Those of you that retired early (pre-SS/RMD) - what were your expenses like first 5-10 yrs?

[vrr106]

I am hoping we have a decent number of folks here who retired >10 yrs before SS and RMDs. How did your expense trajectory change for the first 5-10 years of retirement? I am considering this in the next 4 years (at age 54) and while I have a great handle on my current expense, I'm not sure what I might be missing. I am just starting to put together a "wish list" of things we would like to do, but didn't have the time for but wanted some insights from others.
Off the top of my head, I expect our first 5-10 years to have:
a. Same real expenses for property taxes, insurance, shopping, groceries, utilities, auto, pets
b. Increased expenses for travel, health insurance, home improvement, health/fitness activities, hobbies
c. Reduced expenses for income taxes, kids (younger will start college in 7 years and both have fairly well funded 529s)

[jebmke]

I retired in 2007 at age 55. One of the major "surprised" for me was how much year to year variability in expenses there was.

The peak year was approximately 1.5 times the trough year.

[sailaway]

I retired in 2007 at age 55. One of the major "surprised" for me was how much year to year variability in expenses there was.

The peak year was approximately 1.5 times the trough year.

Did you not have the pre retirement? We spent twice as much in 2019 as 2020 because one year included a boat refit and the other included lots of nothing.

This year's spending should have been closer to 2020 (we moved, so lower base expenses), except we had an opportunity to help a friend pursue an interest and avoid homelessness in one transaction.

[JDCarpenter]

I am hoping we have a decent number of folks here who retired >10 yrs before SS. How did your expense trajectory change for the first 5-10 years of retirement? I am considering this in the next 4 years (at age 54) and while I have a great handle on my current expense, I'm not sure what I might be missing. I am just starting to put together a "wish list" of things we would like to do, but didn't have the time for but wanted some insights from others.
Off the top of my head, I expect our first 5-10 years to have:
a. Same real expenses for property taxes, insurance, shopping, groceries, utilities, auto, pets
b. Increased expenses for travel, health insurance, home improvement, health/fitness activities, hobbies
c. Reduced expenses for income taxes, kids (younger will start college in 7 years and both have fairly well funded 529s)

Everyone is different. But, FWIW....

Retired at 57/56, 6.5 years ago. Our expenses have been as hoped for. Pretty constant with our before-retirement expenditures, excluding kid- (who were out of college at that point), tax-, and work-related expenses. Healthcare has been more than what came directly out of our pockets when we were working, but less than we budgeted for.

Biggest change has been travel, but that was why we saved/invested until we were comfortable with spending twice what we did when working. (We figured it would be more than half of our post-tax expenditures for as long as we could.) Actually has come in a bit higher than that, as we do fixed percentage portfolio withdrawal and that allowed DW to go over the top during a couple of years.

Had to get a new car too, but we got a good loan rate and just pay it as part of baseline expenses.

As I said, YMMV (actually, it will vary!)

Good luck!

[TipsQuestions]

I'd suggest a site search, as this question has been answered thousands of times.

viewtopic.php?t=335148

[jebmke]

I retired in 2007 at age 55. One of the major "surprised" for me was how much year to year variability in expenses there was.

The peak year was approximately 1.5 times the trough year.

Did you not have the pre retirement? We spent twice as much in 2019 as 2020 because one year included a boat refit and the other included lots of nothing.

This year's spending should have been closer to 2020 (we moved, so lower base expenses), except we had an opportunity to help a friend pursue an interest and avoid homelessness in one transaction.

I didn't keep the details on pre. Income taxes would have blown it all out of proportion. My tax bill and personal expenses were distorted by my ex-pat status during the last few years. I think I had a seven figure tax bill one year - I'd have to look at the returns. Most of them were at least high six-figures when I include all the taxes I paid.

[fposte]

Only two years in, but my expenses are roughly the same. It’s just that the portion that used to go to tax-advantaged saving now goes to travel and entertainment.

[MnD]

5 years in our net after-tax income and expenses are the same as when working.
The elephants in the room were and are the large reduction in taxes and the elimination of the expense of saving for retirement.

All the other changes were just noise and increases in some expenses (like travel) were cancelled out by other decreases (commuting, work lunches out). Inflation is noticeable but that would have happened regardless of whether we had retired or not.

[Hacksawdave]

I have tracked budgets going back to 2012 and prepared a five-year plan to retirement in 2016 for year 2022 before I was given ‘unexpected early retirement’ at the end of 2019 at age 56. The first four years had some fluctuations based upon several events that transpired from the end of 2019 to today. The last working year had a budget of $5,011 a month. Below are the changes for each year.

2020 +5.33% (Mostly taxes on severance)
2021 -9.26% (Extended benefits and lower taxes, COBRA was cheaper than ACA)
2022 +6.95% (Hello ACA premiums and inflation)
2023 +8.75% (More effects from inflation and ACA increases)
2024 est. +7.58% (ACA premium costs really went up and expect still lingering inflation)

[secondcor521]

54, single, three kids 28M/23M/21F. FIREd in spring 2016, almost 8 years ago.

I've tracked the average of the last six months' expenses monthly during retirement.

That number varies by about 2x throughout the year, mostly because I have property taxes and Christmas expenses both in December.

That number has been essentially flat since retiring. I think my ability to economize pretty much exactly offsets inflation, so my spending stays the same in nominal terms.

That number is pretty much exactly what I expected it to be: pre-retirement spending minus taxes plus ACA premiums. I chose not to pick up any expensive hobbies and did not plan any expensive travel - both based on personal preference.

I did spend more in my retirement on my kids than I thought. Mostly this was discretionary and wanting to be sure that I did not short them what they needed and wanted just so I could retire early. It worked out because my market returns since retiring have fortunately been good.

I think it's smart to think about expensive lumpy items like car replacements, roof replacements, and HVAC replacements and figure those into the mix somehow. I didn't, really, other than retiring with a ~2% WR and figuring it would work out. It has worked out: the car, roof, and HVAC have not needed replacing since retiring. But mine was not a particularly great plan.

[Padlin]

Married, both retired at 56, will be 67 shortly, SS planned at 70. No debt, all major repairs and purchases done before we retired if it matters.

On a yearly basis, expenses are as planned for, same as when we worked, give or take.

Unplanned for changes… seems your teeth go to heck as you get older, no dental insurance, inflation.

[Parkinglotracer]

Was predictable just watch for lumpy expenses like college, weddings, roofs, kitchens, boats, vacations. This is going to be trite but our spending added up up to all our normal expenses plus the big ticket items we decided to pay for … new car, etc. of course when you decide to buy that car you will likely need to take an extra 20% from taxable or tax deferred account in order to pay capital gains or income taxes.


The only other alternative may be to keep working and dream of you controlling your own time and life. As someone said most retire when they have had enough and they have enough. Good luck!

[beyou]

Unplanned for changes… seems your teeth go to heck as you get older, no dental insurance, inflation.

Inflation +1

Dental cost - can’t believe how much more my dentist charges when no insurance is involved. But he’s good and convenient so I stick with him. Not looking at dental insurance as none are even close to prior employer policy and even that was not critical to have. Retiree options for insurance would force me to change dentists. Would rather pay the rates and go where I want.

[flyingaway]

You can use your current expenses to get an estimate of your expenses in retirement. Some things may not happen every year, but they should be accounted for. For example, we estimated $5,000 each year for repairing around the house, including gardening. In most years, we spend less than $1,000. However, this year, an expensive car repair, roof replacement co-pay, new HVAC, almost trippled that cost, but they average out.

[jeffyscott]

Off the top of my head, I expect our first 5-10 years to have:
a. Same real expenses for property taxes, insurance, shopping, groceries, utilities, auto, pets
b. Increased expenses for travel, health insurance, home improvement, health/fitness activities, hobbies
c. Reduced expenses for income taxes, kids (younger will start college in 7 years and both have fairly well funded 529s)

Not sure why there would be increased "home improvement" after retirement? But, overall that was my approach...use current spending adjusted by things that would change significantly after retiring. For the big changes were health insurance, retirement savings, and taxes. I did not expect anything else to change by much.

I did add an amount to expected expenses to fund car replacement about every 10 years, since we hadn't had that expense in the years leading up to retirement and we went from 2 cars to 1 after we both had retired. I felt that lumpy home maintenance expenses were accounted for, since we had happened to replace HVAC and flooring in the years prior to retirement that I had used for estimating expenses.

Travel expenses are a big variable. Some here talk about 5 figure annual travel expenses. For us it's a few thousand per year. For example, we have a 3 week trip coming up where VRBO accommodations will cost $1800, we'll mostly make our own food, and it'll cost about $200 in gas to get there. We had a 10 day trip in spring and spent maybe $1000 (about half the hotels were on points and we prefer getting fast food to eating in restaurants). Others might spend $15K or more on two such trips by staying in luxury accomodations and seeking high end restaurant experiences, etc.

Excluding the tax expense related to Roth conversions, our average spending over 5+ years has been somewhat less than my pre-retirement estimates. I think I overestimated health care costs (which is not really unexpected, since I assumed spending the maximum out of pocket) and taxes.

[JDCarpenter]

...
Travel expenses are a big variable. Some here talk about 5 figure annual travel expenses. ...

Excluding the tax expense related to Roth conversions, ....

Agree on travel expenses. Probably the single biggest variable among retirees on this site who don't have a dependent child. We haven't yet hit 5 figures, but if our portfolio takes a big hit, DW will be forced to make it happen.

Roth conversion costs are a big thing for us as well. Although I understand arguments to the contrary, I characterize those taxes as prepaid expenses for future years and don't count them in current spending. Whether we make them or not (and we make substantial conversions), it doesn't affect this year's living.

[Golf maniac]

I retired in 2015 at 56, expenses were 57% post retirement. We budget the same way we always budgeted. We save monthly for any large expenses (car, roof, home improvement, vacations, etc). Overall about 60% of our expenses are non discretionary and 40% discretionary. Inflation for us ran about 1 to 2% annually until this year. Our budget for next year will be a 3 to 4% increase. I know I could just pull from retirement accounts for large expenses, but I just like to build up for big expenses. Old habit I guess.

[MikeWillRetire]

My wife and I retired in March. She was diagnosed with cancer a few months before, so we quickly hit the out-of-pocket maximum for healthcare costs. So we spent our discretionary/travel funds on healthcare instead. Your budget should have a good amount of discretionary spending to handle unexpected things like this.
By the way, she is doing well, so we hope to travel next year.

[Colorado14]

I retired last year at age 54 and my spouse was already retired. Allmost one year into retirement and we have experienced the following:

a. Slight increases (due to inflation) in real expenses for property taxes, insurance, shopping, groceries and utilities.
b. Significant Increases in expenses for travel, as planned. Travel is entirely discretionary and we are definitely in our go-go years and now have more free time for travel.
c. Reduced expenses for healthcare due to amazing retiree health care. No need for ACA or game playing to limit income to obtain ACA discounts.
d. Reduced expenses for income taxes.

In the next few years we will likely experience the following:
a. Increased expense for new furnace and air conditioner. (We've set aside $ for this.)
b. A new vehicle (This is a want, not a need, as both vehicles are low mileage, despite many road trips. (We've set aside $ for this.)
c. Possible small inheritance due to death of elderly parent. We're not including this in any planning, as we could inherit $0 or maybe $100k. We don't want to be morbid/focus much on this since the amount/timing is uncertain.
d. Possible increased expenses for home remodel; this is also entirely discretionary.
e. Possible Roth conversions.
f. My pension is extremely modest and will begin at age 60. I quit a pension-eligible job to take a much higher paying job that did not offer a pension.

[Colorado14]

My wife and I retired in March. She was diagnosed with cancer a few months before, so we quickly hit the out-of-pocket maximum for healthcare costs. So we spent our discretionary/travel funds on healthcare instead. Your budget should have a good amount of discretionary spending to handle unexpected things like this.
By the way, she is doing well, so we hope to travel next year.

Sorry for your wife's cancer! It's great news that she is doing well and that you will be able to travel next year. Sending good vibes to you both.

[scrabbler1]

I retired in late 2008 at age 45. I am 60 now. Single, no kids.

My two most volatile expenses in my retirement have been income taxes and medical expenses. The first 5 years (2008-2013) were pre-ACA, so my premiums rose a lot before I switched to a bare-bones plan until the ACA began in 2014. After that, through 2019, sometimes I received a small premium subsidy, other years I received no subsidy. I also had a 12-day hospital stay in 2015, spiking my medical costs. Then, in 2020, I changed the stock portion of my portfolio so I could reduce my income and get a bigger subsidy.

Income taxes bounced around a lot through 2019, usually due to variable cap gain distributions in those year.

Since 2020, my total expenses have been lower than most of my years in retirement, despite recent inflation. The non-medical, non-income-tax expenses have been rather stable in my retirement. They have risen a little in some years, then dropped back in others.

[JakeyLee]

Deleted . Didn’t read the whole post

[snackdog]

Your expenses are entirely up to you and totally variable. If you don’t relocate or make changes, costs can go down from your long established base spending due to less commuting and work lunches, etc. Or spending could rise with home, car and travel. They could be smooth or vary wildly from year to year.

Our expenses doubled and tripled post retirement. Larger house needing work and upgrades. More expensive living location. More travel. Less frugal approach to saving.

[vrr106]

Our expenses doubled and tripled post retirement. Larger house needing work and upgrades. More expensive living location. More travel. Less frugal approach to saving.

Doubling and tripling is pretty significant. Do you mind sharing what % of your investments that high spending represented? significantly over 4%?

[vrr106]

Not sure why there would be increased "home improvement" after retirement?

I do see this in other posts as well as some replies to this post. For myself, we have a lot of "pent up" home remodeling/improvement projects that we don't have time for while working full time

[jebmke]

Not sure why there would be increased "home improvement" after retirement?

I do see this in other posts as well as some replies to this post. For myself, we have a lot of "pent up" home remodeling/improvement projects that we don't have time for while working full time

also, the more time you spend around the house, you find things you'd like to take care of that you might normally just let slide. But perhaps we are saying the same thing. Also, eventually, one gets old enough to start thinking of age-related improvements such as accessibility.

[nguy44]

For us, we spent about $127K less in our first 5 years year retirement (ages 60-65), as compared to the 5 years before retirement. This is not counting federal and state income taxes. That difference was $147K less, but could be higher if we were not doing Roth conversions.

Our 5 year pre-retirement expenses were also inflated, as we made the decision to spend for major, or likely 1 or 2 time, expenses while we were still working and could pay for them out of income without impacting our savings and investing. So we spent on items such as a new roof, several bathroom/family room/study renovations, new driveway, updated appliances (to at least delay the replacement time after retirement), etc. Also, our college expenses for our childrens ended in the year I retired.

Our 5 year plan going into my retirement was to spend, not including income taxes, about $115K (with adjustments for inflation) per year for a very comfortable lifestyle. Our actual spend averaged about $97K per year. Overestimating health care expenses was a big part of why we spent less, but I am not complaining about that .