Question for retirees

[Rich Konopka]

I’m coming up on retirement in the next couple of years depending on how much I can tolerate my company management 😝

In my planning I keep hearing that you will spend more or just as much.

So if you were to choose:

Same, less, more??

Thanks

[Lee DeRaud]

Could be less, more, or same...depends completely on your hobby/discretionary habits.
It's not so much that you're spending a different amount, it's that you're spending it on different stuff.

[Jim Koepke]

I’m coming up on retirement in the next couple of years depending on how much I can tolerate my company management ��

So if you were to choose:

Same, less, more??

Thanks

Do you buy lunch and coffee? If so, you will likely spend less. If you commute any distance to work, you might spend less on gas for the car.

Do you have plans to travel when you retire? This may cause you to spend more. During my first few years of retirement, things were a bit tight. All of my income streams hadn't kicked in. We used to go out for breakfast or lunch more often. Covid changed that.

There are many factors to consider, but there is some evidence to support the earlier people retire the longer they live.

One has to take into consideration what they can afford and what they are going to do.

I worked with a lot of people who didn't want to quit working because they didn't have anything else to do. My foreworker was a very nice guy. He often said he ran the numbers and he was staying at work for fifty cents an hour more than he would be making in retirement. He died before he retired.

Too many hang on because they don't know how to let go.

jtk

[Rich Engelhardt]

Overall we spend more.
It was less though when I first retired 10 years ago.

I just figured why deprive myself of stuff I want at this stage of life.

[Ken Fitzgerald]

It really depends on how and what you do after you retire. Since I don't have to dress as I did professionally, I spend less on clothes. Since I eat lunch at home most days, my out-of-pocket expenses are less. My retirement was a bit different than most people as I awoke deaf one day. For reasons of personal safety and safety to customers equipment, I couldn't continue working. Luckily, I had paid $8/month for 24 years for long term disability insurance. That's one of those things that a lot of people will tell you don't need or criticize one as being over insured. I got the total amount back in less than 1 month. Then I continued to receive my base salary until I turned age 65 and qualified for full Social Security benefits. We were scared we couldn't afford to retire. We haven't changed our lifestyle one bit. I just don't have the option of earning a little extra money by working some available overtime. The only things we have dipped into our 401K for is extras for some really nice vacations, and some things not covered by health insurance.

My plans were to retire shortly any way so awakening deaf just made us except the move. My wife who is older than me decided to retire when I did.

The financial fears were proven unfounded for us.

Good luck with your decision!

[Ron Citerone]

I would say we are spending the same excluding travel. Our travel has been somewhat limited with the pandemic, but we did a lot of road trips and avoided longer trips involving flights.

I would say the biggest question is the cost of health benefits if you have to buy them. That is our biggest expense since our mortgage is paid and we are not quite to Medicare age.

[Mike Henderson]

For most of my working life, I was worried about whether I'd have enough to retire on. So I stuck every extra dollar into savings. Now that I'm retired and can see "the end" I'm not as worried. I won't run out of money. So my wife and I have done some traveling which means that we're spending more than I used to spend.

If you have your home paid for, you can live fairly low cost - if you want (or need) to. It's up to you and what your finances are.

Mike

[Ralph Okonieski]

I am 4.9 years into retirement. The first few years we watched expenses very closely as we decided to delay social security benefits until closer to 70. We have started to increase expenses now mostly for home improvements, resembling Rich’s thoughts on spending to enjoy it now. Even with that, we budget and follow it closely. To answer your question, we started out spending less, now we are spending more, by conscious choice.

[Jim Becker]

What you "spend" post-retirement is really up to you and by that I mean what you spend above housing/utilities/food that is your "base" cost to live where you do.

For the first five years, I probably was on parity with pre-retirement but that was somewhat by design with having a "new business" for awhile as well as subsequent moving and new shop costs. The market also supported it just fine. But that also wasn't an issue because we are a two income family and Professor Dr SWMBO has still been working. That changes at the end of the Spring Semester when she is also retiring and we've been gradually reducing some expenditures...my vehicle was paid off in three years and her's is getting there, for example. Our utility costs here at the new property are much lower than at the old one. Food costs for two are a lot less than for three/four that was the case for the first couple of years of retirement. I actually do plan on reducing my income from my IRA in January or February (more likely) to cut tax liability and that shouldn't hurt too much with the increase in SS kicking in and with other costs reduced. Think of it as "rebalancing" now that the stuff we needed to do with the new house (and new shop) are nearly complete.

[Bruce Wrenn]

A few expenses won't change due to retirement, property taxes, utilities, insurance. But if you aren't old enough for Medicare, this can be a budget breaker. When I was 59, I spent a week in the hospital from an unknown virus. At the time I was self employed, and own my own insurance. BCBS of NC rewarded me for being sick by increasing my rate from $650 a month to $1350. Because I had taught school for 6.5 years, and turning 60 I could draw my state retirement which included health insurance at no cost to me. The savings on insurance for the sixty months between that date and Medicare saved me $81,000, plus I drew my retirement.

[Sam Force]

No way around it for us, retirement was a big cut in income. We are fortunate that I get 2 pensions and wife and I both on SS. Reduced our power bills by moving to a smaller home, we eat out often and take a couple vacations a year. No long term trips as wife is undergoing cancer treatments. We don't notice the reduced income as much as I expected, we buy what we need and most of what we want. I do spend more than my wife as my hobbies are expensive

[Jerry Bruette]

Wife and I are a little less than a year into retirement. So far costs haven't changed much. I do wish we had more in a Roth account though, it would give us a little more breathing room playing the ACA game.

[glenn bradley]

Beyond planned major expenses, we spend less but we are home bodies.

[roger wiegand]

I didn't have as much time to spend money before I retired; that said we're probably spending a bit less now. Basic expenses of mortgage and property taxes haven't changed, our house is now much more efficient so utilities have gone down. Our kids may finally finish their educations in the coming year, which will save some. We go out to eat less, but travel more on our own dime. (though that has been mostly on hiatus with covid). We spend a stupid amount on telephones and internet. For the first time I've started having to hire people to do maintenance tasks; DW won't let me go up ladders taller than my 8 ft step ladder anymore, for example, so we're paying gutter cleaners. The house will need painting in a couple of years, that would always have been a DIY task in the past, now it will probably be a $20K bill to pay. I'm guessing our expenses will continue to rise as we need to buy more services. We pay for a somewhat pricey medicare supplemental plan and have, so far, have had little out of pocket medical expenses beyond that premium despite a couple of major episodes.

[Jim Becker]

A few expenses won't change due to retirement, property taxes, utilities, insurance. But if you aren't old enough for Medicare, this can be a budget breaker.

I agree with this. A primary reason I was able to retire at age 60 is because Professor Dr. SWMBO's employment provides our health/dental/vision insurance and that continues until she retires at the end of this academic year. If I had to pay for insurance on the open market, retirement at 60 wouldn't have been a "good deal". While I'm currently eligible for Medicare, I'm still on The Professor's insurance so I only have Part A and don't have to pay the premium from my SS. Yet. Next summer, a decision will have to be made about how each of us cover ourselves for health care. The Professor will necessarily have to either use and pay for her available retirement coverage (same coverage as now but fully out of pocket for premiums) or use a plan off the market for a a year until she's eligible for Medicare. (She is retiring for medical reasons that I'll not go into here) I will likely fully embrace Medicare at that point next summer for my own coverage and there are bunch of decisions around that that come into play.

[Stan Calow]

Less on clothes, gas, and have all the hobbies, tools and appliances I need. More on entertainment, grandkids, and travel. About a wash.

But our plan was to not intentionally save more money while retired, but to enjoy life.

[Bill Dufour]

Once I retired I am not paying union dues nor mandated retirement. I was not under social security but that take out should stop as well.
Took a few years but now my mindset is to use that piece of stock I saved decades for a special project to come along. Also why wait to buy that special tool I need. Having the time to follow cragslist and take a short vacation to get a big machine at a good price is costly. But $600 total for an 18" planer I always wanted to upgrade too is good
Bill D

[Lawrence Duckworth]

My wife and I spend more on property taxes, food, and booze. We're thinking about getting a smaller place to live and cut back to one meal a day.

[Ron Citerone]

My wife and I spend more on property taxes, food, and booze. We're thinking about getting a smaller place to live and cut back to one meal a day.

Love it! Sounds like a plan! 😁

[Bruce Wrenn]

You will,never get over property taxes, nor will they want less than last year. There should be a law limiting property tax increases for seniors to no more percentage than SS COLA adjustment percentages.

[Lisa Starr]

I was forced into "retirement" by disability at less than 60. Since I was the earner of the larger income, it was a big hit. Fortunately, we had always lived well below our income and were accustomed to purchasing our own health insurance which is a major expense. Once I was eligible for Medicare (2 years after disability) that cut our expenses by over $800 per month. My husband is in the process of winding his business down over the next few years. Until he's able to get Medicare, he'll work at least enough to cover the business insurances, truck and his health care.

[Lee DeRaud]

You will,never get over property taxes, nor will they want less than last year. There should be a law limiting property tax increases for seniors to no more percentage than SS COLA adjustment percentages.
California has such a law, or at least one that more or less does that as a side effect. It has its quirks though.
(A deep dive into the pros and cons thereof would get this thread locked or deleted. Google "California Proposition 13".)

[Steve Demuth]

I didn't have time to spend money when I was working, so my salary went about 25% to state and Federal income tax, 25% to upkeep on the household and little farm, and 50% into savings of one form or another. We spend a little more (on travel, and on my passtimes) in absolute dollars now that I'm retired, but it's still less than our combined Social Security and pension income.

[Bill Dufour]

California has such a law, or at least one that more or less does that as a side effect. It has its quirks though.
(A deep dive into the pros and cons thereof would get this thread locked or deleted. Google "California Proposition 13".)
Prop 13 limits property tax increase to 2% a year. It resets to market value when the property is sold. Son or daughter can inherit the property with the lower tax value. A business can theoretically keep the lowered value for centuries.

[Brice Rogers]

California has such a law, or at least one that more or less does that as a side effect. It has its quirks though.
(A deep dive into the pros and cons thereof would get this thread locked or deleted. Google "California Proposition 13".)

Proposition 13 is good. But when you take out a permit for a pool, a garage, an addition, a new driveway, solar system, they re-assess your property. Also there are some other things that have stretched the 1% proposition 13 limits. It seems like it has increased wayyyyy beyond the 2% per year.

It would be nice if when you reach 65 years old that your property taxes were frozen.

Also, as people age, they consider to downsize. So, they sell a big expensive house where the taxes have been "slowed" and downsize to a smaller one and end up paying more taxes.

[Rich Konopka]

Wow!! Great responses from everyone. We have been budgeting and tracking expenses for a few years. Having no mortgage and college expenses has had a positive impact on our cash flow. Retirement will have a big impact and not sure what to expect of the unexpected.

Health insurance is the biggest issue and why I am still working. I still have a few years to Medicare but I’m thinking of Cobra when I can stretch it to 65. It is $1600 month for 2 of is. Crazy.

Our taxes will drop substantially in retirement from what they are today. Lower federal tax bracket, lower state taxes, and reduced property taxes with seniors not having to pay school taxes.

Biggest expense is healthcare.

Looking forward to traveling and woodworking.


Thanks again for sharing your experiences with retirement.

Cheers

[Lee DeRaud]

Proposition 13 is good. But when you take out a permit for a pool, a garage, an addition, a new driveway, solar system, they re-assess your property.
Only the improvement/addition is added to the assessment, although, yes, a major remodel that adds substantial square footage can be a big hit. AFAIK, things like replacing a driveway or roof do not. At the moment, solar system doesn't either: that is specifically excluded by law, at least until 2024. (An extension to the previous law was just signed in September, I'd be stunned if it doesn't get extended pretty much forever.)


Also, as people age, they consider to downsize. So, they sell a big expensive house where the taxes have been "slowed" and downsize to a smaller one and end up paying more taxes.
As the saying goes, there's an app for that, and the devil is in the details:
"Property owners of at least 55 years of age may transfer the base year value of their principal residence to a replacement principal residence. The replacement must be of equal or lesser current market value and located within the same county." (emphasis mine) I was under the impression that there is a growing number of counties who waive that 'within the same county' requirement, not sure if SD is one of them.

As with most things Prop13-related, people who use their houses primarily as investment vehicles will suffer, those who use their houses as homes will not.

[Bill Dufour]

My father was retired for 26 years. All my life He had three sets of clothes. Nice go to work, around the house, and dirty painting stuff. My Mom said that when he died he still had some dirty painting shirts that were at least 26 years old.
Bill D

[Mike Henderson]

To add what Lee said, I considered an addition to my home, and the contractor told me that only livable space was considered when the house was re-assessed because of the addition. If he was right, adding a garage would not increase your assessment.

And to further echo what Lee said, the addition to your assessment is only the market value of the addition you made to your home. The rest of the home is not re-assessed.

There were some rules about major renovations. I was told that as long as you left one wall, and didn't increase the square footage, your assessment would not change. But I've seen a bunch of major renovations recently that don't keep one wall, so I suspect that rule changed.

The problem with Prop 13 is in the commercial space. A company will create a corporation and put their facility (land and building) into the corporation. When they want to sell the facility, they sell the corporation. Since the owner did not change (the corporation still owns the facility) there is no re-assessment. So increases in assessments only apply to residential property.

Mike

[Lee DeRaud]

To add what Lee said, I considered an addition to my home, and the contractor told me that only livable space was considered when the house was re-assessed because of the addition. If he was right, adding a garage would not increase your assessment.
Not sure about that one, although the rules might have changed.

When I did my patio in 2007, the increased size of the patio itself had no effect, as that did not require a permit. The larger patio cover required a permit (since it's attached to the house), so the difference in size between the old and the new was used as a factor in determining the additional assessed value. As I recall, they just added the new area covered divided by the old area covered times the cost of the new cover. There was no attempt to assess the "market value" of the new cover.

[Rick Potter]

I retired in 1999, with 35 years in my retirement system, no SS. When I retired we had done the American Dream, by living below our means, saving a bit, and paying off our house over 30 years. We sent the kids to a small Christian college in Arkansas (Ouachita Baptist University) which cost less than sending them to a CA state college and living at home.

One thing I think has been missed here is inflation. Since I retired 25 years ago, inflation has not been a real factor in our income. In the last couple years it has shot up again, like the late 70's-early 80's. I remember getting an 11.5% cost of living adjustment one year, and a 16.5% a few years later, because we had dropped so far back in 'real ' wages. We feel very blessed we were retired through the last 20 years, not the future 20 years.

We also are fortunate to have rental property, which helps with the expenses, like helping 7 grandkids to go to college.

Short answer: We spend more.

[George Yetka]

I am far from retirement but I feel as though I will end up spending far more once I am retired. I like to shoot and work the wood as well as a few other expensive hobbies. I keep the costs at bay now by working 60+ hours a week and having 2 little kids. When the kids get older and I have nights back and when I have my days back I think Ill go through more bullets, wood, and building materials.

[Rich Engelhardt]

I retired in 2011 - debt free.
I'm now over $300k in debt.

It's the American way. ;)

We should be debt free next year or the year after next.

[Jim Becker]

Rich, COBRA is generally a very expensive solution so you'll want to also investigate what you can buy on the exchanges that is comparable to your current coverage. Just be careful that the deductible is where you want it to be (some plans have very high deductibles) and that your doctor(s) are on any plans you consider.

[Bill Dufour]

In theory you can transfer your low assessment to a different house in a different county. In fact it only work if you stay in your county or if you move to Modoc county,The only county who will allow the transfers to come into their county, in extreme north east California. County population is about 9,000 and 3,000 live in the capital and only incorporated city of Alturus. I assume you would be hard pressed to pay more for a home in that county then anywhere else in the state. Even after taking your low assessment with you.
Bill D

[Doug Garson]

In BC we have a property tax deferment plan which allows qualified residents 55 and older to defer paying property taxes. The plan is basically a low interest loan which you use to pay your property taxes which you pay off with interest when you chose or when you sell your home.
Getting back to the OP's question, the other challenge in retirement planning other than your spending, is how long will you live? Unfortunately that is a question few if any can answer so the safe assumption is to assume long. Better to die with a sizeable estate to pass on or donate to charity than to run out of money and live your final years in poverty.

[Lee DeRaud]

In theory you can transfer your low assessment to a different house in a different county. In fact it only work if you stay in your county or if you move to Modoc county in extreme north east california. County population is about 9,000 and 3,00 live in the capital and only incorporated city of Alturus. i assume you would be hard pressed to pay more for a home in that county then anywhere else in the state. Even after taking your low assessment with you.
Bill D
Not sure where you're getting that information, but you might want to read this: https://sfassessor.org/Prop19

[Rich Konopka]

Rich, COBRA is generally a very expensive solution so you'll want to also investigate what you can buy on the exchanges that is comparable to your current coverage. Just be careful that the deductible is where you want it to be (some plans have very high deductibles) and that your doctor(s) are on any plans you consider.

We looked at the exchanges and the plans offered in Georgia are just as expensive or real crappy.

[Jim Becker]

We looked at the exchanges and the plans offered in Georgia are just as expensive or real crappy.
Yea, sadly, health insurance is state-based and profit focused. Any comments beyond that gets into prohibited by the TOS things... ;)

[Bill Dufour]

Not sure where you're getting that information, but you might want to read this: https://sfassessor.org/Prop19
That is new law to me. We looked into transfer of the assessment after my mom died about three years ago. At that time only Modoc county would let folks bring in their low assessments. AFAIK you could do it within one county with no problems.
Bill D

[Lee DeRaud]

That is new law to me. We looked into transfer of the assessment after my mom died about three years ago. At that time only Modoc county would let folks bring in their low assessments. AFAIK you could do it within one county with no problems.
That was Prop19 from the 2020 election. Prior to that, IIRC, there were ten counties that allowed the transfer...hang on, found it:

"As of November 7, 2018, the following ten counties in California have an ordinance enabling the intercounty base year value transfer:
Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, Ventura"
(from https://www.boe.ca.gov/proptaxes/prop60-90_55over.htm )

Except for Tuolumne, all were either SoCal or Bay Area, which I suspect were of no interest to you. (Oddly, Modoc was not on the list.)

[Rich Konopka]

Yea, sadly, health insurance is state-based and profit focused. Any comments beyond that gets into prohibited by the TOS things... ;)

Biting my tongue and not going there.