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!)
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
**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!