your statement would make me very uncomfortable for planning a retirement financial plan and budget.

TLDR follows:
sherwink wrote: Fri Oct 15, 2021 11:14 am If you're brutally honest in building your budget, you'll be amazed at how accurate it plays out in your spending life.
What sherwink said !

I’m not saying the following is you HDM1004, but…. It explains why I would be uncomfortable based on your expected budget.

For me and ms gamboolgal – for many years prior to retirement - we read all these Posts of folks planning for retirement and their guesstimated budgets which were/are in lots of cases laughably inaccurate and unrealistic - that end with the words.... And we all live happily ever after... :shock:

How folks can be that naive and cavalier about retirement spending and quality of life vs discretionary spending - well it just was not, and is not ms gamboolgal and I.

But - different strokes for different folks.....

We were / are very thorough in our Budget Planning before Retirement. And it has carried thru to Retirement also.

For us, we want to know the total accurate financial plan with fine granularity - I think this probably came from managing large Offshore Installations, Projects, Builds and major Brownfield Construction projects for decades. I was responsible for planning the Cost and Schedule and the actual execution of the work - if it was wrong – there was Hell On for me – as it rightly ought to have been.

I saw quite afew folks demoted, moved or let go due to poor planning and Cost and Schedule Control over the years – again rightly so.

I also saw dozens of men who retired over the last 43 years come back as Contractors. Some said they were bored, yeah right…. :oops: ...but alot of them admiitted they had not planned their finances properly and needed to come back to work. Several were not happy Campers to be back to having to work at that age and stage of life. Seeing that over and over - really made a impression on me.

We planned our Retirement Budgets to nauseating detail and then added in much conservatism and contingencies, AKA “Belts and Suspenders”. :greedy

But we’re sleeping good at night in retirement. :happy

HDM1004 - All the best in your pending retirement and I do sincerely hope it works out to your satisfaction. :sharebeer

gamboolman...
jwfails
Posts: 85
Joined: Mon Oct 26, 2015 7:49 am
Location: Texas

Re: Actual budget vs predicted once retired!

Post by jwfails »

tibbitts wrote: Fri Oct 15, 2021 11:09 am
jwfails wrote: Fri Oct 15, 2021 9:51 am We budget $60k a year. Third year of retirement. We lived on a budget while working, retirement is no different. Paid off house, no car payments, no recurring debt payments. Our biggest yearly expenditures are property taxes, health care cost, groceries and travel. We pay everything possible on one credit card and use that as a gauge on our monthly spending. We have both always been frugal so not spending is not a problem. We have a problem letting ourselves spend more on non-essentials. This year we splurged on E-bikes, didn’t budget that.

Biggest surprise is we now spend more on groceries as we buy better quality and healthier options.
I don't think it's possible to say "no car payments" or "no house payments." For example, you might actually be paying $6k/yr per car, $12k/yr for a house, etc. The amounts will vary somewhat of course, but aren't discretionary (well, unless you decide not to drive, or convince your kids to let you move in with them rent-free.) You may not be putting out cash for them every year, but if you have a budget like $60k/yr without those expenses, you have to account for all those "one time" $20-50k-ish expenses somehow.
Not really sure what your statement means.

We have bills like everyone, however, our cars and house are free and clear. We do have maintenance cost, painting the house, roof repairs, oil changes, etc. We pay everything out of our budgeted $60k, except large onetime expenses. We have an emergency fund set up for that, and savings (investments) that we can use. We both have pensions that cover our yearly expenses and that has allowed our investments to grow untouched for the most part. We just bought a new vehicle and paid cash out of investments. We needed roof repairs and that came out of savings, etc. I say we live on $60k a year but that doesn’t mean I don’t have savings and investments that I can use for large one time purchases. I guess we all budget in different ways. I don’t have a line item for house repairs or new vehicle purchases.
IMO
Posts: 1533
Joined: Fri May 05, 2017 6:01 pm

Re: Actual budget vs predicted once retired!

Post by IMO »

jwfails wrote: Fri Oct 15, 2021 12:15 pm
tibbitts wrote: Fri Oct 15, 2021 11:09 am
jwfails wrote: Fri Oct 15, 2021 9:51 am We budget $60k a year. Third year of retirement. We lived on a budget while working, retirement is no different. Paid off house, no car payments, no recurring debt payments. Our biggest yearly expenditures are property taxes, health care cost, groceries and travel. We pay everything possible on one credit card and use that as a gauge on our monthly spending. We have both always been frugal so not spending is not a problem. We have a problem letting ourselves spend more on non-essentials. This year we splurged on E-bikes, didn’t budget that.

Biggest surprise is we now spend more on groceries as we buy better quality and healthier options.
I don't think it's possible to say "no car payments" or "no house payments." For example, you might actually be paying $6k/yr per car, $12k/yr for a house, etc. The amounts will vary somewhat of course, but aren't discretionary (well, unless you decide not to drive, or convince your kids to let you move in with them rent-free.) You may not be putting out cash for them every year, but if you have a budget like $60k/yr without those expenses, you have to account for all those "one time" $20-50k-ish expenses somehow.
Not really sure what your statement means.

We have bills like everyone, however, our cars and house are free and clear. We do have maintenance cost, painting the house, roof repairs, oil changes, etc. We pay everything out of our budgeted $60k, except large onetime expenses. We have an emergency fund set up for that, and savings (investments) that we can use. We both have pensions that cover our yearly expenses and that has allowed our investments to grow untouched for the most part. We just bought a new vehicle and paid cash out of investments. We needed roof repairs and that came out of savings, etc. I say we live on $60k a year but that doesn’t mean I don’t have savings and investments that I can use for large one time purchases. I guess we all budget in different ways. I don’t have a line item for house repairs or new vehicle purchases.
I appreciate the above posts.

It seems many come up with a budget or spend (semantics really) number. In this case it's $60K. So one would theoretically shoot for that $60K being 4% or less of a SWR.

But then, it really isn't $60K when you look at it because some lumpy bigger expenses come up here/there in life. What I've noticed is that many just say well if I have to buy a car this year, etc, I'll just cut back on something else. I suppose that works if one puts enough "fat" or non-discretionary amounts into the budget to be able to cut back significantly on something else, or simply overestimate their annual budget/spend planning so that they will automatically have enough cushion. If one didn't budget above and beyond, then it seems like one is then lowering their typical standard of living expenses for the year or perhaps many years.

I've taken the thought on retirement, that one should have an emergency fund that is above/beyond one's "number." The amount of that is debatable. But in life, that emergency fund will get spent (for example the unexpected new HVAC), so it also seems that in one's "number" they should also put a line budget in to replenish one's emergency fund. So for example, if one's annual budget/spend is targeted at $60K, then there should be some budget line amount of say $5K year to replenish one's emergency fund. Otherwise, it just seems that one would be "required" to lower their standard of living for some period of time to cover the unexpected expense. Have a big emergency expense or a number of smaller one's in quick succession (when it rains it pours) then one could now be stuck in a longer period of lowering one's quality of life. Perhaps to the level of just living non-discretionary expenses.

But I think for most on this site, the simple answer is they have a big extra stash of investment money that is well above and beyond their projected budget amount. For those that are not as wealthy, I think one needs to be careful to plan/budget for those lumpy expenses, emergency or not.
tibbitts
Posts: 15340
Joined: Tue Feb 27, 2007 6:50 pm

Re: Actual budget vs predicted once retired!

Post by tibbitts »

jwfails wrote: Fri Oct 15, 2021 12:15 pm
tibbitts wrote: Fri Oct 15, 2021 11:09 am
jwfails wrote: Fri Oct 15, 2021 9:51 am We budget $60k a year. Third year of retirement. We lived on a budget while working, retirement is no different. Paid off house, no car payments, no recurring debt payments. Our biggest yearly expenditures are property taxes, health care cost, groceries and travel. We pay everything possible on one credit card and use that as a gauge on our monthly spending. We have both always been frugal so not spending is not a problem. We have a problem letting ourselves spend more on non-essentials. This year we splurged on E-bikes, didn’t budget that.

Biggest surprise is we now spend more on groceries as we buy better quality and healthier options.
I don't think it's possible to say "no car payments" or "no house payments." For example, you might actually be paying $6k/yr per car, $12k/yr for a house, etc. The amounts will vary somewhat of course, but aren't discretionary (well, unless you decide not to drive, or convince your kids to let you move in with them rent-free.) You may not be putting out cash for them every year, but if you have a budget like $60k/yr without those expenses, you have to account for all those "one time" $20-50k-ish expenses somehow.
Not really sure what your statement means.

We have bills like everyone, however, our cars and house are free and clear. We do have maintenance cost, painting the house, roof repairs, oil changes, etc. We pay everything out of our budgeted $60k, except large onetime expenses. We have an emergency fund set up for that, and savings (investments) that we can use. We both have pensions that cover our yearly expenses and that has allowed our investments to grow untouched for the most part. We just bought a new vehicle and paid cash out of investments. We needed roof repairs and that came out of savings, etc. I say we live on $60k a year but that doesn’t mean I don’t have savings and investments that I can use for large one time purchases. I guess we all budget in different ways. I don’t have a line item for house repairs or new vehicle purchases.
What I'm saying is that most of us probably budget to some extent the way you do, but that's not really budgeting, because every month you're sucking a month of life out of your previously-paid-for house, car, etc. So your $60k/yr might really be more like $100k/yr, and there's nothing wrong with that. It's just not $60k/yr. Outside of Bogleheads, when people say they budget, they don't do that with an essentially limitless pile of additional funds that can be used to instantly nullify the effect of any large expense that comes up. Other people would pay for the new car or roof with monthly payments that would become part of their budget, and it's somewhat misleading when we leave those things out. This is particularly the case with SWR discussions, where you really can't take $50k or whatever out of your investments separately from your SWR, and still preserve the SWR. I understand that some Bogleheads (but not necessarily me) will have pensions and social security that, combined, will cover all their routine expenses, so those people don't really need to consider SWR. Yet we have countless discussions about SWR, so I'm thinking that at least some of us are concerned about those large recurring-but-not-monthly expenses.
Post Reply