Older retirees: Are your expenses lower now than in early retirement?

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Ben Mathew
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Older retirees: Are your expenses lower now than in early retirement?

Post by Ben Mathew » Thu May 30, 2019 9:05 pm

There was a discussion in this thread on annuities about whether we can expect our expenses to decline over time during retirement. This question has come up in other threads too, so I thought it would be useful to get the perspective of older retirees here as to what your experience has been.

1. Were your expenses lower or higher (inflation adjusted) in your 80s and 90s as they were in your 60s and 70s? What were the reasons for the increase or decrease? Less travel? More heathcare expenses? Higher property tax? Downsizing home? etc.

2. Would you recommend that a new retiree (say, age 65), seeking to purchase annuities to reduce longevity risk go with (assuming all products available at actuarially fair prices):

(a) a nominal annuity with a constant $ payouts (so real payouts decline with time)

(b) a nominal annuity with a 2% or 3% COLA to cover expected inflation (so real payouts are constant over time, except for unexpected inflation)

(c) a real annuity with CPI COLA (so real payouts are constant over time, even with unexpected inflation).

(d) a nominal annuity with a constant $ payouts (so real payouts decline with time) but also budget to buy an additional smaller annuity every five years or so to make up for the purchasing power that was lost to inflation.

Thank you for sharing your experience!

********************************************
Here’s a summary of the responses so far:

The Wizard (age 69, 7 years retired): 7 years retired. Don’t anticipate expense decrease. Expect to hire out more (e.g. re-roofed house himself 15 years ago, but will hire out next time.)

tomd37 (ages 82, 84; 17 year retired): 17 years retired. Same expense level as earlier in retirement. Some increases, some decreases--less travel, more property taxes, no downsizing, higher LTCi premiums

fru-gal: seeing dental expenses going up

msk (age 75, 20 yrs retired); Spend whatever comes in. Since pension is COLA, spending stayed the same. If pension not COLA’d, would have found ways to reduce discretionary expenses (pool, and pool boy).

Sheepdog: (age 85, 20 year retired). Expenses went up a bit in nominal terms, but less than CPI, so real spending declined. Less travel since age 79. Higher medical, hearing, and dental. Groceries real decline since adding Aldi. Restaurant spending increasing. High entertainment budget (sports, live theater). Same home. Car expenses lower since greater reliability.

goaties (early retired 20 years ago): constant in real terms so far. Expect medical expenses to go up eventually since that was parents’ experience.

Sandtrap: Similar to Sheepdog, though younger. Early retirement very low. Middle retirement: higher due to long overdue home improvements and medical expenses. Late retirement: expect to taper down unless medical expenses increase.

Nowizard: Spending more in later retirement out of choice since getting more income from RMDs. Renting an extra condo near family. More travel than in early retirement. Healthcare costs higher than working years (but same as early retirement?).

midareff (age 71, 7 years retired): increased medical, dental, condo maintenance. Eat less than before, and eat out less than before, but inflation caused both grocery and eating out expenses to increase. Travel expenses high currently, but expect to decline once mobility declines. Vehicle expenses higher as buy new cars to avail of new safety features. More Uber/Lyft to avoid parking hassle.

carolinaman (ages 74, 76). Limited mobility of wife led to reduced travel and sporting events. Other expenses same. Overall, expenses have reduced with age, and expect that to continue unless medical expenses become big.

Old Guy (mid 70s, early 70s): Spending more. Largest house we ever owned located at the beach. Pool. Travel. Increased charitable donations. Money to child. New car. Eating out.

quantAndHold’s dad: early retirement with wife was more expensive than working years (bought and remodeled condo, travel). After wife died (mid 70s), expenses down (condo paid off, do most things himself, no travel). About age 80, expenses started going up—independent living senior apartment, then higher medical bills and assistance in last two years of life.

JBTX’s parents (80s). Healthy. Expenses haven’t varied appreciably. Never into travel.

littlebird (31 yrs early retired, older spouse): Early go-go years: moderate expenses (fix up new house, buy RV, RV travel). Middle “go-slow” years lower expenses (stay home, day trips, theater, little eating out due to limited options. Bought additional condo in tourist venue.) Later no-go years: limited activities due to disability. Low expenses until spouse needed 24-hour care--very high expenses for 3 years. Low again, and expect that to continue unless care is required.

GingerandPiper: Expenses increase (HOA, insurance, TV, groceries, clothes, lawn care, car maintenanace, handyman). Dental is huge expense. Worried about long term care requirements for dementia, so conserving assets and minimizes discretionary expenses like travel and other entertainment.

plannerman (age 76, retired 21 years). Expenses doubled since early retiremen taxes, medical, gifts, housing increased). RMDS increased taxes, IRMAAs increased medical expenses, grandkids in college increased gifting, CCRC increased housing expenses.

SQRT (69 years, 13 years retired): Spend what we receive in dividends and pension. Dividends grows by 8% per year since retirement. Pension static. Cash flow increasing about twice the rate of inflation, so spending increasing in real terms. Also started liquidating stocks, increasing spending further. Increased spending comes from vacation home renovation, gift to daugher for house down payment. Travel expenses fairly constant. Anticipate spending will decline in 80s.

These perspectives are invaluable. Thank you for sharing!
Last edited by Ben Mathew on Thu Jun 06, 2019 11:48 am, edited 4 times in total.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by The Wizard » Thu May 30, 2019 9:22 pm

I'm just 69, going into year seven of retirement which started in early 2013.
I annuitized a good chunk of tax-deferred 403(b) accumulation with TIAA back in 2013, but mostly in commercial real estate (TREA) and lesser in broad stock market (CREF Stock) accounts.
I had maybe 20% in TIAA Traditional annuitized also, which is close to an SPIA.
So my annuity income has increased nicely since 2013.

So I'm nowhere close to age 80 yet and can't answer those questions. But age 70 SS starts in just nine months for me and that makes things even better.

I don't think my expenses will decrease in coming years. For instance, I'm a bit old to re-roof my house again in a while as I did 15 years ago.

And I'm not sure my my travel expenses will decrease either. Check back in a decade or two...
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by tomd37 » Thu May 30, 2019 10:28 pm

Ben - I am not able to answer all your questions because of our particular situation. I retired at the normal age of 65 and am now getting ready to turn 82 and my wife 84. We are drawing our social security benefits, I have a military pension, and we are taking RMDs from our traditional IRAs each year since we attained age 70. We are in a fortunate position of not needing all our RMDs to meet our annual budget requirements, so some of that can be reinvested in a taxable investment account or in a cash account for one-time larger purchases.

We went into retirement seventeen years ago with a definitive budget and have really not had to change that budget significantly. Yes, some of those budgeted items costs have increased, but others have decreased. So we are still pretty much at the same expense level now as we were seventeen years ago and that is very fortunate. We do less travel as we age (although we did not travel a lot to start with), we are both in excellent health and medical costs are extremely limited as we have good supplemental insurance benefits, our property taxes go up a little every four years but are quite manageable, we do spend more on eating out as we age. We have not yet downsized from our 2100 SF home. Our most significant cost increase has been for the long-term care insurance policies we took out in 1997 and that is something many people have experienced unfortunately. Fortunately we can handle the increases thus far.

As to annuities, if I were to consider an annuity it would not have been before age 80 and it would be a straight SPIA with no COLAs. My understanding is they can be too much of a drag for their benefit.
Tom D.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Watty » Thu May 30, 2019 11:02 pm

Ben Mathew wrote:
Thu May 30, 2019 9:05 pm
2. Would you recommend that a new retiree (say, age 65) seeking to purchase annuities to reduce longevity risk go with:
(a) a nominal annuity with a constant $ payouts (so real payouts decline with time)
(b) a nominal annuity with a 2% or 3% COLA to cover expected inflation (so real payouts are constant over time, except for unexpected inflation)
(c) a real annuity with CPI COLA (so real payouts are constant over time, even with unexpected inflation).
I don't have any special insight about what would be best but I would also add a fourth option to consider;

(d) a nominal annuity with a constant $ payouts (so real payouts decline with time) but also budget to buy an additional smaller annuity every five years or so to make up for the purchasing power that was lost to inflation.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Sandtrap » Thu May 30, 2019 11:24 pm

Option (E)
Laddering in Annuities (SPIA) incrementally (perhaps every 5 years) beginning at age ?

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by AlphaLess » Fri May 31, 2019 12:15 am

The Wizard wrote:
Thu May 30, 2019 9:22 pm
Check back in a decade or two...
Love it!
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Ben Mathew » Fri May 31, 2019 1:16 am

Watty wrote:
Thu May 30, 2019 11:02 pm
Ben Mathew wrote:
Thu May 30, 2019 9:05 pm
2. Would you recommend that a new retiree (say, age 65) seeking to purchase annuities to reduce longevity risk go with:
(a) a nominal annuity with a constant $ payouts (so real payouts decline with time)
(b) a nominal annuity with a 2% or 3% COLA to cover expected inflation (so real payouts are constant over time, except for unexpected inflation)
(c) a real annuity with CPI COLA (so real payouts are constant over time, even with unexpected inflation).
I don't have any special insight about what would be best but I would also add a fourth option to consider;

(d) a nominal annuity with a constant $ payouts (so real payouts decline with time) but also budget to buy an additional smaller annuity every five years or so to make up for the purchasing power that was lost to inflation.
Good idea. I've added it to the options.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Ben Mathew » Fri May 31, 2019 1:18 am

Sandtrap wrote:
Thu May 30, 2019 11:24 pm
Option (E)
Laddering in Annuities (SPIA) incrementally (perhaps every 5 years) beginning at age ?

j :happy
Isn't this the same as Watty's option (d)? Or am I missing something?

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Ben Mathew » Fri May 31, 2019 1:22 am

The Wizard wrote:
Thu May 30, 2019 9:22 pm
For instance, I'm a bit old to re-roof my house again in a while as I did 15 years ago.
Hiring out tasks that are physically hard to do as one ages seems like it would be a big consideration, especially if one doesn't downsize the home. Maid service, yard service, etc.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Ben Mathew » Fri May 31, 2019 1:30 am

tomd37 wrote:
Thu May 30, 2019 10:28 pm
So we are still pretty much at the same expense level now as we were seventeen years ago and that is very fortunate.
Thanks for sharing your experience. Did your expense level stay about the same in nominal or real terms? Constant in real terms would be about 42% more dollars today compared to dollars seventeen years ago. So if expenses were about $50K in 2002, they would need to be about $71K today to stay the same in real terms. Does that seem about right?

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by fru-gal » Fri May 31, 2019 1:40 am

Dental expenses can go up substantially. It seems more and more of my friends are needing implants, which can cost thousands of dollars apiece.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by msk » Fri May 31, 2019 2:48 am

20 years retired, age 75. It's all psychological. You have xS coming in monthly that you are willing to spend. if x goes up, you will spend more, if it stays static, you will spend less on unessentials, like maid service or the lawn mowing. My x was my pension, that from my first day of retirement I considered ample to cover my "regular" expenses (excluding e.g. luxury travel). 20 years later, ditto. Luckily my pension is COLA. If it weren't I would have got rid of the pool and the pool boy years ago.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Sheepdog » Fri May 31, 2019 3:48 am

In my 20 plus years in retirement (now age 85 and climbing.) I found that our "personal inflation" was less than the CPI, less because our expense categories do not follow the CPI categories. We live off of savings and SS only (no pension payments as I took that pension as a lump sum.). Here is our spending history since retiring in 1998. (yes, I have kept track using my Microsoft Money software):

Last year employed, 1998, spending was about $84,000.(higher taxes that year. but considerably less afterwards.) Spending is shown in 5 year increments afterwards.
1999-2003 average $57,850 (1 auto purchased)
2004-2008 average $59,020 (1 auto purchased)
2009-2013 average $67,514 (2 autos purchased)
2014-2018 average $63,874 Lower mainly because of: 0 new autos and our last more expensive travel was in 2013.

There has been no standard of living change in these years. Higher medical, hearing, dental expenses in recent years, but less travel since 2013. Food bills follow food inflation, but adding Aldi as a grocery supplier in the last 8 years or so lowered those expenses. Restaurant spending, however, has and is increasing, a perk of maintaining the nest egg. We have maintained a rewarding entertainment budget, including sports and live theater. We have lived and maintained the same home. We don't buy a new auto as often (cars are more reliable today.) One item that is less is that our income taxes since 2003 have been considerably lower and some years zero because of some personal tax planning at retirement which I won't go into that except that I reduced my taxable investments considerably in my first 5 years using them for expenses and increasing tax deferred and tax free accounts.
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by MikeG62 » Fri May 31, 2019 6:39 am

Sheepdog wrote:
Fri May 31, 2019 3:48 am
In my 20 plus years in retirement (now age 85 and climbing.) I found that our "personal inflation" was less than the CPI, less because our expense categories do not follow the CPI categories. We live off of savings and SS only (no pension payments as I took that pension as a lump sum.). Here is our spending history since retiring in 1998. (yes, I have kept track using my Microsoft Money software):

Last year employed, 1998, spending was about $84,000.(higher taxes that year. but considerably less afterwards.) Spending is shown in 5 year increments afterwards.
1999-2003 average $57,850 (1 auto purchased)
2004-2008 average $59,020 (1 auto purchased)
2009-2013 average $67,514 (2 autos purchased)
2014-2018 average $63,874 Lower mainly because of: 0 new autos and our last more expensive travel was in 2013.

There has been no standard of living change in these years. Higher medical, hearing, dental expenses in recent years, but less travel since 2013. Food bills follow food inflation, but adding Aldi as a grocery supplier in the last 8 years or so lowered those expenses. Restaurant spending, however, has and is increasing, a perk of maintaining the nest egg. We have maintained a rewarding entertainment budget, including sports and live theater. We have lived and maintained the same home. We don't buy a new auto as often (cars are more reliable today.) One item that is less is that our income taxes since 2003 have been considerably lower and some years zero because of some personal tax planning at retirement which I won't go into that except that I reduced my taxable investments considerably in my first 5 years using them for expenses and increasing tax deferred and tax free accounts.
Sheepdog,

Real life experience like this is invaluable. Thanks for sharing it.
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by jebmke » Fri May 31, 2019 7:03 am

The problem is, you can be rolling along fine for years and then things change drastically. A friend of mine (mid-80s) was happily living in her own home, living mostly off her pension with normal expenses. An Alzheimers diagnosis last year changed everything. She now has a burn rate over $10K/month on top of her normal expenses. She is selling her house and will move in with a close friend.
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by goaties » Fri May 31, 2019 7:19 am

I've been early-retired for close to 20 years and I would have to say that, adjusted for inflation, my expenses are the same. However, I have always assumed an eventual massive bump-up in medical expenses because that's what happened to my parents. Depending on the disease, one can live for many years, running up bills of 80 - 100K annually for custodial care. Or, require medications in the same price range (a friend with MS is paying 70K just for prescriptions).

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Sandtrap » Fri May 31, 2019 7:28 am

Ben Mathew wrote:
Fri May 31, 2019 1:18 am
Sandtrap wrote:
Thu May 30, 2019 11:24 pm
Option (E)
Laddering in Annuities (SPIA) incrementally (perhaps every 5 years) beginning at age ?

j :happy
Isn't this the same as Watty's option (d)? Or am I missing something?
Not the same.
j :happy
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by mptfan » Fri May 31, 2019 7:29 am

goaties wrote:
Fri May 31, 2019 7:19 am
I've been early-retired for close to 20 years ...
At what point are you no longer "early-retired?" :D

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by goaties » Fri May 31, 2019 7:40 am

mptfan wrote:
Fri May 31, 2019 7:29 am
goaties wrote:
Fri May 31, 2019 7:19 am
I've been early-retired for close to 20 years ...
At what point are you no longer "early-retired?" :D
Ha!
good question. I guess when I turn 65?

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by protagonist » Fri May 31, 2019 7:48 am

mptfan wrote:
Fri May 31, 2019 7:29 am
goaties wrote:
Fri May 31, 2019 7:19 am
I've been early-retired for close to 20 years ...
At what point are you no longer "early-retired?" :D
When you decide you are old.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Sandtrap » Fri May 31, 2019 7:53 am

Sheepdog wrote:
Fri May 31, 2019 3:48 am
In my 20 plus years in retirement (now age 85 and climbing.) I found that our "personal inflation" was less than the CPI, less because our expense categories do not follow the CPI categories. We live off of savings and SS only (no pension payments as I took that pension as a lump sum.). Here is our spending history since retiring in 1998. (yes, I have kept track using my Microsoft Money software):

Last year employed, 1998, spending was about $84,000.(higher taxes that year. but considerably less afterwards.) Spending is shown in 5 year increments afterwards.
1999-2003 average $57,850 (1 auto purchased)
2004-2008 average $59,020 (1 auto purchased)
2009-2013 average $67,514 (2 autos purchased)
2014-2018 average $63,874 Lower mainly because of: 0 new autos and our last more expensive travel was in 2013.

There has been no standard of living change in these years. Higher medical, hearing, dental expenses in recent years, but less travel since 2013. Food bills follow food inflation, but adding Aldi as a grocery supplier in the last 8 years or so lowered those expenses. Restaurant spending, however, has and is increasing, a perk of maintaining the nest egg. We have maintained a rewarding entertainment budget, including sports and live theater. We have lived and maintained the same home. We don't buy a new auto as often (cars are more reliable today.) One item that is less is that our income taxes since 2003 have been considerably lower and some years zero because of some personal tax planning at retirement which I won't go into that except that I reduced my taxable investments considerably in my first 5 years using them for expenses and increasing tax deferred and tax free accounts.
+1
Very similar to "Sheepdog" (also no pension). And, similar spending patterns. . . Though a bit younger.
Early: retirement (transition years) were very low.
Middle: has been substantially higher with home improvements (long overdue) and medical expenses.
Later: Likely, as long as medical expenses don't swell or unforseen medical events, the coming years expenses should taper down.

Standard of living has always been the same. Frugal.

j :happy
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Nowizard » Fri May 31, 2019 8:06 am

We do not have lower expenses, but much of the increase is a choice based on having additional, discretionary income from RMD's. For example, we rent a condo in another city where family reside, and we travel more now than in early retirement. The expenses are greater, but they are also discretionary and could be decreased if necessary. Healthcare costs are an additional expense since we fund the full cost of policies with no aid from prior employers, and this occurs even though we have excellent insurance and good health. The new tax laws have also had a negative effect for us.

Tim

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by midareff » Fri May 31, 2019 8:09 am

71 now and retired since 4/2012..... medical insurances and dental expenses, car insurance, condo maintenance and food costs both for grocery store and eating out continue to go up annually although I think we eat a bit less than we did and maybe eat out a little less. Travel has gone WAY up but the high ambulatory years don't last forever. Vehicle expenses have gone up as I am interested in having all the latest safety features which meant a new car in 2018 as well as being more inclined to take Uber/Lyft than deal with a potential hassle for parking. Pension with a 3% annual cola and SS pay the bills, portfolio pays for travel and luxuries. No need to buy a SPIA in any form.
Last edited by midareff on Fri May 31, 2019 8:18 am, edited 2 times in total.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by longinvest » Fri May 31, 2019 8:09 am

Ben Mathew wrote:
Thu May 30, 2019 9:05 pm
(d) a nominal annuity with a constant $ payouts (so real payouts decline with time) but also budget to buy an additional smaller annuity every five years or so to make up for the purchasing power that was lost to inflation.
How does that work in real life? How does one explain the process to the "non-financial" spouse? How much must be set aside for this? How should this money be invested? Do insurers sell small SPIAs in old age at fair prices? Do they continue to sell such small SPIAs in very old age (100 or more)?

Without this information, the item doesn't seem very actionable to me.
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by carolinaman » Sat Jun 01, 2019 7:45 am

We are ages 74 and 76. DW has limited mobility which has reduced our travel and attendance at sporting events. We sold our rights to Carolina Panthers tickets 2 years ago because she was unable to attend games. Otherwise, our expensive have not changed much. We each have medical conditions but so far they have not cost us major expenses.

I think the trending down of expenses as we age has been consistent with what I have read. I do not foresee much change now except the wild card of medical care which may or may not occur for either of us.

If you delay SS until 70 that is the best COLA annuity you can have. I like the idea Watty proposed of one large annuity and periodic annuities to supplement. Depending upon your sources of retirement income, the annuity COLA may not be that big a deal. For example, if the lion's share of your retirement income comes from SS and investments, then an annuity COLA might not matter that much.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Ben Mathew » Sat Jun 01, 2019 11:40 am

Moved summary of responses to OP.
Last edited by Ben Mathew on Thu Jun 06, 2019 11:44 am, edited 2 times in total.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Ben Mathew » Sat Jun 01, 2019 11:53 am

longinvest wrote:
Fri May 31, 2019 8:09 am
Ben Mathew wrote:
Thu May 30, 2019 9:05 pm
(d) a nominal annuity with a constant $ payouts (so real payouts decline with time) but also budget to buy an additional smaller annuity every five years or so to make up for the purchasing power that was lost to inflation.
How does that work in real life? How does one explain the process to the "non-financial" spouse? How much must be set aside for this? How should this money be invested? Do insurers sell small SPIAs in old age at fair prices? Do they continue to sell such small SPIAs in very old age (100 or more)?

Without this information, the item doesn't seem very actionable to me.
I've heard this option mentioned before, so I think it should be included. It shouldn't be too hard to implement unless cognitive decline becomes an issue. At age 65, besides purchasing a nominal annuity, also figure out how much nominal annuities currently cost for people at age 70, 75, 80 and 85, and invest the necessary fund in TIPS. Convert each earmaked TIPS fund to annuities at the predetermined age. There will be some uncertainty due to changes in annuity pricing, but overall this is not a bad way to go. It's an intermediate path between TIPS for inflation protection, and nominal annuities for longevity insurance. If there were well priced real annuities available, that would be better option. But since there isn't, I think this could serve as a reasonable compromise.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by longinvest » Sat Jun 01, 2019 12:11 pm

Ben Mathew wrote:
Sat Jun 01, 2019 11:53 am
longinvest wrote:
Fri May 31, 2019 8:09 am
Ben Mathew wrote:
Thu May 30, 2019 9:05 pm
(d) a nominal annuity with a constant $ payouts (so real payouts decline with time) but also budget to buy an additional smaller annuity every five years or so to make up for the purchasing power that was lost to inflation.
How does that work in real life? How does one explain the process to the "non-financial" spouse? How much must be set aside for this? How should this money be invested? Do insurers sell small SPIAs in old age at fair prices? Do they continue to sell such small SPIAs in very old age (100 or more)?

Without this information, the item doesn't seem very actionable to me.
I've heard this option mentioned before, so I think it should be included. It shouldn't be too hard to implement unless cognitive decline becomes an issue. At age 65, besides purchasing a nominal annuity, also figure out how much nominal annuities currently cost for people at age 70, 75, 80 and 85, and invest the necessary fund in TIPS. Convert each earmaked TIPS fund to annuities at the predetermined age. There will be some uncertainty due to changes in annuity pricing, but overall this is not a bad way to go. It's an intermediate path between TIPS for inflation protection, and nominal annuities for longevity insurance. If there were well priced real annuities available, that would be better option. But since there isn't, I think this could serve as a reasonable compromise.
This answer doesn't address the real life issues I raised. Let me be explicit:
  1. The answer doesn't tell me how to get my wife interested sufficiently to teach her how to find CPI numbers, make the appropriate division, and use the derived factor to determine the additional amount of SPIA* to buy.
  2. The answer doesn't tell me how much money I must set aside for buying future self-made inflation increments.
  3. The answer doesn't tell me how to invest the money put aside for buying future self-made inflation increments.
  4. The answer doesn't tell me if the pricing of a small SPIA, bought as an inflation increment to an existing SPIA, will be sold at a fair price (due to the hidden commission which gets larger, as a percentage, for smaller SPIAs).
  5. The answer doesn't tell me if an insurance company will be willing to sell a small annuity to my wife at ages 100 and 105, if she ever gets there. There is a non-negligible number of women who make it to such ages. Their rent (and the price services they need) continues to increase with inflation over time. And even if an insurance company is willing to sell it, will there still be sufficient money put aside to buy it?
Buying an inflation-indexed SPIA might be more "expensive" than a nominal SPIA, but this is normal; I always expect insurance to be expensive. The question, with insurance, is usually about whether I need it or not, how much I need, and whether I can afford to pay for the amount I need.

* Single-Premium Immediate Annuity.
Last edited by longinvest on Sat Jun 01, 2019 12:24 pm, edited 3 times in total.
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Old Guy » Sat Jun 01, 2019 12:15 pm

Nope. Spending more. I'm in mid 70s, spouse in early 70s. That's what we saved and invested for.

Largest house we ever owned located at the beach. Pool. Travel. Increased charitable donations. Money to child. New car. Eating out.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by mariezzz » Sat Jun 01, 2019 12:22 pm

jebmke wrote:
Fri May 31, 2019 7:03 am
The problem is, you can be rolling along fine for years and then things change drastically. A friend of mine (mid-80s) was happily living in her own home, living mostly off her pension with normal expenses. An Alzheimers diagnosis last year changed everything. She now has a burn rate over $10K/month on top of her normal expenses. She is selling her house and will move in with a close friend.
She's lucky to have such a good friend.

I don't understand how an Alzheimer's diagnosis increases expenses by $10K if still living one one's home. Even if a person moved into assisted living, and enlisted someone to oversee financial life (to protect against bad decision making), one year after a diagnosis, functioning is still pretty good and most people wouldn't increase their expenses by anything close to $10K.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by delamer » Sun Jun 02, 2019 11:06 am

mariezzz wrote:
Sat Jun 01, 2019 12:22 pm
jebmke wrote:
Fri May 31, 2019 7:03 am
The problem is, you can be rolling along fine for years and then things change drastically. A friend of mine (mid-80s) was happily living in her own home, living mostly off her pension with normal expenses. An Alzheimers diagnosis last year changed everything. She now has a burn rate over $10K/month on top of her normal expenses. She is selling her house and will move in with a close friend.
She's lucky to have such a good friend.

I don't understand how an Alzheimer's diagnosis increases expenses by $10K if still living one one's home. Even if a person moved into assisted living, and enlisted someone to oversee financial life (to protect against bad decision making), one year after a diagnosis, functioning is still pretty good and most people wouldn't increase their expenses by anything close to $10K.
I am thinking back to when my parents moved from their paid-off home to an independent apartment in a CCRC.

The apartment rent was about $2200/month (20 years ago). My guess would be their carrying costs for the house were about $700/month, so their added housing costs were $1500/month. Plus they had some additional savings because their dinner meal was included in the rent.

While elder housing is pretty expensive, most elders have some housing expenses prior to making that move (unless they live with a relative and don’t contribute to the household expenses) so the net isn’t as high as the gross.

If one spouse needs assisted living/nursing home care and the other spouse is still living independently, then you can have a huge increase in expenses.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by quantAndHold » Sun Jun 02, 2019 11:29 am

I’m not old enough to answer for myself, but I handled dad’s money for years.

When he first retired, mom was still alive. They bought and remodeled a condo, traveled, etc. I wasn’t handling their money hen, but from the outside, it appeared that their expenses were more than when he was working.

After mom died (he was in mid 70’s) his expenses went down. He was still living in the paid off condo, doing most things for himself, but he stopped traveling.

At about age 80, expenses started ratcheting up as he needed more help. He sold the condo and moved, first into an independent living senior apartment, as time went on he needed to pay for increasing amounts of care. The last two years of his life were the most expensive of his life, by a factor or two or three (or ten, in the last couple of months). High medical bills, and need for fairly extreme amounts of care.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by JBTX » Sun Jun 02, 2019 11:38 am

Parents are healthy and in 80s and best I can tell their expenses haven't varied appreciably. They have plenty of savings for their needs. They live modest but comfortable life. Nothing extravagant but they don't pinch pennies either. The were never into travel.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by TN_Boy » Sun Jun 02, 2019 11:41 am

tomd37 wrote:
Thu May 30, 2019 10:28 pm
Ben - I am not able to answer all your questions because of our particular situation. I retired at the normal age of 65 and am now getting ready to turn 82 and my wife 84. We are drawing our social security benefits, I have a military pension, and we are taking RMDs from our traditional IRAs each year since we attained age 70. We are in a fortunate position of not needing all our RMDs to meet our annual budget requirements, so some of that can be reinvested in a taxable investment account or in a cash account for one-time larger purchases.

We went into retirement seventeen years ago with a definitive budget and have really not had to change that budget significantly. Yes, some of those budgeted items costs have increased, but others have decreased. So we are still pretty much at the same expense level now as we were seventeen years ago and that is very fortunate. We do less travel as we age (although we did not travel a lot to start with), we are both in excellent health and medical costs are extremely limited as we have good supplemental insurance benefits, our property taxes go up a little every four years but are quite manageable, we do spend more on eating out as we age. We have not yet downsized from our 2100 SF home. Our most significant cost increase has been for the long-term care insurance policies we took out in 1997 and that is something many people have experienced unfortunately. Fortunately we can handle the increases thus far.

As to annuities, if I were to consider an annuity it would not have been before age 80 and it would be a straight SPIA with no COLAs. My understanding is they can be too much of a drag for their benefit.
I'm curious about this: "We went into retirement seventeen years ago with a definitive budget and have really not had to change that budget significantly"

Is your budget the same in *nominal* dollars? If so, your spending has dropped about 30% over the 17 years. If in real terms, did you explicitly adjust for inflation?

I.e. inflation was 2% in year 2003, our budget for 2004 is 2003's budget + 2%?

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Re: Older retirees: Are your expenses lower now than in early retirement?

Post by tomd37 » Sun Jun 02, 2019 12:13 pm

Since my last post, I looked at copies my budgets for the years since retirement. The year to year increase in "budget totals" has increased about $500 per year on average or recently 7%. I do not compare actual expenses against budgeted amounts for each category so I cannot say whether or not I am spending that amount in each category. There are certain budget categories that basically do not change much each year (e.g. property tax, gifts, insurances, vacation, auto maintenance) while there are other categories that do vary up or down such a dining out, internet access, cell phone service, and the big variable food (food being anything we buy at the supermarket to consume in the home and not just food we eat).
Tom D.

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Re: Older retirees: Are your expenses lower now than in early retirement?

Post by littlebird » Sun Jun 02, 2019 12:58 pm

31 years to date. Spouse considerably older.

Early years (go-go years) of an early retirement: Spent fixing up new house in new LCOL locale, buying RV and the million accessories available to enhance it, travel in the RV. Moderate expenditures.

Middle years (go-slow years): staying home, day trips only, much theater, little eating out, mainly due to poor options for same. Low basic expenditures. Much discretionary spending, especially purchase of a small condo in a tourist venue to acquire access to better eating out options.

Later years (no-go years) activities limited by increasing (non-matching) disabilities of two people. Low expenditures, up until the point when spouse needed 24-hour care, then extremely high expenditures relative to income. At that point, annuitized a Vang. Variable Annuity and came through the three year period of care with net worth intact, except for the asset lost to conversion to income. For the next few years, I would expect low expenditures, until I enter the age range where the need for help is likely.

Reading over my post on expenses, retirement can sound like a very dry and dull experience. In at least my experience, it has been anything but. It’s been a wonderful journey, but I have to admit we were very lucky in timing, both on the micro level of our own choices and the macro one of what society provided to us during our lifetimes.

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Re: Older retirees: Are your expenses lower now than in early retirement?

Post by TN_Boy » Sun Jun 02, 2019 5:23 pm

tomd37 wrote:
Sun Jun 02, 2019 12:13 pm
Since my last post, I looked at copies my budgets for the years since retirement. The year to year increase in "budget totals" has increased about $500 per year on average or recently 7%. I do not compare actual expenses against budgeted amounts for each category so I cannot say whether or not I am spending that amount in each category. There are certain budget categories that basically do not change much each year (e.g. property tax, gifts, insurances, vacation, auto maintenance) while there are other categories that do vary up or down such a dining out, internet access, cell phone service, and the big variable food (food being anything we buy at the supermarket to consume in the home and not just food we eat).
What I was getting at is that unless your budget has increased quite a bit in nominal dollars since 17 years ago, your answer to the OP's question would seem to be "my overall expenses went down in real terms." That's assuming you wind up spending overall what your budget says you should spend.

Or am I misinterpreting your post here?

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Sandtrap » Sun Jun 02, 2019 5:53 pm

delamer wrote:
Sun Jun 02, 2019 11:06 am
mariezzz wrote:
Sat Jun 01, 2019 12:22 pm
jebmke wrote:
Fri May 31, 2019 7:03 am
The problem is, you can be rolling along fine for years and then things change drastically. A friend of mine (mid-80s) was happily living in her own home, living mostly off her pension with normal expenses. An Alzheimers diagnosis last year changed everything. She now has a burn rate over $10K/month on top of her normal expenses. She is selling her house and will move in with a close friend.
She's lucky to have such a good friend.

I don't understand how an Alzheimer's diagnosis increases expenses by $10K if still living one one's home. Even if a person moved into assisted living, and enlisted someone to oversee financial life (to protect against bad decision making), one year after a diagnosis, functioning is still pretty good and most people wouldn't increase their expenses by anything close to $10K.
I am thinking back to when my parents moved from their paid-off home to an independent apartment in a CCRC.

The apartment rent was about $2200/month (20 years ago). My guess would be their carrying costs for the house were about $700/month, so their added housing costs were $1500/month. Plus they had some additional savings because their dinner meal was included in the rent.

While elder housing is pretty expensive, most elders have some housing expenses prior to making that move (unless they live with a relative and don’t contribute to the household expenses) so the net isn’t as high as the gross.

If one spouse needs assisted living/nursing home care and the other spouse is still living independently, then you can have a huge increase in expenses.
+1
MIL, age 95, dementia, 24 hour home and nursing care. Unable to do well in a care home setting.
Expenses = enormous.

Deceased FIL was an original "Boglehead". Did well for DW. Fortunately.

j :D
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Sandtrap » Sun Jun 02, 2019 5:56 pm

The Wizard wrote:
Thu May 30, 2019 9:22 pm
I'm just 69, going into year seven of retirement which started in early 2013.
I annuitized a good chunk of tax-deferred 403(b) accumulation with TIAA back in 2013, but mostly in commercial real estate (TREA) and lesser in broad stock market (CREF Stock) accounts.
I had maybe 20% in TIAA Traditional annuitized also, which is close to an SPIA.
So my annuity income has increased nicely since 2013.

So I'm nowhere close to age 80 yet and can't answer those questions. But age 70 SS starts in just nine months for me and that makes things even better.

I don't think my expenses will decrease in coming years. For instance, I'm a bit old to re-roof my house again in a while as I did 15 years ago.

And I'm not sure my my travel expenses will decrease either. Check back in a decade or two...
Reroof your own home. . . . :shock:
Wow!!!
You are Formidable Indeed!

Similar age and status. Now, everything hurts to do "what I used to do". :shock:


I've been thinking if there's any good reason to delay SS "beyond" 70????

j :D
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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by delamer » Sun Jun 02, 2019 7:07 pm

Sandtrap wrote:
Sun Jun 02, 2019 5:56 pm
The Wizard wrote:
Thu May 30, 2019 9:22 pm
I'm just 69, going into year seven of retirement which started in early 2013.
I annuitized a good chunk of tax-deferred 403(b) accumulation with TIAA back in 2013, but mostly in commercial real estate (TREA) and lesser in broad stock market (CREF Stock) accounts.
I had maybe 20% in TIAA Traditional annuitized also, which is close to an SPIA.
So my annuity income has increased nicely since 2013.

So I'm nowhere close to age 80 yet and can't answer those questions. But age 70 SS starts in just nine months for me and that makes things even better.

I don't think my expenses will decrease in coming years. For instance, I'm a bit old to re-roof my house again in a while as I did 15 years ago.

And I'm not sure my my travel expenses will decrease either. Check back in a decade or two...
Reroof your own home. . . . :shock:
Wow!!!
You are Formidable Indeed!

Similar age and status. Now, everything hurts to do "what I used to do". :shock:


I've been thinking if there's any good reason to delay SS "beyond" 70????

j :D
No sure if your comment was in jest, but your SS benefit doesn’t increase after 70.

So the answer is no.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by The Wizard » Sun Jun 02, 2019 8:25 pm

Sandtrap wrote:
Sun Jun 02, 2019 5:56 pm
Reroof your own home. . . . :shock:
Wow!!!
You are Formidable Indeed!

Similar age and status. Now, everything hurts to do "what I used to do". :shock:


I've been thinking if there's any good reason to delay SS "beyond" 70????

j :D
I'm an engineer and did a significant addition to my house in my 30s/40s and to my girlfriend's house in my 50s, so putting a second layer of shingles on my house a while back wasn't that hard, with a pneumatic nailer.

But next time they'll have to peel both layers off into a dumpster, so what the heck, just pay a crew to get it done...
Attempted new signature...

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by The Wizard » Sun Jun 02, 2019 8:43 pm

delamer wrote:
Sun Jun 02, 2019 7:07 pm
Sandtrap wrote:
Sun Jun 02, 2019 5:56 pm
...I've been thinking if there's any good reason to delay SS "beyond" 70????

j :D
No sure if your comment was in jest, but your SS benefit doesn’t increase after 70.

So the answer is no.
No is correct.

And in my case, age 69 and living in New England, I continue to cut, split, and stack tons of hardwood firewood each year, both for my house and the girlfriend's house.
This saves a few thousand in heating bills each year for sure.
No ladders involved, so I suspect this may continue for another decade, at least...
Attempted new signature...

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Re: Older retirees: Are your expenses lower now than in early retirement?

Post by GingerandPiper » Sun Jun 02, 2019 9:17 pm

My expenses increase every year - HOA - home insurance health insurance - car insurance - Part D prescription insurance - TV (Comcast and premium channels such as Prime and Netflix) - cell phone - groceries - clothes -lawn care -car maintenance - handyman hourly rates and on and on and it doesn't look like that's going to change. Insurance companies just increase rates when they don't reach their profit projections - at least it seems so. Dental is a huge expense for me. Be thankful if you haven't "aging" teeth.

I'm terrified of getting dementia and the high costs associated with it. As a result, I seldom travel unless to visit family and forego other entertainment I would like.

What's ironic is that I'm not a poor person (thank you, dear Mr. Bogle) but I believe I need to conserve as I might live 20 years needing full time care.

But is that really living...(ah, a question not to be answered on this thread or forum).

Ginger

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by Sandtrap » Sun Jun 02, 2019 10:06 pm

delamer wrote:
Sun Jun 02, 2019 7:07 pm
Sandtrap wrote:
Sun Jun 02, 2019 5:56 pm
The Wizard wrote:
Thu May 30, 2019 9:22 pm
I'm just 69, going into year seven of retirement which started in early 2013.
I annuitized a good chunk of tax-deferred 403(b) accumulation with TIAA back in 2013, but mostly in commercial real estate (TREA) and lesser in broad stock market (CREF Stock) accounts.
I had maybe 20% in TIAA Traditional annuitized also, which is close to an SPIA.
So my annuity income has increased nicely since 2013.

So I'm nowhere close to age 80 yet and can't answer those questions. But age 70 SS starts in just nine months for me and that makes things even better.

I don't think my expenses will decrease in coming years. For instance, I'm a bit old to re-roof my house again in a while as I did 15 years ago.

And I'm not sure my my travel expenses will decrease either. Check back in a decade or two...
Reroof your own home. . . . :shock:
Wow!!!
You are Formidable Indeed!

Similar age and status. Now, everything hurts to do "what I used to do". :shock:


I've been thinking if there's any good reason to delay SS "beyond" 70????

j :D
No sure if your comment was in jest, but your SS benefit doesn’t increase after 70.

So the answer is no.
Another senior brain fart. :oops:
Thanks!
j
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Re: Older retirees: Are your expenses lower now than in early retirement?

Post by Bongleur » Sun Jun 02, 2019 11:33 pm

It would be useful to know the relative prices of a) thru e).
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Re: Older retirees: Are your expenses lower now than in early retirement?

Post by plannerman » Mon Jun 03, 2019 6:06 am

Ages 76, retired 21 years, our expenses have roughly doubled since early retirement. The biggest contributors to the increase are taxes, medical, gifts and housing. RMDs increased taxes, IRMAAs increased medical expenses, grandkids in college increased our gifting, and move to CCRC increased our housing expenses.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by SQRT » Mon Jun 03, 2019 7:29 am

msk wrote:
Fri May 31, 2019 2:48 am
20 years retired, age 75. It's all psychological. You have xS coming in monthly that you are willing to spend. if x goes up, you will spend more, if it stays static, you will spend less on unessentials, like maid service or the lawn mowing. My x was my pension, that from my first day of retirement I considered ample to cover my "regular" expenses (excluding e.g. luxury travel). 20 years later, ditto. Luckily my pension is COLA. If it weren't I would have got rid of the pool and the pool boy years ago.
Agree with this. We spend pretty well as much as we receive in divs and pension. Divs have grown by about 8% per year since I retired 13 years ago. Pension is static. All in all our cash flow is increasing about twice the rate of inflation so have a bit more to spend each year on this basis.

Recently, after a bit of a run up in our portfolio, we have started to liquidate small amounts of stock, further increasing our available funds. I am currently almost 69 and am spending/giving more on things like, vacation home renos and gift to daughter for house down payment. Travel expenses have been fairly constant up to this point.

I would anticipate that our spending would probably decline once I am in my 80’s, so am trying to get more spent now. :D

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Re: Older retirees: Are your expenses lower now than in early retirement?

Post by Ben Mathew » Thu Jun 06, 2019 11:45 am

Updated original post with summary of responses so far.

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Re: Older retirees: Are your expenses lower now than in early retirement?

Post by Ben Mathew » Thu Jun 06, 2019 11:58 am

Bongleur wrote:
Sun Jun 02, 2019 11:33 pm
It would be useful to know the relative prices of a) thru e).
Good point. The implicit assumption I had in mind was that the all policies are available actuarially fair prices. I've now edited the OP to make that assumption explicit. Real annuities are currently more expensive. But I did not want to tie the response to current pricing, because the situation could change if more vendors offered the product. Anyway, the responses so far have focused on the expenditure trajectory, so I don't think it matters one way or the other.

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Re: Older retirees: Do you have lower expenses now than you did in early retirement?

Post by beyou » Thu Jun 06, 2019 12:22 pm

Ben Mathew wrote:
Fri May 31, 2019 1:22 am
The Wizard wrote:
Thu May 30, 2019 9:22 pm
For instance, I'm a bit old to re-roof my house again in a while as I did 15 years ago.
Hiring out tasks that are physically hard to do as one ages seems like it would be a big consideration, especially if one doesn't downsize the home. Maid service, yard service, etc.
Depends if you EVER did things yourself :-)
Never wanted to reroof my house myself, not when young and certainly not when older. Wife had cleaning crews visit periodically. We had a landscaper. So for me the spending was already high in various apsects (also due to HCOL location). Based in my vhcol while working, I do expect expenses could be reduced if that was my goal. Not sure I want to move or start performing tasks I never wanted to do before, so may not decline. Likely my expenses would rise in other areas and will have to decide if relocation to offset is necessary.

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