What can a $120K spending budget do in early retirement years?

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flyingaway
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What can a $120K spending budget do in early retirement years?

Post by flyingaway » Sun May 19, 2019 4:43 pm

Since I want to do some one more years (OMYs) and that could support a larger retirement budget, I am trying to figure out a reasonably large spending budget for early retirement years (55~70), in order to see if it is worth my time to do some OMYs.

So I think the following is a line item list of my tentative future $120K early retirement budget with lots of travels for two persons and a large U.S. based house in a low cost of living area.

(1) $30,000, travel and leisure (travels, entertainments),
(2) $25,000, healthcare (insurance, copay, deductibles),
(3) $15,000, home (property tax, insurance, repairs),
(4) $15,000, tax (federal and state),
(5) $10,000, services (water, electricity, phone, internet),
(6) $15,000, daily life (food at home and eating locally, grocery, cloths, gas, minor repairs, etc.),
(7) $10,000, savings for large items (new car, roof replacement, etc.).

This is much larger than our current spending in every categories. But doing OMYs must have a clear purpose.

What do you think of the itemized budget? Anything important is missing?

Calli114
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Re: What can a $120K spending budget do in early retirement years?

Post by Calli114 » Sun May 19, 2019 5:08 pm

One big line item would be the question of whether you're able before MCare age to manipulate your income to qualify for ACA low rates and subsidies.

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Reb Tevye
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Re: What can a $120K spending budget do in early retirement years?

Post by Reb Tevye » Sun May 19, 2019 5:21 pm

Maybe a much bigger number for taxes if you are doing Roth conversions. Though arguably you could mentally account for that as “not spending.”

Charity?

Otherwise, sure, it looks great for a LCOL area.
You may ask yourself if your non-retired neighbors, the Jones, live on an income that is more or less than that.
Regardless, if your in-laws live on less, you are golden.
"So, what would have been so terrible if I had a small fortune?"

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Re: What can a $120K spending budget do in early retirement years?

Post by Misenplace » Sun May 19, 2019 5:56 pm

This topic has been moved to the Personal Finance forum.

Moderator Misenplace

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MikeWillRetire
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Re: What can a $120K spending budget do in early retirement years?

Post by MikeWillRetire » Sun May 19, 2019 8:10 pm

Your total budget is very similar to my estimated retirement budget, and I live in Maryland, a somewhat HCOL area. My budget is broken down into many more categories than yours, but I have been tracking my expenses for many years now.

delamer
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Re: What can a $120K spending budget do in early retirement years?

Post by delamer » Sun May 19, 2019 8:27 pm

Auto insurance.

Paying for a cleaning service and/or lawn maintenance as you age.

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Will do good
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Re: What can a $120K spending budget do in early retirement years?

Post by Will do good » Sun May 19, 2019 8:32 pm

Wouldn't your health care cost come down after your Medicare starts at 65?

MnD
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Re: What can a $120K spending budget do in early retirement years?

Post by MnD » Mon May 20, 2019 8:27 am

So you could retire earlier than 55 but are contemplating what you could do with $120K budget if you did a few OMY's to extend your work to 55?

We retired late last year at 56 at something in the range of your income and compared to yours, we are spending more on a number of medium and big ticket items that require a fair amount of focus and time to do properly and that we were too time constrained to get done when we were both working and/or didn't want to do until retirement because we wouldn't take full use of the purchases until then. Home remodeling/repair, furniture/appliances and a tear drop camper are 2019 major items. In 2020/21 biggies will be one vehicle replacement and some major international travel. We have low fixed expenses so have a ton of discretionary flexibility at this income level and are enjoying it immensely. The gift of time and a nice income that doesn't require us to rent ourselves out to exhaustion is even better than we had imagined. Retiring earlier wasn't an option due to some cliff-vesting and no way would we have done any OMY's past when we bagged it. When we decided we had "enough", the marginal utility of OMY dropped to about 0.

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flyingaway
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Re: What can a $120K spending budget do in early retirement years?

Post by flyingaway » Mon May 20, 2019 11:35 am

MnD wrote:
Mon May 20, 2019 8:27 am
So you could retire earlier than 55 but are contemplating what you could do with $120K budget if you did a few OMY's to extend your work to 55?

We retired late last year at 56 at something in the range of your income and compared to yours, we are spending more on a number of medium and big ticket items that require a fair amount of focus and time to do properly and that we were too time constrained to get done when we were both working and/or didn't want to do until retirement because we wouldn't take full use of the purchases until then. Home remodeling/repair, furniture/appliances and a tear drop camper are 2019 major items. In 2020/21 biggies will be one vehicle replacement and some major international travel. We have low fixed expenses so have a ton of discretionary flexibility at this income level and are enjoying it immensely. The gift of time and a nice income that doesn't require us to rent ourselves out to exhaustion is even better than we had imagined. Retiring earlier wasn't an option due to some cliff-vesting and no way would we have done any OMY's past when we bagged it. When we decided we had "enough", the marginal utility of OMY dropped to about 0.
July 1, 2019, may be the time that I could actually retire, beyond that, I will be considered as doing one more years (OMYs). Unfortunately, our current portfolio could not support a $120K annual budget.

However, I do not really want to do OMY just for increasing the size of my portfolio, I want to see what may be the benefit of a larger portfolio. The major benefit for us is to enlarge the travel budget from $10K to $30K, in addition to more liberal allocations to other categories. We do not expect large bills in the next few years.

As I mentioned in other related threads, the major reason that I will not be fully retired is that my wife wants to keep the house and her circle of friends, but we could not do long-term travel and keep the house at the same time. I just do one or more OMYs to see what will happen as time goes. More money is not a bad thing.

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flyingaway
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Re: What can a $120K spending budget do in early retirement years?

Post by flyingaway » Mon May 20, 2019 11:36 am

Will do good wrote:
Sun May 19, 2019 8:32 pm
Wouldn't your health care cost come down after your Medicare starts at 65?
I did not do a detailed budget, just a rough one to see what might be the benefits of a large portfolio, if I will be doing one more years.

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flyingaway
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Re: What can a $120K spending budget do in early retirement years?

Post by flyingaway » Mon May 20, 2019 11:42 am

MikeWillRetire wrote:
Sun May 19, 2019 8:10 pm
Your total budget is very similar to my estimated retirement budget, and I live in Maryland, a somewhat HCOL area. My budget is broken down into many more categories than yours, but I have been tracking my expenses for many years now.
Did you track your expenses before or after your retirement? Do you think my $120K budget is balanced in categories?

I did some tracking several years ago. My working year annual expenses were about $50K, excluding income taxes and health insurance deducted directly from the paychecks. If I added those back, my annual expenses would be around $80K.

Since I am likely to do at least one OMY, I want to see what the benefits of a $120K budget could bring. I understand that one OMY may not actually bring the $80K budget to the $120K budget.

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Re: What can a $120K spending budget do in early retirement years?

Post by Longdog » Mon May 20, 2019 12:07 pm

I don't think people make a conscious decision to do One More Year. I think it's more out of fear of not having enough to support their current lifestyle in a worst case scenario, or not having something specific that they are driven to do once they retire. In my opinion, you are unique in considering making it a conscious decision with a future benefit. Keep in mind that it is an easily reversible decision - you're not actually committed to a full year or full year increments. You don't need to declare it to anybody!
Steve

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Re: What can a $120K spending budget do in early retirement years?

Post by 22twain » Mon May 20, 2019 12:09 pm

flyingaway wrote:
Sun May 19, 2019 4:43 pm
large U.S. based house in a low cost of living area.
How large a house? Ours is probably rather small by most people's standards on this forum: about 2000 sf, 3 bd, 2 ba, detached carport, smallish lot, no fancy landscaping.
(3) $15,000, home (property tax, insurance, repairs),
For us, $2,000-$2,500 for property tax and insurance, maybe $1,500-$2,000 for maintenance and repairs, not counting real biggies like the occasional new roof.
(5) $10,000, services (water, electricity, phone, internet),
For us, about $6,000. But we don't pay for TV (antenna on the roof). If we had cable, it might be about another $1,000.
Last edited by 22twain on Mon May 20, 2019 12:14 pm, edited 1 time in total.
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Re: What can a $120K spending budget do in early retirement years?

Post by smitcat » Mon May 20, 2019 12:10 pm

MikeWillRetire wrote:
Sun May 19, 2019 8:10 pm
Your total budget is very similar to my estimated retirement budget, and I live in Maryland, a somewhat HCOL area. My budget is broken down into many more categories than yours, but I have been tracking my expenses for many years now.
Yes - exactly. That budget is very similar to our estimated retirement budget as well.

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Re: What can a $120K spending budget do in early retirement years?

Post by IntangibleAssets » Mon May 20, 2019 12:16 pm

22twain wrote:
Mon May 20, 2019 12:09 pm
flyingaway wrote:
Sun May 19, 2019 4:43 pm
large U.S. based house in a low cost of living area.
How large a house? Ours is probably rather small by most people's standards on this forum: about 2000 sf, 3 bd, 2 ba, detached carport, smallish lot.
(3) $15,000, home (property tax, insurance, repairs),
For us, $2,000-$2,500 for property tax and insurance, maybe $1,500-$2,000 for maintenance and repairs. But we don't have fancy landscaping.
(5) $10,000, services (water, electricity, phone, internet),
For us, about $6,000. But we don't pay for TV (antenna on the roof). If we had cable, it might be about another $1,000.
I agree, in a true lcol area even with a decent sized house those numbers are large for annual expenses.

something like

5K budget for "home"

and 6K for services is about right for us

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Re: What can a $120K spending budget do in early retirement years?

Post by The Wizard » Mon May 20, 2019 12:35 pm

I don't see any Roth conversions in the OP's early retirement years.

I've been retired for six years now with a comparable retirement income level, though I'm single.
But I've never bothered trying to categorize where my annual retirement income goes to. I have enough and invest the excess, so there's no crunch time...
Attempted new signature...

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Re: What can a $120K spending budget do in early retirement years?

Post by marcopolo » Mon May 20, 2019 2:15 pm

flyingaway wrote:
Sun May 19, 2019 4:43 pm
Since I want to do some one more years (OMYs) and that could support a larger retirement budget, I am trying to figure out a reasonably large spending budget for early retirement years (55~70), in order to see if it is worth my time to do some OMYs.

So I think the following is a line item list of my tentative future $120K early retirement budget with lots of travels for two persons and a large U.S. based house in a low cost of living area.

(1) $30,000, travel and leisure (travels, entertainments),
(2) $25,000, healthcare (insurance, copay, deductibles),
(3) $15,000, home (property tax, insurance, repairs),
(4) $15,000, tax (federal and state),
(5) $10,000, services (water, electricity, phone, internet),
(6) $15,000, daily life (food at home and eating locally, grocery, cloths, gas, minor repairs, etc.),
(7) $10,000, savings for large items (new car, roof replacement, etc.).

This is much larger than our current spending in every categories. But doing OMYs must have a clear purpose.

What do you think of the itemized budget? Anything important is missing?

What would your spending budget be if you retired this year?
How many more years would you have to work to get to the $120k level?
Let's say that is another 5 years, how confident are you that you would not then want a $140k budget in just a couple more years?

There is obviously no right answer to that trade-off.

As far as the budget itself, it is quite similar to our own (retired a little over a year ago), with some minor shifting between categories. Actual healthcare spending is less, but we are keeping it high in the budget due to uncertainty around future of ACA. Makes for a very nice retirement.

The only category that seems high is the taxes, unless you are including Roth conversion taxes in there, or a lot of your expenses are paid from tax-deferred accounts. If you are withdrawing mostly from taxable accounts (often the case for early retirees in their 50s like you), the effective tax rate could be much lower. Of course, that depends on your individual situation.

Good luck.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: What can a $120K spending budget do in early retirement years?

Post by barry2ipa » Mon May 20, 2019 2:47 pm

We are planning somewhat differently .... retiring in our early 50's (this year 2019 fall)

We are thinking of allocating
1. $90K - including rent for the first 14 years. This includes everything OP mentioned other than travel
2. Allocating $600K for travel / activities (all up) for the rest of our lives. We can decide to be more adventurous in the first 10-12 years and spend time on longer trips etc.
3. Sales proceed of our current place (around $900K after all the fees/taxes) - keep in a safe investment - and use that to buy something in final place we will be retiring to in the 8-12 year timeframe (we know where it is - in the US)

Mitigation
- we can always reduce our travel budget if we want to need to

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Re: What can a $120K spending budget do in early retirement years?

Post by bhsince87 » Mon May 20, 2019 3:07 pm

Looks like a pretty good estimate to me. Ours is actually very similar to that.

We budget $15k for travel, but $35k for healthcare. Insurance alone is $28k with a $5k deductible. Plus medication costs. And that's at current rates. We expect those to go up until we hit age 65.
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Re: What can a $120K spending budget do in early retirement years?

Post by smitcat » Mon May 20, 2019 3:17 pm

IntangibleAssets wrote:
Mon May 20, 2019 12:16 pm
22twain wrote:
Mon May 20, 2019 12:09 pm
flyingaway wrote:
Sun May 19, 2019 4:43 pm
large U.S. based house in a low cost of living area.
How large a house? Ours is probably rather small by most people's standards on this forum: about 2000 sf, 3 bd, 2 ba, detached carport, smallish lot.
(3) $15,000, home (property tax, insurance, repairs),
For us, $2,000-$2,500 for property tax and insurance, maybe $1,500-$2,000 for maintenance and repairs. But we don't have fancy landscaping.
(5) $10,000, services (water, electricity, phone, internet),
For us, about $6,000. But we don't pay for TV (antenna on the roof). If we had cable, it might be about another $1,000.
I agree, in a true lcol area even with a decent sized house those numbers are large for annual expenses.

something like

5K budget for "home"

and 6K for services is about right for us
"5K budget for "home"
Not likely for a 2,000 + square foot home unless you are in a very LCOL area.

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Re: What can a $120K spending budget do in early retirement years?

Post by kaudrey » Mon May 20, 2019 3:22 pm

smitcat wrote:
Mon May 20, 2019 12:10 pm
MikeWillRetire wrote:
Sun May 19, 2019 8:10 pm
Your total budget is very similar to my estimated retirement budget, and I live in Maryland, a somewhat HCOL area. My budget is broken down into many more categories than yours, but I have been tracking my expenses for many years now.
Yes - exactly. That budget is very similar to our estimated retirement budget as well.
We aren't retired yet, but will be in about 2 years. Our budget is similar to this. Although we may blow it in the first two years if we do a trip to Antarctica and a safari, which we plan to do.....

smitcat
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Re: What can a $120K spending budget do in early retirement years?

Post by smitcat » Mon May 20, 2019 3:28 pm

kaudrey wrote:
Mon May 20, 2019 3:22 pm
smitcat wrote:
Mon May 20, 2019 12:10 pm
MikeWillRetire wrote:
Sun May 19, 2019 8:10 pm
Your total budget is very similar to my estimated retirement budget, and I live in Maryland, a somewhat HCOL area. My budget is broken down into many more categories than yours, but I have been tracking my expenses for many years now.
Yes - exactly. That budget is very similar to our estimated retirement budget as well.
We aren't retired yet, but will be in about 2 years. Our budget is similar to this. Although we may blow it in the first two years if we do a trip to Antarctica and a safari, which we plan to do.....
Yes - I hear you , fortunately that is our budget and not our projected resources.

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Watty
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Re: What can a $120K spending budget do in early retirement years?

Post by Watty » Mon May 20, 2019 5:21 pm

flyingaway wrote:
Sun May 19, 2019 4:43 pm
Anything important is missing?
I found a lot of expenses ended about the time I retired so I no longer had;

1) A mortgage payment, house was paid off
2) Child raising and college expenses, kid was out on his own.
3) Retirement savings
4) FICA taxes
5) Lower medical costs once Medicare was started.

I didn't try to calculate it but having $120K in retirement income when you are retired could be somewhat like someone that is earning $200K+ a year when they are younger and have all those expenses. Be sure that sound sounds right to you.

You also need to look at your likely expenses at different ages. I have seen relatives naturally slow down in their mid 70s even though they were in relatively good health. At that point the didn't want to travel much and even going out for an expensive evening was a rare event. They were also more interested in decluttering and downsizing than buying new stuff. At that point there were often months that they did not even spend their entire Social Security check since they had few expenses other than food, utilities, a housekeeper several days a week, and a medicare supplement.

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Re: What can a $120K spending budget do in early retirement years?

Post by hvaclorax » Thu Jul 11, 2019 10:01 am

I would add to the above list of less costly when retired, what I call DIY savings. These are the items you do for yourself like home and garden maintenance and repair. Snow removal saves me a bundle. Ditto for downsizing bike and ski maintenance. Selling on Craigslist. YMMV. HVAC

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