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Read any article on retirement planning and there will be something about the expenses that go away upon retirement.
Usually the top two are no more mortgage payment or saving for retirement followed by commuting and other work related costs, less driving hence less gasoline, less spent on clothes. Some articles mention no longer paying life insurance premiums, less dining out and fewer subscriptions.
Some of these may be significant and others not so much. Certainly if a mortgage is paid off at retirement that is a big reduction and no doubt most will see a drop in their savings rate especially if saving was a significant percentage of income.
On the negative side we are told we may see health care spending increases, more travel spending, higher utility bills because you are home more, home maintenance because you can’t do as much yourself and support for children and grandchildren.
My personal experience was no significant overall change in spending upon retirement because our mortgage was finished years before, our health insurance premiums increased significantly, I had no commuting costs, we wore casual clothes at work the last few years. Our travel costs increased. My payroll saving rate in the 401k was modest and is nearly the same now as a percentage of income while spending on family increased significantly. We eat out more.
So, overall what has been your experience or what does your spreadsheet predict will happen? 😉
Noticeable decrease in spending/expenses, about the same or increased spending – including discretionary spending?
As a single guy, I had lots of income and assets while working, but I was too busy at work to spend it. So I saved more than many people do.
But when I retired, I had even more assets and income, and inherited some money. But I also had more time to develop hobbies and interests that take a substantial amount of money. And of course, prices are now much higher for basic living expenses. So I spend considerably more than I did while working, and could spend even more if I wanted to.
I expect my expenses to remain fairly stable, I might relocate to a state that won’t tax IRA withdrawals as that could reduce expenses in an appreciable way.
Changing from savings to spending is likely the biggest impact, savings is a high percent of our monthly income.
We retired just over 2 years ago, so I’m beginning to see how accurate my guess on our spending would be. Although some expenditures went up or down, the overall is pretty close to what we used spend while working. Go figure, current behavior is the best predictor of future behavior. This works for us since we had planned for such case.
Sounds good to me.
My spending has increased significantly. I expected and planned for the increase. I now take 3 international trips each year. I do more socializing that involves expenditures. These increases were planned. My household expenses have not changed. I have not needed to take any funds from my IRAs or taxable account, RMD start next year. I am no longer accumulating financial assets, that is very different from my career years. After being a life-long saver, I adjusted to not saving money. Enough is enough. My financial future does not need additional resources. I am enjoying retirement.
I’m pretty clear on how this is going to look for me. I’ll have more take-home income because I was paying my (involuntary) share of my pension contribution and my (voluntary) contributions to my 403B and 457 accounts, plus my Social Security and Medicare contributions. We’re paying more for health insurance because of IRMAA, despite a supplement from our retirement system (CalPERS).
We live two miles from campus, so my commuting costs were negligible, and I didn’t go to campus everyday, anyway. We eat at home mostly except for a regular Saturday lunch on the patio of our favorite Mexican place. I’ve never been much for spending on clothes, etc., and I expect to spend even less as a retiree.
We do have travel plans, but except for the pause on that during COVID, we’ve been traveling quite a bit over the past ten years—my schedule as a professor has breaks, and my husband works remotely, and we agreed not to postpone travel until after retirement.
So at this point I don’t anticipate many surprises. I pretty much did that work last year when deciding on a retirement date.
Since retiring three years ago, my core expenses — which do not include taxes or charity — have increased 36%. This is due to insurance premiums not previously required (health, dental, IRMAA), increases in existing insurance premiums, and general inflation (food, utilities, etc.). Taxes are about the same as I have income from tax deferred sources and had worked half-time anyway for a few years before retirement. Major travel, renovations, and acquisitions hold little interest to me, and the costs of my hobbies are modest, so discretionary spending has also remained similar. Overall, I am not surprised by the new costs as I was quite thorough in my projections and retirement planning.
Just for fun I went to Quicken to see what I spent in 2002, my first full year of retirement and compared that to 2000 my last full year of work. 2001 was a mixed year so no good data. Anyway, in 2000 we had been really saving big time so when I looked at expenses there wasn’t really much difference once you took out the work related and income tax differences. In 2000 we had saved about 50% of our net, so in 2002 when we had no salary, we weren’t saving anything but our reduced income, then mainly investment income, still covered our expenses.
We have a few years to go, but running the numbers in Maxifi software tells me our discretionary spending amount could be a number that sounds ridiculous to me, in a good way.
Some expenses will drop, for sure. We may just sell our house and slow travel for a few years, renting a house/apartment in different places and just enjoying the tourist life. We have European passports, so we have options.