Budgeting, Retirement, Retirement Journey

Series: Retirement Preparation. The retirement budget.

grey metal case of hundred dollar bills
Photo by Pixabay

Expenses.  This is probably one of the most important of all the areas of preparedness for retirement.  Without knowing how much you will need in retirement makes saving goals for retirement a guessing game.

I have been preparing my budget now, and will be living off of our potential retirement income over the next four years, while saving the overflow in a cash liquid account.

Of course, we don’t know exactly what will happen in retirement, but we do know we will need a good amount for health care.  I am not going to nickel and dime this category  because quite frankly without health, nothing else matters.

Another line item I want to have is a significant amount in travel.  For the first 10 years of retirement, we plan on taking full advantage of our current health (good!) to blow through our travel bucket list.  (a topic for a future post!)

white cruise ship
Photo by Matthew Barra

That leaves us with the every day expenses — mortgage, utilities, cell phone, car expenses (insurance, gas, maintenance) food, eating out, gas, gifts, clothes, subscriptions, giving, personal care, blow $, household, taxes and insurance.

Mortgage.  Ultimately, we don’t want a mortgage.  Unfortunately, four years doesn’t give us enough time to pay off our current home.  Our plan is to sell our current home and downsize to a smaller home in our area.  Our children and grandchildren are here, so moving to another area doesn’t appeal to us.  However, downsizing into half the space, half the utility bills and half the taxes and insurance does. 😉 We hope to downsize in the next three years before we retire.  Potential Savings:  $30,000/year.

Cars.  We will be going down to one car.  In Virginia, there is a personal property tax on cars each year.  If you have a fairly new car (which we do), it can be as high $1,000 or more.  Going down to one car would be a HUGE savings to several line items, including car maintenance, gas, taxes and insurance.  My husband never uses his car on the weekend, and I barely use my car during the week.  When he is retired, we don’t see needing both.  Potential Savings:  $3,500.00/year.

By rejiggering just those two categories alone, we would save over $30,000 in yearly expenses.

All other expenses.

We are in a good place with other line item expenses, so I’m keeping them all the same for retirement.  By saving on the big ticket items (mortgage and cars), the other line items can remain the same.

So, where does that leave us?

Here is our preliminary REALISTIC retirement monthly budget, and one we follow now except the $2,500 is our mortgage instead of healthcare, and our taxes and insurance is $1200/mo.

  • HealthCare:   $2,500.00** (This includes insurance, co pays, medications, and concierge service for my endocrinologist )
  • Travel: $1,500.00 (5 trips a year)
  • Taxes & Insurance: $550.00
  • Utilities: $275.00
  • Cell/Cable: $200.00
  • Groceries: $500.00
  • Household: $100.00
  • Subscriptions: $25.00
  • Eating Out: $100.00
  • Home/Car Maintenance: $250.00
  • Gifts: $200.00
  • Clothing: $150.00
  • Personal Care (makeup/hair): $100
  • Blow $:  $200.00

Total:  $6,650.00

**Healthcare will go down significantly when Medicare kicks in, although I anticipate spending some money for gap insurance.

Well there you have it.  After months of agonizing over our expenses, I can honestly say the above numbers are as accurate as they can be.  I’m not going to lie, that is a high monthly nut to cover.  $400,000 for the first 5 years to be exact, then $135,000 for the next 2 years (when medicare kicks in).  However, once we start social security at age 67 (yes, we changed our minds again 😉 ) our monthly draw from personal savings will be $2,625/month or $31,500/year.

Will we have enough to retire at age 60 given the above numbers? I think so.  But stay tuned for the next post in our series, OUR CURRENT SAVINGS.

If you are retired or planning to retire, how do your expenses align with mine?  Please share!

 

 

 

 

 

 

18 thoughts on “Series: Retirement Preparation. The retirement budget.”

  1. I’ll try again to post a comment.
    Here goes.
    In 2.5 years, when hubby retires, we are going down to one car. We’re going to trade in our two cars and buy a super super, most luxurious vehicle on the face of the earth. Powerful enough to tow our RV in comfort and style. And then head out west. FINALLY!
    Note: I can’t get over how some states tax cars every single year. And people complain about New York???
    We have no mortgage or debt. We downsized for our retirement in 2001. We did what you plan to do: downsize to a smaller, less costly home, in the same state, near our kids.
    In retrospect, I should have held onto more money simply because of hubby’s health. You just never know.
    Our vacation costs run around $3000 to $5400 a year. I put away enough cash to cover 75% of that. The rest comes out of savings. We already did most of our travels while still employed. Now, at our age we just do the Florida thing in winter (3 months) and just added staying at a beach (2 months) on the eastern seaboard in the summer. In our RV.
    Most of our other expenses are contained.

    Glad you are back blogging. Missed you.

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    1. I didn’t see another comment? I’ve learned from you not to sacrifice with our health. I’m not giving up the doctors I’ve come to trust, so if I have to pay extra, I will make sure I do. 🙂

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      1. The first few never posted. I tried again and I think my comment got through this time.
        My husbands only goal right now is the surgeon who is going to perform open heart surgery on him to alleviate his two aneurysms. Whatever we have to do to retrain this great doctor, that’s what we are doing. We’ll know in December if and when the surgery will be needed.

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  2. Good start. Long response…
    Remember that if you save $500,000, you will make interest on money. Ours is in stacked CDs.
    Not great returns but….
    We found we needed about $300 each in allowance to satisfy our wants. Mine goes to hair color, Target with the littles, and saving for travel. His goes to—it is none of my business :). We love the autonomy–which we have known our entire marriage. Start stashing a cushion now! I can say, we do not argue about money.
    We found our out of pocket health went down! Less stress, less need for meds. It is good to keep a slush fund though. I shattered my elbow- $3000…
    We go through about $10,000 in travel yearly. Three trips to PHX see mom and one big trip. Your budget seems realistic for that, but a bit low for big travel. I saved my allowance for a long time and head to Hawaii, with my sister in law, in two weeks.
    Chase Sapphire is your friend, buy everything with it in your move!
    Moving? We regret buying 70 miles from the grands. I put more miles on my car then ever before! Dangerous and draining. Remember HOA fees- especially in NoVA. My daughter is looking there and the fees are rising – fast. I’d sell sooner then later. NoVA is white hot! Finding a smaller place is challenge. Fortunately, you need not care about schools- but neither do the millions of DINK moving to your area! Get to know your excellent local library and parks.
    Your taxes, insurance and gifts are the same as mine—but your current property taxes are probably in your mortgage. Don’t forget to adjust when you move.
    We have lived off of $1000 less then your plan a month- but do not pay healthcare or mortgage.My husband drew SS at 65 (four years ago). I will at 66.6 . We will have to “out of pocket” Medicare for that 1.6 years. Glad you can see the value in waiting.
    We retired for good at 53/60. God bless his pension! We have stayed even in our retirement accounts.
    I think we live pretty middle class.

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    1. Hi Janette! Your comment was in spam. I’ll remember to check in future. I don’t have property taxes included in my mortgage. We pay them separate. You are right, I forgot HOAs. But minimal in comparison. You will see when I post our savings, we should be in good shape. I think we are okay with travel. $1500 a month in travel is $18000 a year. Enough for a big trip and a couple of smaller ones. We will be doing a ton of traveling in 2020, and it doesn’t quite reach $18000. I will definitely look into the Chase Sapphire card. I’ve been hearing good things about that one. 🙂

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  3. I would say the medical is way to high at least post medicare. I have an advantage plan with a 3500 max out of pocket and have less than five hundred dollars extra spent in the last year and I have chronic health problems. so unless you have some really esoteric drugs in there. I eat out a great deal more than you do. Lunch every week and dinner every week so that 100 would be shot. I rarely spend on clothing except for replenishment and weight loss changes. I dont spend that much on travel now but Im 67 and I did and I dont like cruising. these days I prefer vactioing in one place to travel. I also have line items for hobbies and entertainment (as in entertaining others) but you may consider that your blow money

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    1. Hi Barb,
      Thanks for sharing! 🙂 It’s always interesting to hear others’ expenses. My $2500 in healthcare is full healthcare before medicare. We will be able to get Cobra through my husband’s work, and that is $1850 a month. Add in co-pays, meds, and my endocrinologist’s concierge fee (a must for me), dentists, eye doctors I think it’s reasonable to assume that rate. However, when we are on medicare, I will purchase Gap insurance, plus continue to pay my endocrinologist. I’m presently contributing the max into our HSA which will help with the medical expenses. (Better to lean higher, than lower). We LOVE cruising, but will be doing other things in our future. Hiking mountains is something we aspire to do. (Better to do that sooner rather than later, right?)

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  4. Sharon, I think your proposed budget is very realistic. I compared it to our excel spreadsheet budget and our numbers are awfully close even though we live on opposite coasts. Here’s what our monthly numbers look like this year (Federal taxes excluded).
    Healthcare: Typical year $954/month but has gone up to as high as $1537, when we have a one off such as new hearing aids (this year) or tooth implants.
    Travel: $500 Low this year because we RV’d a lot in 2019.Six 7-10 day trips so far and have already paid for upcoming 3 month Snowbird trip. This is much higher per month if we plan extended trips overseas.
    Insurance $480 Includes house, liability, vehicles, earthquake.
    Property Tax $566
    Utilities $261
    Cell/cable/internet $230
    Groceries $650- High for 2 people, because we live in one of the highest priced food areas in the country supposedly second only to NYC. Plus DH is a celiac so we pay a lot more for Gluten Free foods.
    Fuel $650 High this year because of all the RV trips.
    Household $142
    Restaurant $133
    Home/Yard maintenance/Cleaning service $427
    Vehicle Maintenance $122 (Truck, car, MH, raft trailer, lawn mower, small engines, boat)
    Charity $516
    Gifts $42
    License tabs/Memberships/Park Passes $68
    Personal Care $136 includes monthly massages
    Clothing $92
    Hobbies $50
    Monthly total $6019 low or high of $6602 (one off this year for the hearing aids)
    If you live on your proposed budget for the next 4 years, you will be very prepared understanding your actual costs before you retire; including any potential one-off budget items. Also if you plan on downsizing, you should consider doing it sooner in your 4 year plan rather than later; since you are looking at a $30,000 yearly savings. If you move next year, you could save another $90000 before you retire; that can fund a lot of future fun trips.
    KJ

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    1. Hi KJ,
      Thank you so much for sharing your retirement budget!! It makes me feel confident that we are on the right track. We would downsize sooner, but the area of housing we are interested in is too far from my husband’s commute (which is already almost an hour one way). I’m considering hiring a realtor early, however, to make sure our home is ready to sell and to be on the lookout for properties that may come up. I agree that it would be easier if we were already in the downsized house when we retire.

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  5. Hi Lara,
    Thank you so much for the info. I’m following that as well. My husband is doing okay, although we are both looking forward to our next trip in 4 days (yep, another cruise). We need a bit of a break, and are looking forward to having 7 glorious days together. 😉

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  6. Hi Lara,

    We have three retirement funds. Our largest one is about 70% stocks, the rest in cash and bonds. We plan on letting this grow over the next 14 years, so are confident it is balanced correctly, but of course we will monitor it.
    Our second retirement account is mine, and it’s the smallest. This will be the buffer if the market goes down as this is in very conservative funds.
    Our third retirement account is the one my husband has at his work. He’s been with this company 8 years, and it’s sizeable, but not huge. We hope to grow this another $250,000 over the next four years which is totally doable with our contributions and his company’s contributions. This is the account we will pull from initially. It is in a 2025 target fund.
    To be honest, my husband is the investment ‘expert’, although I intend on taking a more active roll over the next couple of years. 😉

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