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August 29, 2016


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Good points! Probably the biggest reason folks worry about running out of money is because with more free time, they are more likely to buy stuff, go on trips, etc. If you're already disciplined about how you handle spending money, then you shouldn't have a problem. But if not, it can be quite worrisome.

For me personally anyway I find the list of reasons costs will go down to be mostly wrong.

* Commuting is true.
* Costuming - perhaps a bit, but you still have to wear clothes. Maybe a slight improvement.
* Meals - still have to eat, might be slightly cheaper but free time will likely increase the desire to eat at nicer places more often. Currently between work, real estate and kids, we eat out and go out rarely.

So those three are someone between truly and barely true. From there it goes from slight savings to everything actually being likely 180 degrees incorrect.

* Decompression - No way. I buy nothing to decompress. I will likely buy things to keep me occupied in retirement. This will be a cost not a savings.
* Escape Entertainment - Also no way. I don't do this either, but will definitely want to increase my entertainment spending in retirement.
* Vacations and expensive play things - Seriously, this is starting to sound like the reasons costs will go up in retirement. Same thing here. I don't do this much now. It will increase in retirement.
* Job-related illness - What is that? I haven't taken a sick day in a decade and rarely go to the doctor. Illness and medical costs are a huge increasing expense as we age.
* Hired help - don't have any. Might want some when I am older and focused on leisure.
* Job enhancement costs - I don't spend anything on that either.

There is only 1 major category that I can think of that will drastically reduce my costs in retirement or at least in later retirement. Kids will be on their own and they are the single biggest cost I have. But as for this list most of it rings extremely hollow at least to my current lifestyle.

As to income taxes, if one has considerably lower income then this would be true. I don't expect to do that and increasing tax rates have already hit me the last couple years with higher state income tax rates, higher capital gains rates, and higher medicare tax rates due to obamacare increasing the rate and taxing unearned income which was previously not taxed for medicare. If income is low in retirement then tax should go down. My projections show I will pay more tax and higher rates in retirement than I have most of my working life and it already started the last couple years. I also expect tax rates in 2030 to be worse than they are today.

Reasons costs may go up:

1. Medical
2. Travel and Leisure
3. Increasing tax rates on those who have to help those who don't and deal with our exploding debt and deficit.
4. Inflation

When I put this list against the list of reasons costs will go down, for me this list dwarfs the list of cost reductions. But again, if they put kids on the list of reductions then I think it balances. Kids are the only real major reduction in costs for me in retirement.

These are all good points. I've estimated a pre-retirement budget based off eight years or so of Quicken files. The big expense items like you, are the savings, if you can call that an expense, and taxes. I'm also still in the process of paying off the house, but that should be gone by retirement time.

The big wildcard for me is figuring out how much my food and utilities will go down once the kids are out of the house. For that one, I'm just going to have to wait and see, I suppose. Travel will go up, but when you can flex your schedule to non-peak times of the week and the year, it should be relatively manageable.

I totally agree with Apex, a few posts ago.
You make it seem like retirement is like suspended antimation.
The clothing expense may go down, but that's about it. Retirement is not static. It's living, breathing and costly.
Medical expenses offset any reduction in other expenses.
Flying is not an accomplishment. It's an activity. Meaning: retirement is expensive. Not a leisure time activity.

I am not in retirement, but I feel that the 80% of the pre-retirement number is just TOO HIGH. People are saying that they are spending 60% to 90% with the average out there saying it is 80%. I really really really do NOT think so.

I think the number of close to 50% of the pre-retirement expenses.

We spend a pretty penny today (minus mortgage), although in retirement, we should go down 50% from what we are spending today. In my case, the kids are out of the house, and they are now out of the University also. So, that means, it is down to where it should be, but we both are working right now.

So, taking it a few years into the future, and I am expecting it go down to 50%, since we will downsize the home also. Keep in mind that I am keeping mortgage (non-existant) out of this equation since that throws off ALL computations.

Bottom line is less expenses in Commuting, Clothing, Car, Eating Out, Socializing with Work-Friends, Gifts for Work-Friends, Expensive Vacationing, and other Social Outings due to Work-obligations. I am expecting that what increases is utilities, more socializing, eating at restaurants, vacationing, coffee-outings, home-improvements/upgrades etc.

I agree, that I do not have any decompression expenses but even if others have it, it should not be a big ticket item (I think).

So, I am sticking to the 50% number......

Four years into retirement and I suggest costs do not decrease dramatically. In addition I had a job that provided car, phone and computer, all of with I had to replace. Not complaining but recommend a higher budget that in your mind you think it will be. Dining with friends, medical and dental and travel and contributions to the Grand kids 529 will sunprise you

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