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Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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We are expecting several "phantom increases" not related to taxes. First, we have enough equity in our home to pay cash in a less expensive area about 70 miles away, where the property taxes are also far less. We currently have two car payments, both will be paid off when we retire and still have only about 50,000 miles each, so no car payments. Naturally, we will also stop contributing to the 401K and 457s, reducing our expenses. We plan to work to full retirement age (66) and maybe longer, and will both have pensions as well as SS. Based on estimates (3-5 years from now) we could potentially end up with more spendable income than now, with only the minimum distribution from the 401/457.
I used "phantom" in the sense that the increased real income (net) appeared to come out of nowhere, as in "I make less than I did, and my living expenses have not changed, but I have $500 a month more in my checking account!", not in the sense that the income appeared to be there but really is not there. I can see where that could be confusing. Like people that count on the mortgage tax break to allow them to afford their home. Not a smart way to buy a house as that deduction may easily be outclassed by the increased unanticipated costs of ownership. In that case, the anticipated or calculated cost reduction disappeared like a phantom.
That's the correct way to look at it. But I wondered how many underestimated the amount or didnt account for all deductions, or if because of other increases its a moot point.
My summary numbers are in red below. The rest is just to emphasize that spending is very individual and a function of where you live, your health, your entertainment expenses, and your current situation (own house?).
2015 numbers - spending as % of pension and SS income Taxes federal quarterly -4.96% Federal Income Tax withheld -6.82% Estimated state sales tax (Note these are still embedded in the spending below) -2.22% Total taxes (without property tax) -14.01%
Petsmart and petco -0.76% Stuff purchased -2.55% Amazon stuff purchased -3.62% Total stuff -6.93%
Insurance (Car house umbrella earthquake) -2.33% Propery tax -3.36% Yardwork -1.09% House Maintenance -4.38% Car Maintenance (and drivers licence renewals) -0.44% Gasoline -0.25% Total house and car -11.85%
Comcast -2.46% Netflix -0.14% Phones -0.28% Utilities (minus comcast and phone) -3.98% Total Utilities -6.85%
Groceries -13.50% Restaurants -4.11% ATM (mostly spent for food) -0.30% Total food -17.91%
Medical and Dental Premiums (including Medicare) -12.65% Prescription medicine -2.66% Rite Aid, therapy, etc. -1.82% Total medical (also has some non-medical rite-aid in it) -17.13%
Spending as % retirement SS & pensions -72.46% Spending as % pre-retirement wage income -37% One SS check deferred to age 70 with spousal benefit on-going
That is what I actually spent in 2015 (no budget). For the 1st 5 years we have had net savings each year averaging about 18% of retirement income per year. First couple of years cost the most since I moved across country leaving household goods, cars, and stuff behind. We have not spent any of our 401k type money but have paid taxes on some of it. Our taxes will increase substantially this year as my husband goes into RMD. We have no LTC insurance so savings will need to cover it, if needed. We also have no children.
Anyway, the answer to the original question is that I spend less than 40% of my pre-retirement income. This spending is not really different from what I actually spent in the last fifteen prior to retirement.
That's the correct way to look at it. But I wondered how many underestimated the amount or didnt account for all deductions, or if because of other increases its a moot point.
It is simple balance sheet stuff. Some things generate more income and others cut expenses . While both improve cash flow and appear similar they are different.
Cutting expenses has a bottom , after which no more expenses can be cut. If expenses continue to rise there is nothing more you cut .Owning vs is renting is an example of cutting expenses.
Additional income adds to the revenue side and in theory has no limit.
That is why stocks get hammered when earnings are good but revenues miss. Profits can come from cost cutting only to a point . But income increasing can have the sky the limit
To heck with "wishes and dream lists". We live in our own time and space now, and had the good sense to move to a state with lower COL. That has saved us a bundle. Property taxes before the move were $4K+ and now they are just shy of $800.
We both by-passed Medicare as a waste of money and time. I don't know why so many age 65ers think that because they are eligible, they "must" sign up. It isn't mandatory. You may be able to get a better deal elsewhere, and we have.
Children have "wishes and dream lists". Retirees have good times while dealing with reality.
Interesting, I thought people can't wait to get Medicare. How do you manage to find it cheaper than $104 a month. Do you mean you don't pay for part B? Because part A is free if you paid into the system. Am I wrong?
We both by-passed Medicare as a waste of money and time. I don't know why so many age 65ers think that because they are eligible, they "must" sign up. It isn't mandatory. You may be able to get a better deal elsewhere, and we have.
I don't think you can opt out of part A, but what kind of private insurance do you have (unless you are still working and have ins. through your employer) that would not require you to get part B?
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