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Old 02-19-2015, 02:48 PM
 
Location: Somewhere in USA
583 posts, read 496,421 times
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I want to retire early, like around 55 or so...I do not want to work forever or continue to work after retiring age. I know when you're retired...every day feels like Saturday and I will work towards this. In the mean time, I am saving and investing heavily...but how much is enough varies by individuals. My question is, during your retirement, do you budget your spending? How much per month do you spend...how much do you extract from your pension/401k and etc... Do you also think you will outlive the hard earned $ you saved throughout your life?

I am curious...as I 33 and by no means retiring any time soon but would like to know how others are living by this day in age. I don't want to know how much you have, all I'm curious is how you budget to live off of the $ you have...whether in large or small.

thanks for sharing!
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Old 02-19-2015, 03:45 PM
 
71,584 posts, read 71,751,865 times
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very simple method i used since we are retiring in july.

i added up all our non descretionary expenses , those are the ones that must be paid with no flexability in the amount.

i multiplyed that by 2 and gave us a nice amount of descretionary spending .

i then subtracted social security and pensions and what was left had to be generated by our investments.

i multiplyed that times 25 as a ball park amount i wanted in amount for the portfolio size.

once i had that amount i used a good retirement calculator like firecalc and fidelity rip to see what kind of success the allocations i was comfortable with could provide with an above 90% success rate.

so here are some hypothetical numbers.

all the non descretionary spending comes to 30k . i multiply x2 and set a 60k budget.

social security comes to 20k so 40k has to come from investments.

40,000 x 25 = 1,000,000 bucks . so i need to generate a 4% withdrawal rate inflation adjusted .

a check of the safe withdrawal rate chart based on the updated trinity study says a 50/50 mix of equities and bonds should do the trick. i can adjust dynamically up or down once things are under way.


Last edited by mathjak107; 02-19-2015 at 03:53 PM..
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Old 02-19-2015, 04:24 PM
 
Location: Los Angeles area
14,018 posts, read 17,737,509 times
Reputation: 32304
I often take the road less travelled, so this may not be very helpful to the original poster, but he asked and here is my answer:

I am 70 and I have NEVER in my life "budgeted" in the sense of having a list of categories of monthly expenditures. However, I am aware of my monthly TOTAL expenditures (discretionary and non-discretionary together) over time and also of my average monthly income. Since the former has always been less than the latter, I have never found it necessary to get into greater detail.

Now that probably makes it sound like I've been used to having a rather high monthly income. But the strange part is that no, I have had a lifetime very modest income as a high school teacher who sometimes worked moonlighting jobs. It also probably makes it sound like I've never done much in the way of hobbies, travel, etc. Also not true.

The seeming contradiction is resolved by the fact that I have always kept my spending on basics to a minimum. That is, my housing, clothing, food, and car expenses were (and are) marked by frugality - not through discipline (although I guess one could call it that) but through natural inclination. I have no interest in designer clothes, wine costing more than $10 a bottle, or cars at the level or BMW or Mercedes or similar.

The same pattern continued after I retired from full-time work almost ten years ago. My pension plus part-time work (the latter just screwing around at stuff I enjoy, not any serious attempt to earn money) totaled the same or a little better than the (small) amount I made before retiring. My expenses continued also at more or less the same level - I still travelled some, but in a more or less frugal manner as always. I started splurging a bit on the best available seats for live classical music concerts, but I only go once or twice a month, so the total over a year's time is not at all outrageous.

Still no "budgeting", and still income exceeds expenditures - not every single month, but on the average.

I wouldn't be surprised if most people think I'm crazy. But my method has worked for me, and has given me a lifetime of total financial security and comfort, with no stress or agonizing about money.
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Old 02-19-2015, 04:48 PM
 
71,584 posts, read 71,751,865 times
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actually i think you are 100% correct.

i think once the ship sales you get your arms around everything and have a feel for what you need and just kind of naturally budget without really budgeting.

it is no different than what we do now working. we really do not keep tabs but somehow we know what we should or shouldn't do.

it is like throwing a ball. it is a feel you aquire , you know how high to arc it ,you know fast and hard to throw it. you can't describe that to someone who never did it. it is a feel they will develop on their own.

the budgets and planning are only to set an initial lifestyle at the gate.
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Old 02-19-2015, 05:23 PM
 
48,516 posts, read 83,943,432 times
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Pretty much as Mathguy points out. I have been retired since 2000. Even with the recession; we am wealthier than when I retired. We do budget;just as we did when working. The reason was so that we knew exactly what we spent and where. Savings and investment were all part of the budget and still are. My wife did cost accounting; so its a natural for her. You can go to her computer and see our financial state of where we have been and where we are. As always to each his/her own tho.
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Old 02-20-2015, 06:57 AM
 
Location: Somewhere in USA
583 posts, read 496,421 times
Reputation: 532
Very helpful replies...I appreciate it!
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Old 02-20-2015, 07:26 AM
 
Location: Central Massachusetts
4,800 posts, read 4,847,776 times
Reputation: 6379
Quote:
Originally Posted by ameridreamNoT View Post
I want to retire early, like around 55 or so...I do not want to work forever or continue to work after retiring age. I know when you're retired...every day feels like Saturday and I will work towards this. In the mean time, I am saving and investing heavily...but how much is enough varies by individuals. My question is, during your retirement, do you budget your spending? How much per month do you spend...how much do you extract from your pension/401k and etc... Do you also think you will outlive the hard earned $ you saved throughout your life?

I am curious...as I 33 and by no means retiring any time soon but would like to know how others are living by this day in age. I don't want to know how much you have, all I'm curious is how you budget to live off of the $ you have...whether in large or small.

thanks for sharing!
ameridreamNoT

First it is awesome that you are taking an interest in your future planning. You will get great advice here. My two cents here will hopefully give you a bit of understanding of what you face. You are 33 now and you state you want to retire at 55. That is early and so you will need to plan and save accordingly. Your current and future income is going to be key and critical. The more you make and save the more you will have to retire on. Retirement also means different things to different people. Some it is just a change in where and how much they work and others it is that they are not earning any income at all.

So what you will want to do if you insist on focusing on your early retirement is to not spend a dime more then is necessary. If your only focus is on early retirement then you will miss out on a lot of life.

My real suggestion is to enjoy life and not focus primarily on early retirement. Do not overspend but do not go through life without enjoying it either. Save as much as you can using tried and proven means (IRA, Roth IRA, 401k/403b Roth 401k/403b).

I will say one last thing. 55 is a long time from now for you and you might change your mind when you get to that age.
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Old 02-20-2015, 07:40 AM
 
Location: Maryland
282 posts, read 305,964 times
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Quote:
Originally Posted by ameridreamNoT View Post
I want to retire early, like around 55 or so...
How much per month do you spend...
Good advice posted so far.
As far as spending, I budget to spend the same amount as when I was working. I may spend it slightly differently, but the total is expected to be the same. That is the life style I am used to and don't plan to change. This is the after tax net income. Remember you won't pay 6.2% social security payroll tax, 1.45% medicare payroll tax, and you won't have to "save" 10%-20% into a 401k/IRA/investments after retiring. So the gross (before tax) income may only need to be ~80% of your working salary/income. For many, retiring before collecting social security benefits can be tough.

If you have a home mortgage before retirement and plan to have the mortgage paid off when you retire, you can adjust for less spending. But remember you will still have property tax, home insurance, maintenance/repairs, etc.
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Old 02-20-2015, 08:18 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
29,806 posts, read 54,455,776 times
Reputation: 31111
Living off of our retirement savings would be risky, since that money is most likely going to grow slower than inflation. While we have a few more years to work, the combination of SS and our two pensions will result in almost what we take home now, and we plan to sell the big empty nest and use the equity to pay cash in a lower cost area. The investment/savings are meant as the "gravy" for things like travel, unexpected medical expense, home repairs.
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Old 02-22-2015, 05:04 AM
 
Location: Colorado Springs
4,840 posts, read 4,956,944 times
Reputation: 17309
If you have been taxed at the maximum Social Security "contribution" for 35 years of employment you ought to consider Social Security as your base retirement income. The current maximum SS payout at a full retirement age of 66 is $2663 per month. The spousal benefit is one half that amount.

However, if you initiate and then suspend SS at 66, your spouse can collect her monthly benefit of $1332 [this does not grow by further waiting] even though you are delaying yours. At 70, your benefit grows to $3515 so your combined income from just SS is $4847 or $58,164 per year.

Now, if you consider that the average family income in the USA is about $55K, living on $58K should be doable, especially if you have a paid off house and no debt.

You can then use your retirement savings for travel.
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