As I'm starting to get a feel for my monthly expenditures, I'm wondering how those will relate to my expenses in retirement. I know that my rent will drop dramatically, and I won't have to spend money commuting or buying work clothes. On the other hand, I'm sure some expenses will rise. The unavoidable one is health insurance.
For people who are (semi-)retired, what expenses rose after retirement? How did your expenses post-retirement compare to those pre-retirement?
High expenses in retirement
I think this question depends on what your going to be doing after you retire. I am a complex case, but the bottom line is that I dropped a little in income, but rose a little in savings which were work related expenses. I am no longer running all over hell and half of Georgia managing my business. However, now that I have more free time, I "find" things that need spending money on. These are offset by my doing them myself, in lieu of hiring someone else. I find it averages out to be around the same costs as I had prior to retirement.
Let's face it, do you know anyone who is going to retire and sit on a pickle barrel and pitch playing cards at a hat all day?
Me either. I have the ability and often by accident without planning it, I wind up making a couple grand here and there. My passive income is enough to cover everything, with some additional savings out of that as well. My passive income sets up about a 5% consideration for inflation annually which is currently meeting my needs.
If one is going to set up a passive of 20K, and live on 15K then one should be fine. Again, what about pitching the cards at the hat? That won't last long for many of us. One would either get into some other earned income, or would spend one's time in other ways that cost money.
I think it all depends on your lifestyle expectations after retirement. At any age, just getting by and paying one's monthly expenses begins to taste of the keg pretty fast.
Let's face it, do you know anyone who is going to retire and sit on a pickle barrel and pitch playing cards at a hat all day?
Me either. I have the ability and often by accident without planning it, I wind up making a couple grand here and there. My passive income is enough to cover everything, with some additional savings out of that as well. My passive income sets up about a 5% consideration for inflation annually which is currently meeting my needs.
If one is going to set up a passive of 20K, and live on 15K then one should be fine. Again, what about pitching the cards at the hat? That won't last long for many of us. One would either get into some other earned income, or would spend one's time in other ways that cost money.
I think it all depends on your lifestyle expectations after retirement. At any age, just getting by and paying one's monthly expenses begins to taste of the keg pretty fast.
This is something I find I have a hard time predicting as well. I've spent most of my 20's saving money, being austere, and making investing my hobby. But I'm also interested in refurbishing a car, playing around with alternative energy, and becoming a serious gardener when I get into retirement in a couple years.
You can read about how much it costs other people to do that kind of stuff, but it never seems very helpful because; I'm not other people. For some people, the cost of gardening is a spade, a pair of gloves, and lots of time; for others it's a roto-tiller, pesticides, a greenhouse, gardening clothes and shoes, a fence, grow lights, seed starting kits, bunches of pots for transplantings, dozens of books, purchased compost, etc.
I remember when I bought a motorcycle to save money on commuting costs. And people would tell me until they were blue in the face that it was going to end up costing me money because soon, like everyone else, I would want to trade in my Japanese 250cc for a big Harley, I'd want chrome on everything, and I'd be spending $2,000 on riding gear like all the weekend riders. Well, after 4 years of happily riding my 2nd hand 250 and saving thousands in gas, insurance and maintenance costs, it's clear to me most people don't think like I do. So to use them for guidance as to what my future hobbies might cost me is useless.
I think the best I can do to predict my "fun money" needs in retirement is to look up prices of things, think projects through now, before I retire, and figure out what kind of time-line I will want to be on for all my projects and how busy I will want to be so I can figure out what kind of cash flow would be optimal. Looking towards how other people do it doesn't really give me much helpful information.
You can read about how much it costs other people to do that kind of stuff, but it never seems very helpful because; I'm not other people. For some people, the cost of gardening is a spade, a pair of gloves, and lots of time; for others it's a roto-tiller, pesticides, a greenhouse, gardening clothes and shoes, a fence, grow lights, seed starting kits, bunches of pots for transplantings, dozens of books, purchased compost, etc.
I remember when I bought a motorcycle to save money on commuting costs. And people would tell me until they were blue in the face that it was going to end up costing me money because soon, like everyone else, I would want to trade in my Japanese 250cc for a big Harley, I'd want chrome on everything, and I'd be spending $2,000 on riding gear like all the weekend riders. Well, after 4 years of happily riding my 2nd hand 250 and saving thousands in gas, insurance and maintenance costs, it's clear to me most people don't think like I do. So to use them for guidance as to what my future hobbies might cost me is useless.
I think the best I can do to predict my "fun money" needs in retirement is to look up prices of things, think projects through now, before I retire, and figure out what kind of time-line I will want to be on for all my projects and how busy I will want to be so I can figure out what kind of cash flow would be optimal. Looking towards how other people do it doesn't really give me much helpful information.
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Freedom_2018
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@Mike BOS:
I think I went somewhat the middle path between a Honda Rebel and the Harley...
Purchased a new Vulcan 900 custom in late 2009 (2008 model for $6.4K OTD). Spent another $2K on comfortable seat, handlebar risers for longer riding comfort, a couple of helmets, protective riding gear for 2 people (jacket, pants and boots), detachcable nylon saddlebags & tankbag to carry stuff for multi-day trips...so like $8.4K in all..(of course there is insurance of $480/yr and registration fees). But that is it..don't believe in upgrading/accessories for the "look"..whatever that is.
I did think hard before buying this bike (motorcycle rider thinking hard..oxymoron? ha..ha..). Needed something that would comfortable carrying 2 people and some gear (total ~ 400lbs) and would have reasonable gas mileage (52 mpg) and insurance costs.
I think for some folks the motorcycle is all about the bike..so therefore the more powerful, shiny, accessory rich etc. the more satisfaction they get...also I've noticed they like polishing their bikes a lot and riding in big groups
11,000 miles later...for me it is more about the ride and taking multi-day trips with my friend...an open road and blue skies ...don't need much more than that. I plan to ride this bike till it can't run any more.
I think I went somewhat the middle path between a Honda Rebel and the Harley...
Purchased a new Vulcan 900 custom in late 2009 (2008 model for $6.4K OTD). Spent another $2K on comfortable seat, handlebar risers for longer riding comfort, a couple of helmets, protective riding gear for 2 people (jacket, pants and boots), detachcable nylon saddlebags & tankbag to carry stuff for multi-day trips...so like $8.4K in all..(of course there is insurance of $480/yr and registration fees). But that is it..don't believe in upgrading/accessories for the "look"..whatever that is.
I did think hard before buying this bike (motorcycle rider thinking hard..oxymoron? ha..ha..). Needed something that would comfortable carrying 2 people and some gear (total ~ 400lbs) and would have reasonable gas mileage (52 mpg) and insurance costs.
I think for some folks the motorcycle is all about the bike..so therefore the more powerful, shiny, accessory rich etc. the more satisfaction they get...also I've noticed they like polishing their bikes a lot and riding in big groups
11,000 miles later...for me it is more about the ride and taking multi-day trips with my friend...an open road and blue skies ...don't need much more than that. I plan to ride this bike till it can't run any more.
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jacob
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I was using a HSA+HDHP before retiring, so that didn't change. I didn't eat less or dress differently afterwards eithe, so that remained constant. I haven't moved to a cheaper location. I was riding my bike to and from work. So the 20% rule didn't apply to my situation.
My expenses depend on my activities. I have found myself buying tools over the past two years and obviously this costs money. I have concurrently sold almost all my books, so the expenses aren't killing me. It's largely also a one-time expense and I buy the high-end tools used so I can sell them again at a small loss if I lose interest. I have somewhat broken my rule of low capitalization/free hobbies (no rules without exceptions). There is a slight danger that I'll start "gadget-collecting" again---this is essentially the habit I broke when I started on ERE+ 10 years ago. I'm watching this carefully.
Exceptions to the rule: I'll spend money if it makes me a better person, e.g. education, skills, ... I won't spend money to make me a more entertained person.
Exception to the exception: I just paid $9.95 for a computer game (Jets'n'guns). This is the first game I've bought since 2005.
My expenses depend on my activities. I have found myself buying tools over the past two years and obviously this costs money. I have concurrently sold almost all my books, so the expenses aren't killing me. It's largely also a one-time expense and I buy the high-end tools used so I can sell them again at a small loss if I lose interest. I have somewhat broken my rule of low capitalization/free hobbies (no rules without exceptions). There is a slight danger that I'll start "gadget-collecting" again---this is essentially the habit I broke when I started on ERE+ 10 years ago. I'm watching this carefully.
Exceptions to the rule: I'll spend money if it makes me a better person, e.g. education, skills, ... I won't spend money to make me a more entertained person.
Exception to the exception: I just paid $9.95 for a computer game (Jets'n'guns). This is the first game I've bought since 2005.
@Jacob
LOL. Once you've reached a second-order exception to the rule, you've instituted operational anarchy.
I'm inclined to agree with you that, if one is truly maximizing savings for ERE, most daily expenses pre-retirement will be the same post-retirement. I like the way HSpencer frames it. Either you're spending time in retirement doing something productive, which might make you some money, or you're spending some time doing something that's going to cost you some money. The neutral activities lead too quickly to boredom.
LOL. Once you've reached a second-order exception to the rule, you've instituted operational anarchy.
I'm inclined to agree with you that, if one is truly maximizing savings for ERE, most daily expenses pre-retirement will be the same post-retirement. I like the way HSpencer frames it. Either you're spending time in retirement doing something productive, which might make you some money, or you're spending some time doing something that's going to cost you some money. The neutral activities lead too quickly to boredom.
As an example, I have always been keenly interested in learning gunsmithing. I am currently taking a course in gunsmithing from the American Gunsmithing Institute. The beginnings of the course involve minor repairs and maintenance of firearms. I already had shop space for a bench, a few precision tools, micrometer, gauges, and a good drill press. As I progress, and do my apprentice work with a local gunsmith, I will find the need for a metal lathe, a milling machine, and some other expensive items. I have no idea at this time if I will take it that far.
This is not planned as a money making venture, but rather a lifetime dream I have had. If I become accredited ( a big "if"), then I would need to use the skill to earn money, as it is just too expensive to do as a hobby only. My goal is to learn to build custom M1911A1's from stock guns. This would include doing custom conversions on the guns, which involve the machinery, and expensive custom-made parts. I am too old, tired, and cranky to consider working as a gunsmith, or opening a business of my own. Hence, I will invest enough to learn what I want to learn for my own purposes.
This is not planned as a money making venture, but rather a lifetime dream I have had. If I become accredited ( a big "if"), then I would need to use the skill to earn money, as it is just too expensive to do as a hobby only. My goal is to learn to build custom M1911A1's from stock guns. This would include doing custom conversions on the guns, which involve the machinery, and expensive custom-made parts. I am too old, tired, and cranky to consider working as a gunsmith, or opening a business of my own. Hence, I will invest enough to learn what I want to learn for my own purposes.
News Bit:
"LRE" Late Retirement Extreme??
http://www.wset.com/Global/story.asp?S=14280154
Quote from Link: ""Right now with gas prices going up, food prices going up, with the economy being so-so, I don't think it pays to jump off and going to a fixed income thinking that you'll make it," said Harman, who is considering delaying retirement".
"LRE" Late Retirement Extreme??
http://www.wset.com/Global/story.asp?S=14280154
Quote from Link: ""Right now with gas prices going up, food prices going up, with the economy being so-so, I don't think it pays to jump off and going to a fixed income thinking that you'll make it," said Harman, who is considering delaying retirement".
"I won't spend money to make me a more entertained person." That rule definitely does not apply to me and I hope it never has to. I select wisely by choosing the venue that has the most bang for the buck. We buy season tickets to college football and several live theater groups. My retirement will include the continuation of these entertainment venues.
Gas is a drop in the bucket compared to health care. There are a lot of affordable alternatives today.... but checkout check the cost trends towards the bottom of this page.
http://hspm.sph.sc.edu/COURSES/Econ/Classes/nhe06/
It would be a dream if health care costs would track with inflation, oil, GDP, real estate, or the DJIA. It's just unsustainable, and something will have to change drastically in the next 10-20 years. Besides investment volatility, that's far and away the biggest risk I see when jumping into ERE. It's specifically what's keeping me employed an extra year or two to build a extra dedicated hedge against those expenses.
This assumes you are above abusing the systems in place to provide care to those who aren't below the poverty line by choice.
http://hspm.sph.sc.edu/COURSES/Econ/Classes/nhe06/
It would be a dream if health care costs would track with inflation, oil, GDP, real estate, or the DJIA. It's just unsustainable, and something will have to change drastically in the next 10-20 years. Besides investment volatility, that's far and away the biggest risk I see when jumping into ERE. It's specifically what's keeping me employed an extra year or two to build a extra dedicated hedge against those expenses.
This assumes you are above abusing the systems in place to provide care to those who aren't below the poverty line by choice.
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jacob
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"It's just unsustainable, and something will have to change drastically in the next 10-20 years."
Bingo! This is why the current growth rates can't be projected out for the next 50 years. They are bound to taper off. Right now they are the result of a broken system + boomers with lots of money. Once these things go back to normal prices will stabilize.
We might even be lucky and have prices reduced by 50% if the US decides to adopt whatever health care policies are used by the second most expensive country in the world.
I'd say you guys have "near-term" bias worrying about extrapolating current trends. How about worrying that capital gains and unearned income taxes will rise to 48%? This is not unrealistic.
Bingo! This is why the current growth rates can't be projected out for the next 50 years. They are bound to taper off. Right now they are the result of a broken system + boomers with lots of money. Once these things go back to normal prices will stabilize.
We might even be lucky and have prices reduced by 50% if the US decides to adopt whatever health care policies are used by the second most expensive country in the world.
I'd say you guys have "near-term" bias worrying about extrapolating current trends. How about worrying that capital gains and unearned income taxes will rise to 48%? This is not unrealistic.
Oh, now you've done it! I hadn't thought of that tax shift - certainly a plausible fallout as the left continues to spend and shift the tax burden to the right. Ironic that we frugal few will share the pain directed at the rich. Something new to worry about 
My gut feel on the health care change is that it will be more a matter of reduced expectations in the level of coverage, because I think substantial cost optimizations are unachievable given the scale and complexity of our society and government.
An interesting statistic would be comparing the costs for treatment of a specific malady over time. That would isolate increase in actual cost vs. increase in gross provided service. My (unsubstantiated) belief is that the latter is a bigger contributor. Viagra, heart transplants, "gotta go, gotta go, gotta go right now", gastric bypass, aids drugs, other long term costly prescriptions, keeping very sick and/or very old people alive longer and longer, etc.
My gut feel on the health care change is that it will be more a matter of reduced expectations in the level of coverage, because I think substantial cost optimizations are unachievable given the scale and complexity of our society and government.
An interesting statistic would be comparing the costs for treatment of a specific malady over time. That would isolate increase in actual cost vs. increase in gross provided service. My (unsubstantiated) belief is that the latter is a bigger contributor. Viagra, heart transplants, "gotta go, gotta go, gotta go right now", gastric bypass, aids drugs, other long term costly prescriptions, keeping very sick and/or very old people alive longer and longer, etc.
I just want to go hiking when I retire. My plan is a little vague, but it is something like live in Slab City in winter and hike and live on trails spring, summer and fall. I will do without health insurance beyond whatever bare minimum they will be giving to old people by then. If it's nothing, well then I'll just stick to the trails that don't have precipitous cliffs or raging snowmelt streams.