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I'm 49, and hoping to retire at age 62 (or sooner). I'm trying to determine what my expenses will be when I retire, and how much money I'll need to be able to pay the bills. I hope by doing this now, I'll be better able to adjust my savings rate to make up for any future shortfalls.
I've come up with the monthly budget below, which is based on a few assumptions. The main assumption being that I sell my house here, and buy a condo in Florida with the equity I've built up (currently about $150k).
Another assumption is that Social Security will still be around, and my pensions will actually pay out as expected.
Assumption #3 is that my 401k does not tank before I begin taking money out, and I'll be able to pull out 4% yearly.
I'm planning on sharing some expenses with my partner, but I'd like to create a budget based on my income alone (we can't legally marry, so we don't have survivor benefits).
So, take a look at the monthly expenses I've come up with, and tell me if you see anything that is missing, way off, or just doesn't seem right. I'm hoping the current retirees will be able to spot things that I haven't thought of, especially related to medicare and health care.
I realize that everyone's expenses are different, and no one can determine what's important to someone else, but I'm hoping that people who are actually living in retirement will be able to see if I'm on a viable track, or if i need to rethink my plan.
The income numbers are based on current balances and estimates. The expense numbers are based on current bills and some guesswork.
Income
Pension #1 $365.00
Pension #2 $650.00
401k $600.00
Social Security $1,575.00
Tot Income $3,190.00
Expenses
Income Taxes $350.00
Condo Fee $400.00
Property taxes $400.00
Condo insurance $50.00
Medicare parts A and D $150.00
Medicare Supplemental $150.00
Med Copays $80.00
Cable/Intrnt/Phone $150.00
Cell Phone $77.00
Car Insurance $85.00
Utilities $100.00
Savings $400.00
Gas $80.00
Groceries/wine $400.00
Credit Card $250.00
Miscellaneous $50.00
Tot Expenses 3,172.00
Well then try living on that budget for a year and exclude those items you will not have after retired.
See if your budget is realistic.
I did that and discovered I was off and actually needed more money.
That second year of experimenting worked though.
Then I stuck to that and banked the extra money.
That gave me the confidence to move forward and take an early retirement with a reduced pension.
To me..time was worth more then the money and I was able to afford the time so I took it.
It's good to plan ahead, but when I was your age I planned to retire at 62. Well stuff happens (like the last four years) and now I am looking at 67. Plus I hope to work very part time. Also, I no longer plan to live off my investments (due to losses), but just have them in reserve. Luckily, my pension income will be somewhat higher than I planned on, because I moved and got a new job 10 years ago, which will provide me with a second pension. So, I and the wife will be fine
I do notice that you plan to save $400 a month, so that's not really an expense. And why pay for a land line and a cell phone-unless you're planning to live where there is no service. So in other words, it looks like you'll be OK if...
Take a personal finance class at your local community college. They will likely go through the whole planning for retirement routine and most text book publishers have online models for you to complete. One proven fact is that people often need just as much in retirement income as they did prior. We tend to spend more discretionary income in retirement (travel, hobbies, dinners, entertainment). I just retired and my wife just spent $1000 on season tickets to the Tucson Symphony Orchestra - I can assure you that's an expense we never had before and now she's looking at the concert schedule for the Fox Theater
In twelve years, I doubt $80 will fill your car even one time, a good bottle of wine alone will be $100, Medicare supplemental will skyrocket under the ACA unfortunately unless you go HMO (if that's even still allowed). That's a heck of a condo fee, must be a really nice place but what about special assessments and increases in that fee?
I did a spreadsheet for 4 years so I know exactly how much I spend a month and a year. So I know what I need to net in order to keep my current standard of living. Add to it Medicare costs and inflation. Then I had to figure what I needed to gross in order to get to my net. And, yes, it wasn't enough without taking money about of the 401k. But I plan to move where rents aren't as high as they are here.
One of things that adds up is just plain "cash"...you'd be surprised how much you can spend (or save) by looking at how much cash you spend in a month. You're gas expense seems low...and I would budget for travel (you might want to escape Florida once in a while). What happens when you have to buy a new car, could you make car payments? You don't need to answer in specifics but these are things to think about.
I would also suggest getting rid of your land line phone and just have a cell. Nobody needs a land line phone anymore. Keep in mind, that 12 years from now, who knows what kind of financial world we will live in. If you work to 66, you will earn alot more in SS. Just my 2 cents..
Well a 400 a month condo fee might be high, unless you want ocean front then that's to low
Florida insurance will be more than 50.00 a month
And a lot of communities include Cable, phone and Internet with the monthly condo fee
I'm 49, and hoping to retire at age 62 (or sooner). I'm trying to determine what my expenses will be when I retire, and how much money I'll need to be able to pay the bills. I hope by doing this now, I'll be better able to adjust my savings rate to make up for any future shortfalls.
I've come up with the monthly budget below, which is based on a few assumptions. The main assumption being that I sell my house here, and buy a condo in Florida with the equity I've built up (currently about $150k).
Another assumption is that Social Security will still be around, and my pensions will actually pay out as expected.
Assumption #3 is that my 401k does not tank before I begin taking money out, and I'll be able to pull out 4% yearly.
I'm planning on sharing some expenses with my partner, but I'd like to create a budget based on my income alone (we can't legally marry, so we don't have survivor benefits).
So, take a look at the monthly expenses I've come up with, and tell me if you see anything that is missing, way off, or just doesn't seem right. I'm hoping the current retirees will be able to spot things that I haven't thought of, especially related to medicare and health care.
I realize that everyone's expenses are different, and no one can determine what's important to someone else, but I'm hoping that people who are actually living in retirement will be able to see if I'm on a viable track, or if i need to rethink my plan.
The income numbers are based on current balances and estimates. The expense numbers are based on current bills and some guesswork.
Income
Pension #1 $365.00
Pension #2 $650.00
401k $600.00
Social Security $1,575.00
Tot Income $3,190.00
Expenses
Income Taxes $350.00
Condo Fee $400.00
Property taxes $400.00
Condo insurance $50.00
Medicare parts A and D $150.00
Medicare Supplemental $150.00
Med Copays $80.00
Cable/Intrnt/Phone $150.00
Cell Phone $77.00
Car Insurance $85.00
Utilities $100.00
Savings $400.00
Gas $80.00
Groceries/wine $400.00
Credit Card $250.00
Miscellaneous $50.00
Tot Expenses 3,172.00
Extra $18.00
On the income side, are the pension COLAed? Is SSA current or future? Let's assume they are all in today's $, so your expense are what you are paying now.
On the expense side, I think you need do more HW. What is the savings? Do you still need them when you draw down on your portfolio? What is credit card? It is just duplicate of the stuff you paid?
You budget for tax seems too high.
Gas seems not enough. Where is car maintenance?
Groceries for 2 people seems low. Do you ever eat out? Travel?
Thanks everyone for the replies.
The pensions are not adjusted for Cost of Living. I will need to figure out how inflation will eat into that. The $400 condo fee is a number I got from a community in Ft Myers that I was looking at. It may include cable, so I should check that out too. The savings will hopefully be used for travel, but who knows.
And I guess the land line can go... no need for that and a cell.
I think I need to add more $$ for car and entertainment expenses...
Thanks everyone for the replies.
The pensions are not adjusted for Cost of Living. I will need to figure out how inflation will eat into that. The $400 condo fee is a number I got from a community in Ft Myers that I was looking at. It may include cable, so I should check that out too. The savings will hopefully be used for travel, but who knows.
And I guess the land line can go... no need for that and a cell.
I think I need to add more $$ for car and entertainment expenses...
Figure on 40 to 50 cents a mile for actual car costs: gas, maintenance and repairs. That's today.
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