I’ve written a bit about retirement planning. While most people focus on the big number – How Much Money Do I Need to Retire Comfortably? – That number can be very different depending on each of our individual circumstances.
That big number will be very different for someone who is still paying a mortgage (or 2) and still paying for kid’s education. While someone who has paid off their home and has minimal expenses will need a lot less.
What Do You Spend?
If you don’t know this number off the top of your head, it takes some work to figure it out, but it is well worth the effort. Block off some time, get your checkbook and credit card statements and come up with a list.
- Phone Bill
- Electric
- Internet
- Heating
- Mortgage
- Groceries
- Travel/Vacations
- Hobbies
- Gifts (Christmas can be a killer)
- Donations
- Snow Removal
- Lawn Care
- Sirius XM, Apple Music
- Streaming Services
- Credit Card Debt
If this is your first time through, the number will probably surprise you, and not in a good way. I use an account aggregator and can get this number real-time or historically. I don’t like it, but I can get it.
My Spending Hasn’t Changed
Many retirement planning articles tell us to get ready for big savings when we retire. We’ll spend less on gas with no daily commute. We’ll spend less on dining because we won’t get lunch out or grab take-out for dinner in our rush home after work.
We’ll have time for more DIY so we’ll save on lawn care, snow removal and other maintenance items that we now have the time to do.
While this may be true, I’ve found that my expenses shifted. I travel a bit more – not a ton, but a little. I play more golf. I dine out more frequently to stay social.
My spending is roughly the same, and I think most of my retired friends would agree.
Well, That’s Bad News
It’s kind of a bummer, but it makes sense.
However, the news isn’t all bad.
My buddies and I talk about how we need to do the golf and the traveling now while we’re healthy. We may not be in a position to enjoy these things when we’re 80.
While I hope to be writing a post when I’m 80 saying that I need to travel and play golf now because I won’t be able to at 100, this likely will not be the case.
My Mom
Let’s go to a more experienced retired person’s point of view.
My mom is 88 and has been retired for years. About 5 years ago, I began helping her with her finances. At this point, she had stopped her annual Florida trip and had slowed down on some of her other activities.
She still drove, went out with friends and even had a gym membership.
Her house and car are both paid off and she has no debt.
Her expenses every year came to roughly $20,000.
Seriously?
Yes, 3 years in a row, exactly the same.
How is that possible?
Grocery spending was ridiculously low. She was shopping but it was usually $10-$20 each trip. She’s in her mid 80’s how much can she eat.
It’s funny, I’ve noticed when we grab lunch after golf these days, usually 2 or 3 of us are bringing half our meal home. We just don’t eat as much. Tony and I regularly split a salad and a dinner at Napoli and often there is some to take home.
My mom drove a 2010 Camry. She drove mostly around town and we’d do an oil change every few years, tires every 10, and an inspection sticker. That’s it.
It makes sense that we’ll slow down as we get older. We’ll do less stuff, we’ll eat less, we won’t go out as often.
I remember growing up, Mr Britain was always home and would come out and yell at us anytime our hockey puck or baseball went on his sidewalk, or God forbid, in his yard.
I get it now. Recreational yelling. Nothing else to do, let’s yell at the kids. And it’s free!
And I have a kid or 2 on my street that could use a dose of that…
Wrap-Up
Many of us plan our retirement based on current expenses. And while that makes sense, I do think my mom’s experience is a more realistic scenario. We’ll likely spend less in our 80’s than in our 60’s.
I don’t know of any retirement tools that allow us to incorporate declining spending. But I think it is something to consider.
Our medical expenses are likely to increase and if we need long-term care, that will be expensive.
All of these need to factor into the plan, but I think my mom’s experience of significantly decreased spending will likely hold true for many.