Pre-Post retirement Budgeting

[Z Barebow]

Since the subject of budgeting is discussed, (I did not want to hijack hunting budget thread) what app/tool would be a good choice leading up to (and in) retirement?

Background. I/we currently do NOT have a budget. Wife is retired (collecting SS), I am 6-8 years from retirement. (Yes she is a cougar!) Kids are out of the house, mortgage will be paid off in 4 years. And one vehicle payment. I have always been the major breadwinner. (And my job adequately compensates me)

My plan is to identify all expenses (and income) for a 2+ year time period. Biggest fear is "running out of money". Our retirement holdings are currently in decent shape. (Per financial "guy") With 6-8 years of additional contributions and growth, I "think" we will be fine. But I would like to KNOW that we are fine. (And only way to do this, IMHO is to start tracking current expenses.

Thoughts?

 

[cnelk]

There’s no way to know what inflation will do. That’s the biggest unknown.

Two years before I retired, I knew what my pension was going to be so I started ‘living’ on that amount, and saved the remainder. Kind of a trial run.

Once I retired, I started my handyman/carpentry gig - which was always the plan.

Man, so glad I did because inflation has taken a bite out the original household budget.

 

[timberland]

There’s no way to know what inflation will do. That’s the biggest unknown.

Two years before I retired, I knew what my pension was going to be so I started ‘living’ on that amount, and saved the remainder. Kind of a trial run.

Once I retired, I started my handyman/carpentry gig - which was always the plan.

Man, so glad I did because inflation has taken a bite out the original household budget.

I love that idea of living off your expected budget before you HAVE to. that should be taught to everyone! all the retirement calculators should give your monthly retirement income projection

 

[ZDR]

For a detailed monthly budget, an excel spreadsheet is hard to beat. I built one with every spending category broken down into line items and it proved useful for my first year of retirement. PM me your email address and I’ll send you the template.

 

[MattB]

Prior to retiring, I tried to put everything I could on a credit card for a couple of months, then downloaded and categorized my expenditures. That provided a useful baseline for monthly expenses. Then we just had to figure out the periodic expenses (car/house insurance premiums, property taxes, car registration, hunting application fees, vacations, etc.).

One thing we figured out is we way under-estimated the random stuff that comes out of nowhere (e.g. vet bills, car maintenance/repairs), so it is good to have a catch-all to estimate that.

 

[cnelk]

An Excel budget is a must. Even when not retired.

After I got used to what my budget actually was, I ‘pay myself’ first, then pay all my monthly required expenses, whatever is left is the disposable income for the rest of the month.

I’ve gotten paid once a month for over 30 years and wouldn’t have it any other way.

 

[thegrouse]

I use a spreadsheet. I have tracked my spending for years and know how much I spend in what category. I also keep a "retirement" spreadsheet. This I estimate based on my current spending and what I will not have in retirement such as 3 iPhones on a plan, 2 teen drivers and so on. I am confident of how much money it will take to live the life I want. Of course a nursing home or runaway inflation can eat up any plan.

 

[rayporter]

the first few years after you retire are vital as well. i knew a couple fellas that spent too much in the beginning and were hurting.

stick to the budget!

 

[Lee_R]

Fina

Since the subject of budgeting is discussed, (I did not want to hijack hunting budget thread) what app/tool would be a good choice leading up to (and in) retirement?

Background. I/we currently do NOT have a budget. Wife is retired (collecting SS), I am 6-8 years from retirement. (Yes she is a cougar!) Kids are out of the house, mortgage will be paid off in 4 years. And one vehicle payment. I have always been the major breadwinner. (And my job adequately compensates me)

My plan is to identify all expenses (and income) for a 2+ year time period. Biggest fear is "running out of money". Our retirement holdings are currently in decent shape. (Per financial "guy") With 6-8 years of additional contributions and growth, I "think" we will be fine. But I would like to KNOW that we are fine. (And only way to do this, IMHO is to start tracking current expenses.

Thoughts?

Financial advisor here. If you've got an advisor, have them run a Money Guide Pro or eMoney plan for you. You can run best/worst case scenarios for the markets, inflation, needs for long term care, etc. The low cost online brokers (fidelity, vanguard, schwab) should have viable options for you too. They'll be able to run Monte Carlo simulations to give you probabilities of success and will likely find things you've not thought of. Feel free to pm me if you have any questions.

 

[Jason Snyder]

Fina

Financial advisor here. If you've got an advisor, have them run a Money Guide Pro or eMoney plan for you. You can run best/worst case scenarios for the markets, inflation, needs for long term care, etc. The low cost online brokers (fidelity, vanguard, schwab) should have viable options for you too. They'll be able to run Monte Carlo simulations to give you probabilities of success and will likely find things you've not thought of. Feel free to pm me if you have any questions.

We just had this done last fall.

 

[thegrouse]

I like to use firecalc.com It covers every scenario of the stock market's history and allows you to tweak many items.

 

[magtech]

House insurance
Car insurance
Food budget
Animal spending ( if you have)
Entertainment
Travel
Family events
Boat costs
Rainy day fun
Cash side fund
Gas spending
Auto repair budget
House improvement budget
Health care spending
Personal goal saving ( hunting dreams etc)
Inflation appropriation budget
Lawyer spending ( will trust etc)
Personal finance person budget
End of life item replacements ( old furnishing, tools etc)
Gambling spending ( if you do it)
Taxes on funds ( not old and not sure how it applies for you)
Clothing budget
Lawncare/landscaping yearly ( if it applies)
Birthday/holiday spending
Discretionary budget
Family support/ relationship support fund
House utilities

Im sure im missing a plethora of things, but i havent done my spending analysis in a cpl years. Good luck.

 

[Novahunter]

Plan to have an income producing asset (like a rental property) or some type of job that produces incomr after you retire.

The whole idea that one can live off their retirement savings for 20 or 30 years is a bit rediculous in my opinion.

 

[thegrouse]

Plan to have an income producing asset (like a rental property) or some type of job that produces incomr after you retire.

The whole idea that one can live off their retirement savings for 20 or 30 years is a bit rediculous in my opinion.

There is nothing ridiculous about it. It is just math

 

[Novahunter]

There is nothing ridiculous about it. It is just math

What about when costs skyrocket for a medical reason, or for "X" reason? Relying only on your saving and 20+ year projections is a surefire way to be very broke in your latest years.

The math is just projections based on assumptions. If your assumptions are wrong, and you have no backup plans for income, you are screwed.

Buy an asset or two that produces income. Have a plan for some type of job, even of it's working the counter at Sheetz for 20 hours a week.

Relying solely on savings is not smart retirement planning.

 

[GBHunter]

Congrats on thinking ahead, the planning you do today will pay dividends in the long run. Today marks 3 years retired and it has been everything I ever hoped and planned for.

When my spouse and I talked about "Budgets" at our house, it never turned out to be a positive conversation in the end, so the strategy was changed. If your spouse is good with this, I suspect your ahead of several.

We started tracking our spending every month for two years in a simple excel spreadsheet. This was not to limit our spending on anything (like a budget can do), we just documented what was spent in our daily lives with no restrictions. This spending plan was the key piece to know our strategy was good and we could pull the plug. We use credit cards for most spending, so it is quite easy from each statement. Cash was just entered as cash, we do not break it down on what was spent on.

We are now 5 years into documenting spending every month and really enjoy doing it together (can't believe I am saying this after how hard it was to start). It allows us to see where we may need to cut back and where we can splurge more. The data has been very valuable in fact to the point now where we need to be spending more every year. (New custom rifle in future)

If you are a numbers person and concerned about making your funds last, go for it and record the data. Your strategy does not need to be perfect now, it will change along the way. When the time comes to pull the plug, these two years of spending history will help ease the anxiety, and know the time is right.

Good luck, I wish you success.

 

[pacoalcracker]

Your IRA, 401(k), annuities, pensions, soc sec and savings/CD's etc......all are assets that produce income. If you put enough away during your working years, you won't need rental/income producing properties or a job when you retire (unless you just want one, which is certainly understandable). Everything in life is a projection based on assumptions. Nothing except death is guaranteed......nothing. Most retiree's die with 80% of their wealth still intact and left behind. The "outliving your retirement savings" is largely a myth that rarely happens for most people that worked for 40-45 years. All the bads things soon to be retiree's dream up never actually come to fruition. Put 15% of your earnings in the S&P 500 index type investment during your career and retire in peace...just as Warren Buffets advises.

 

[MattB]

Your IRA, 401(k), annuities, pensions, soc sec and savings/CD's etc......all are assets that produce income. If you put enough away during your working years, you won't need rental/income producing properties or a job when you retire (unless you just want one, which is certainly understandable). Everything in life is a projection based on assumptions. Nothing except death is guaranteed......nothing. Most retiree's die with 80% of their wealth still intact and left behind. The "outliving your retirement savings" is largely a myth that rarely happens for most people that worked for 40-45 years. All the bads things soon to be retiree's dream up never actually come to fruition. Put 15% of your earnings in the S&P 500 index type investment during your career and retire in peace...just as Warren Buffets advises.

While it is good to diversify the sources of your cash inflows, I largely agree. There is the 4% rule (don’t withdraw more than 4% in any year and it should last you 30 years). Ramsey even goes so far as to suggest that a 100% equities portfolio should support an 8% withdrawal rate, but I personally think that’s a flawed strategy unless you are willing to really ratchet back spending in down markets.

 

[Traveler]

Need to estimate realistically what expenses will be, including all the unexpected costs that exist today, maybe more. Add in inflation, your money today will only be worth less in the future. If you are relying on savings/401k/cd/etc there are a lot of tools that help estimate how long they last. It really depends on what you are invested in to determine the rate of return your savings earn.

How Long Will My Money Last in Retirement? Calculator, How to Stretch It - NerdWallet

To estimate how long your money will last in retirement, weigh annual expenses against total savings plus investment returns over time. Three strategies can help.

www.nerdwallet.com

Savings Calculator - How Long Will My Money Last in Retirement?

Use our Savings Calculator to determine how long your money will last and better predict your retirement.

www.mutualofomaha.com

 

[Holeintheheadgang]

Write your known current costs per month on a piece of paper. This will emblazon in your head what you have to spend. Subtract from your income and if you're like me you will be pleasantly surprised by the difference.
Then you will start wondering where all the money is going.