The first question to ask yourself in retirement planning is: Do I want to live at a level less than, equal to, or more than my current standard of living? We chose to keep our current standard of living, but you need to start there; you can’t know how much is “less” or “more” until you’ve figured out what “is.” I have produced a monthly cash flow statement that tracks every penny in and every penny out for almost 30 years now and highly suggest this exercise as a way to get a factual view of where your money really goes. Bank and credit card statements are not granular enough for me. This data took the guesswork out of retirement income planning. I posted a basic copy of the spreadsheet I use here.
Our monthly/annual spend has not changed much in retirement. Some of my spreadsheet categories have gone, some added, some increased, some decreased, but the overall annual spend has remained pretty consistent. After tracking this detail for years and knowing that we wanted our retirement lifestyle to remain consistent with our working lifestyle (or a bit higher), our savings and investment strategy was built on achieving that level of sustained annual income.
I found that just because things like work-related expenses, education costs, and mortgages may go away, other costs happily take their place (you know, nature abhors a vacuum and all), so I didn’t concern myself too much with how the underlying buckets would change in retirement, I just needed a firm handle on our aggregate annual cash flow which turned out to be surprisingly consistent year over year regardless of how our lives changed.
This history was critical to forming the retirement plan we established with our FA who asked us a series of questions that became our retirement roadmap. She also told us something I found very helpful when it came time to step off the corporate merry-go-round and we were trying to fix on a date. She said, “Retirement is a faith position. You’ve done the work and you’ve gotten where we agree you need to be. You need to believe in that work. You’re good to go.” We’ve been retired eight years now, no surprises because the plan was sound and based on hard data.
The conventional wisdom is that retirees spend aout 80% of what they spend when working. That has not been the case for us. We always were on a lean budget so our retirement spend is almost identical to the working spend. There just wasn’t a lot of of fat to cut. In fact, I think we spend more because we are traveling and trying to go from savers to spenders.
Quite a lot of replies already! I decided to retire when I got a serious health diagnosis and decided if things went south in only a few years I didn’t want to have spent most of them still working. Fortunately health has held up but I retired at age 62 and never looked back. To be honest 25% of the job was enjoyable but the rest was drudgery so I don’t miss it. Since you are also 62 one thing that is important is to look into what you’ll do for medical insurance until Medicare at age 65.
It was a big transition to move from saving money for retirement to actually starting to spend it. You have a financial planner so I imagine you’ve had conversations about a safe withdrawal rate and also the mix of investments you have between stocks and bonds so that you’ll be ok if the market has a serious drawdown (such as 40%) and stays below current levels for many years. But here I am typing a reply to CC instead of sitting at a desk at work so I can say life is better now!
OK that was the push we needed. I read the post to H and he said let’s do it. Signed up for beginner pickle ball in April. We took classes about two years ago and never followed up. Starting again. I think the time may be right for us.
For people who wonder what they’ll do in retirement I’ll put in a plug for volunteering. Most non profits can use some help these days and in my particular field of libraries/museums/historical societies you’ll likely meet a great group of people.
Great suggestion. I’ll also mention that there are some volunteer gigs (such as the biweekly drive-thru food pantry where I often volunteer) where you are NOT committed to a particular timeslot…. no need to find backup for coverage when away. While we are still enjoying early retirement, traveling a lot and doing spur of the moment activities I’m not yet willing to loose schedule flexibility. I have committed to 3rd Sunday church ushering (and coffee hour snack contributor), but it is easy to get usher backup and leave store bought cookies ahead of time.
On the spend tracking topic, one idea I’ve had is to have one credit card for Needs and another for Wants. But… that idea came along too late to help on the retirement planning, and we’ve set a strategy of putting as many expenses as possible on our Chase United Visa (for airline points).
A bit of an outlier in this discussion but pretty much the norm for many of our friends. We had a goal decades ago of when we wanted to retire (a bit on the young side) and that we wanted to retire in a different (warmer) part of the country. That was our decision point -as long as we could make it a reality.
We saved in many areas of our life - DIYed so many things, from home reno and fixit projects, cooking, to finances, taxes, traded babysitting, no Starbucks or meal delivery charges. We rarely went out to dinner, but we did go on nice family vacations, and didn’t skimp on college. Invested -investing is a hobby-with more risk than may have been safe (looked bad in tech wreck and COVID times, and a few other times but overall worked out fine).
We did not keep a budget, but are somewhat naturally thrifty. Our before retirement and after retirement spending barely look related, as we had kid and college expenses before and totally different home and tax expenses and lifestyle spending. (Our retirement date and kids out of college dates were not far apart). We spend more in retirement on a weekly basis. We eat out often, travel, donate, have bigger wardrobes, make sure we spend quite a bit of time with our kids, grandkids, friends who live in other places, which is a little bit expensive. Many of our retirement friends have similar histories, priorities, and before and after lifestyles.
We have plenty to do and are happy we retired several years ago.
Also maybe a bit of an outlier because…Although we could play pickleball every day neither of us chooses to play that. My husband does play tennis (tried pickleball for a few months) and we are active in other ways.
Also on the spend topic… We didn’t count SS into our retirement plan, but there it was so we took it at 64/65. It’s enabled us to take less from our investments (about 2% annually), so our portfolio has grown since we’ve retired. We didn’t have any anxiety about switching from saving to spending because that’s what we built the pile for, but we never seriously considered that it would continue to grow significantly beyond our needs. Our plan is to die with a dollar, but we’re not making much progress toward that goal. I guess our son will eventually benefit more than we planned — unless we think of some profligate things to buy/do… Maybe more ice cream?
H retired at 70 after 45 years with his employer. If he had stayed, his salary would go down 10% every year for 3 years. He also found it harder to learn as quickly as he used to and found work wasn’t as enjoyable any more. He was begged and went back for 6 months as a temporary hire (receiving salary + pension), to help train others in what he had been doing and then was done for good.
When he retired, he had a pension with COLA and continued to cover us under his family medical insurance plan, which his employer pays 70% of the premium (it is our Medigap plan & covers our Rx too).
Before he retired, I looked up our checkbook registers for the past few years and figured out what we had spent. I also calculated which would go away (his FICA, his pension contributions, kids ed expenses, mortgage—paid it off before he retired), as well as any new projected expenses. From my calculations it looked like we were fine and we have been for over a decade since H retired. The pension and RMDs more than cover our expenses every year, plus a small amount of SS.
I had been working fulltime when we met, took a break from workforce for maybe 8 years to raise kids & then worked part time thereafter (and still do but now it’s mostly volunteer work).
I get a small SS amount & H now gets a tiny amount of spousal SS from my account. It helps pay part of his Medicare premium.
H took up hand woodworking in retirement and is very happy. We have done some traveling and go out to eat with family & friends. My siblings are traveling quite a bit in retirement and one takes a class per term with friends, free at local U as an elder. Several of my sibs play pickleball and several help with their grandkids and one plays mahjong and sometimes volunteers at church for food distribution
We did take out a HELOC before H retired because it was totally free (no fees at all) and never used it so it closed after 8 years when bank forced the issue. We have received inheritances from SisIL and my parents that we hadn’t counted on, which have been happy surprises.
My job became untenable in my early 60s and my brother and both parents died within a five month period. I filed for Social Security at my full retirement age of 66. But shortly thereafter I was offered a bookkeeping job at the fabric store I have been frequenting for the last 35 years or so. I only work about ten hours a week and can take off all the time I want so I have been doing that for the last twelve years. My husband was offered a buy out in 2016 and has been happily retired ever since.
I had gone to working part time in 2014 and fully retired in 2020 (I did continue some very minimal consulting/committee work for another year). DH just retired from full time work last fall but is still doing some consulting.
The calculation of spending before and after retirement can be tricky. For my husband there was a huge savings in commuting costs and buying lunch at the office.
I think our biggest new cost (not insignificant) was medical/dental premiums from marketplace insurance. Much higher than the rates we paid for insurance from his company. Even now with Medicare the premiums are not insignificant.
Because we were no longer earning wages, we had to start paying quarterly taxes on our investment income.
We then downsized from our home to an apartment in another state. All of our housing costs changed completely - no real estate tax, maintenance, etc. - instead rent. Also, utility rates in a new state were completely different.
Your most significant expense differences that change from pre to post retirement may not be in the day to day, or even travel/luxury expenses, but in your core living expenses.
It’s true that one can only guesstimate costs in retirement. In past few years, we have put in new roof, split A/C, photovoltaic and solar. We hadn’t really budgeted for any of them but it worked out (especially with fed & state rebates). We also replaced 2 cars—both about 20+ years old.
Traveling and dining out are categories that can go up & down—we can cut back or increase (faster food or fine dining), stay at nicer places or with friends, etc.
I had a very serious health scare at age 49 back in 2020 (not actually COVID related). Once I knew I was going to recover, we accelerated our early retirement plans.
A couple years ago NiceUnparticularMom’s executive position was eliminated, and she was offered a nice severance. She could have taken another position but we took this as a sign she was done.
Then I also mostly retired at the beginning of this year. I’m an attorney and sort of like the mob, it is hard to be entirely out. But I went from non-equity partner to Of Counsel and only do consulting work when I want to.
Obviously we wanted a solid financial plan, particularly with kids still in school (we have an S24 and D30). Doing a phased retirement between the two of us really helped, though, as we got some sense of how expenses would actually work.
The final push for me was D30 deciding she wanted to go to boarding school. Suddenly this was our last year with her at home, and I wanted to be able to do everything without interference from work. And then we are transitioning to empty nest mode, which will include frequent travel to wherever the kids might be.
I retired at 59, when DD had a baby, so I could help with childcare. DH retired at 61 after 32 years working for a city, when we decided to downsize and move states.. DD and DS were out of college, mortgage was paid off and we had no debts. I didn’t realize then how lucky we are with our defined benefit plan pensions…Basically DH receives 89% of his highest 3 years of salary for life, with 100% survivorship benefits to me, and I receive two smaller pensions w/ partial survivorship to him. They are fixed, so will not increase with inflation. I took SS at 64, and he will at 70.
We were very frugal when it mattered, early on in our married life. Our salaries as public school teacher and librarians have been modest, but our spending has also been modest. We have a newly built, lovely small cottage, share one electric car (bought lightly used), rely on solar for much of our power, and have simple needs. We really like being retired, and help out with the grandkids on almost a daily basis, while also playing music, bird watching, gardening, etc. We are not sorry we retired so early, or sorry we left Texas for a more progressive state!
I am also somewhat amused by the handle “anxiousmom” in this context. NiceUnparticularMom and I have been reflecting a lot lately on how basically the only remaining major area of stress in our lives is our kids. Not all in a bad way, of course, like some of what is happening is they are striving to do new and/or hard things, which involves stress but for good reasons. But caring about a young person as they go through young people things is inevitably a bit of a roller-coaster ride for us emotionally.
I joined CC when DD was 16 or 17 years old, and CC had a different name and format. (She is now 40!!!). We had no debt at the time except for the mortgage, but also no college savings. Literally no college savings, but had newish vehicles that would last us through the college years. I had no idea how we would be able to pay for college for DD and three years later, for DS, and no real knowledge about how financial aid worked.
So I was very anxious about the whole process, hence the screen name!
It actually worked out beautifully, as DD received great no-loan financial aid at a great school, and DS went to the same great school and overlapped with DD one year- so paid the same amount that year for the two of them as we had done for just one. We ended up paying for the 7 years of university out-of-pocket, with all of my take home salary going to their university. We were probably making 75K a year max combined salaries at the time, so we had quite a bit of need. At graduation DD had no loans, and DS had under 10k. And since he was in a high paying field then, he rapidly paid them off.
Now, I find other things to be anxious about, such as climate change and politics, and now, grandkids, and the future of our society!. We have been outstandingly lucky, in so many ways.
Maybe more ice cream?
I joined CC when DD was 16 or 17 years old, and CC had a different name and format. (She is now 40!!!). We had no debt at the time except for the mortgage, but also no college savings. Literally no college savings, but had newish vehicles that would last us through the college years. I had no idea how we would be able to pay for college for DD and three years later, for DS, and no real knowledge about how financial aid worked.