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You Might Be Underbudgeting for Early Retirement

It’s a notion so ingrained in the conventional wisdom that I can’t recall where I heard it first: the idea that you’ll spend less in retirement than you spent while working. If you read traditional retirement planning advice, you’ll see the numbers 70 and 80 percent thrown around a lot, as the percentage range of your prior spending that you can expect to spend in retirement.

There are numbers assigned, so it must be science, right?

Not even a little bit.

It’s a total chicken or egg question. We know from data that retirees spend on average less than those still working, but we don’t know why that is, because no one actually asks that follow-up question in the large-scale surveys these stats come from. So isn’t it possible that people spend less in retirement because they have less to spend, not because they want to spend less?

Coupled with all of this is the lore in the early retirement community that you’ll be content with very little in early retirement, and maybe you will be! But not everyone will.

Let’s talk about why it’s worth questioning that conventional wisdom, and by extension, why you may be underbudgeting for early retirement.

Underbudgeting

Want to know a fun fact? We spend more money now than we did when we were working. (Quick reminder that we don’t share numbers. This post explains why.)

On the basics, everything is about the same, but we’re spending more in several categories:

Groceries. I’m home more now, and work used to pay for a lot of my meals when I traveled nearly every week.

Travel. We took three big international trips last year and a bunch of domestic ones. While we could travel when it was cheapest, that was still two more international trips and several more domestic ones than we would have ever had time for in a year while working.

Experiences. We can say yes to things on a whim now, and we often do. Whether that’s going to the ballet or seeing a concert, tickets cost money.

Makeup. This one is a slight joke, but I do find it hilarious that I’ve bought and worn more makeup doing book promotion in the last few months than I bought and wore during my entire working career.

Tanja Hester, author of Work Optional, on CNBC On The Money

On CNBC this past weekend, wearing sooooo much makeup (applied by a pro, not by me, and removed by belt sander).

Those things might be specific to us and our situation, but when you have more time on your hands, it follows that you might want to do a few things with some of that time that have a cost associated with them.

Understanding Your Priorities

Let’s use an example to illustrate a concept. A common question I get is, “What if I really love travel? Can I still retire early?” As someone borderline obsessed with travel (I recently lost my United 1K status. Please keep me in your thoughts during this trying time), I always reassure them that it is, but the truth is that the real answer is: it depends. Or, perhaps more accurately, yes, you still can, but your travel priorities might dictate whether you’re happy with the kind of travel you can actually do on a typical early retirement budget, or whether you’ll need to raise that budget a bit.

Because “travel” isn’t one thing. Buying a last-minute first class ticket to Paris and staying at the Ritz is “travel” just as much as hitchhiking across the desert southwest and sleeping in a tent is “travel.” What’s important to note is both where you fall on the spectrum of Paris Ritz to desert hitchhiking, but also how you feel about seeing the whole world versus just some destinations.

If you love seeing new places, but you’re agnostic about what they are and are game to go wherever’s cheapest, then great. As an early retiree, you can travel off-peak and chase the best deals to the most economical destinations. If, however, you’re more like us, and you have a list of places you want to see, some of them expensive, then you may find yourself choosing between overspending your budget or not seeing some of those places.

That’s no way to spend your dream life. Especially when you can plan a little better and skip having to compromise.

And that’s really just one example. Whether it’s travel or something else, spend some time considering what it is that you love about the activity that you hope will fill lots of time when your time is your own. If you’re game to do it as cheaply as possible, no matter what, then maybe it won’t cost you much more in retirement than it does now. But don’t go in assuming that.

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Unrelated side note: We have SO MUCH SNOW this year.

The Perpetual Womp-Womp of Health Care

I’m working on a big health care update post, to share what it’s like to use actual health care services in early retirement, but in the meantime, I’ll just share this little nugget: our health insurance premiums went up $300 a month in 2019 vs. 2018, adjusting for plan changes. That’s a huge difference, and would sink a budget with less wiggle room.

Health care is nearly impossible to predict, and could easily end up costing more than you expect it to. Another way you could spend more than you do now – in fact, a way that you will spend more than you do now. (Prices go up as you get older. Don’t forget to factor that in.)

Related post: Early Retirement Health Care Costs for 2019 and Beyond

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Work Optional features most of a chapter on health care in early retirement.

There’s No Downside to Giving Yourself a Cushion

If you’ve read this blog more than once, or you’re read Work Optional, you know that I’m not a big fan of the idea of saving 25 times your annual spending, the inverse of the supposedly safe “4% rule.” There are a bunch of reasons (see the links below), but among them is exactly what we’re talking about here: that you very well might end up spending more in early retirement than you expected to. Overspending your budget just a little bit when you’re already withdrawing the most you safely should could end up being a big problem, especially if you compound that with a bad sequence of returns, which our friend Karsten reminds us early retirees are statistically much more likely to experience. (Yay! ::sarcasm::)

Related post: The Fundamental Problem with the 4% Rule for Early Retirement Isn’t the 4% Rule

Related post: The Case for Conservative Early Retirement Investment Projections

Giving yourself a bigger cushion, however, in the form of an actual savings buffer, a lower safe withdrawal rate than 4% or a well-bolstered contingency built into your plan, give you a lot more safety.

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My dad and I before people arrived for my recent book release party at a friend’s incredible maker space. Photographic proof that I have worn a non-black garment. I’m going crazy in retirement, you guys. Also, said garment was not free. 

But You Also Might Make Some Money

I know very few early retirees who earn $0 a year from work in one form or another. (Would-be retirement police, read this post before making a fuss.) And if you end up making a little side hustle money in retirement, that very well might provide the perfect buffer against higher-than-expected spending on the fun things that you enjoy.

Just make sure you’ve done the math on how much you might realistically net from part-time work before you start planning on that income.

Illustrative example and sidebar: I am not a fan of the “barista FIRE” term that romanticizes retail and food service work as being “stress free” and “easy.” (This seems to be an especially classist version of the more common phenomenon of assuming our own job is hard and stressful but everyone else has it easy. The grass is always greener.) But the term also shows either a limited grasp of basic math or, more likely, a big misunderstanding about how much a barista earns. Starbucks, for example, has average pay per Glassdoor of $9.43 per hour, about $8.65 after you subtract FICA. Assuming you have no other tax withheld and do not pay a health care premium out of your pay, it will take 115 hours of work to earn $1,000. Working at that rate full-time would only get you to $18,000 a year, again assuming zero taxes. Is anyone seriously giving up a highly paid job to work as a barista and get yelled at by hurried customers all day?

Of course, if you have a side hustle that pays you more lucratively, then the buffer it provides will be invaluable for both smoothing out the bumps in your spending curve and just providing a general contingency against the unpredictable.

Your Turn

Do you think you’ll spend more than you do now in early retirement? For those already retired, how does your spending compare, and how would it compare in a perfect world? Thoughts on “barista FIRE”? Spill ‘em all in the comments.

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47 replies »

  1. I fully agree that there is no magic answer here on how much you will spend in retirement.
    One thing which is very interesting that we found is that when you have stopped working, you have the time to look for ‘better deals’ or travel outside holiday periods, etc which in effect allows to spend less on the same time of activities that we were doing before.
    If you have time, you can take your time to do what you want to do in the most cost optimal way, whereas when you are working ‘traditionally’ is not always possible.

    Nice article – thanks!

  2. Timely post for *this* guy. There’s so many variables hanging in the breeze – particularly health care. I had an original goal of early 2020 to hang it up, then moved that date up to mid-2019. Here we are approaching mid-2019 and I’m thinking I’ll keep work another 2 to 5 years!

    I think there’s a Maslow’s Hierarchy of Needs (Wants) that comes into play for some of us. It can be awfully tough to give up making and stashing money, partly because you’ve transitioned from needs to wants and partly because you’re paranoid about the future.

    I suppose if I could crystallize what my life would look like after early retirement, and that it included cash flow generation without the stress of the 9 to 5, I’d be golden. Real estate? Maybe. Blogging? Hahahaha….

  3. Living this now…..we recently decided to become snowbirds and get a second home in Florida….of course the idea never even surfaced while I was working. Two months after retirement and here we are pursuing a new dream. That brings a second set of costs that we are putting in our plan. It is a priority and we will adjust in other places to make it happen. Also, definitely seeing healthcare as my major concern. What would you say is a reasonable annual increase to comprehend for healthcare in my plan? We don’t anticipate qualifying for any credits or premium reductions.

  4. Tanja:

    So good to see you back and a pic of Dear Ol’ Dad. :) I think you’re onto something regarding barista fire. I frequent Starbucks and that job looks anything but stress-free. I think you’re spot on that we romanticize such a role like we would hang out a la the movie “Clerks” or something.

  5. Okay, that maker space 😍

    1) We absolutely spend more money when not working, because we are generally traveling. If we were early retired, I’m certain this would be even more true. Though we’d have time for even more slow travel, so maybe less expensive (at least for those who give up their home base for a time for full time travel).

    2) I actually just had this conversation in the past week. Working at a pet store was just as stressful as my current job is now, at least at times. I like the IDEA of barista FIRE, but I agree that the label is off and should be more like “super safe low paid passion job FIRE” or something, but that’s a mouthful.

  6. Medical coverage is a very large issue that really needs to have detailed retirement plan in and of itself. Particularly for rising premiums and planning around out of pocket maximums and deductibles. This will probably have us saving (working) longer to save an extra 20-25% over our plan, just to cover the exposure. A retirement plan buster and disappointment could be having to pull out unplanned funds for a medical issue in a bear market.

  7. Agree with the importance of thinking this through! Honestly, if my plan can’t easily accommodate a swing in something as small as the grocery budget or joining a climbing gym because I *finally* have time to go…then I’m cutting it waaaay too close for my comfort.

    As I think about how much I’ll spend, I focus more attention on the biggest-picture items, which probably can’t be absorbed in the error margin. Aside from the obvious question of health care, the biggest one for me is where I live.

    I own a modest place, and if I am spending more time in it, then the lack of an extra room for art studio/music-making/guest accommodations might be a problem. If I stay in my current neighborhood, which I love, then comfortably buying a bigger place would definitely mean more years of work. I’m not going to pull the trigger on early retirement until I either have enough money to move if I ever want to or I am VERY sure I won’t want to.

    For thinking through the smaller stuff, Your Money or Your Life has a good section on the true cost of work (commute, wardrobe, massages because of stress) that could provide good prompts for thinking through how those items translate into post-work life.

  8. Here for the healthcare info and updates, thanks for sharing! How far in advance do you know the premiums will be increased?

    We’re not FIRE but definitely spend more when we’re off work and stay-cating, which is the closest thing to FIRE for our situation. We try to cook at home more than eating out but the meals get upgraded (more meat, “fancier” sides) and there are often more baked goods hanging around. Also, there is more time to browse for things on our wishlist, which aren’t always necessities.

  9. One way to look at this problem is to assume you’ll spend generally the same amount in retirement as you do now, but deducting the % of your income you are currently saving for retirement. If you save 30% of your income for retirement, then you’ll need roughly 70% of that income when you are retired – this math only gets better for great savers!

  10. I agree 100% with this. I did a “sort of” experiment last year where I didn’t really pay too much attention to what I was spending to reset my baseline spending, if you will. I didn’t have as much work travel as you but not having work travel and snowboarding 18 days even with hotel points made for extra gas and food expenses. Also, I had more time to be spontaneously social so those times where I said “no” to something before because I had to work OR save energy for working, I said yes and frequently it may have involved spending money I hadn’t planned on spending. I’m truly enjoying reconnecting with friends and neighbors and just people in general more frequently, but I’ve gotten better at picking and choosing my spots where I might be able to steer said gathering to a more potluck style event. And then I still don’t even know what my final tax liability will be. I’m waiting on a K-1 document to drop into my TurboTax and see if my estimate has high, low or on target. The new tax plan made it difficult to estimate and I have the added complication of having a partner who works, but we file taxes jointly (though I’ll have to check if it makes sense to separate them now, I still don’t know!). I didn’t completely wreck what I had budgeted but I certainly spent more than the higher end of my range of projected expenses.

  11. I’m about to do one of the things you warn against – retire “from” something instead of “to” something. The money part you allude to is a concern, but now that I am less than 1 month away from the big day, I find myself more concerned with the “what now” questions. But I agree with you. i would rather err on the side of having too much in financial resources than not enough. I enjoy your website and enjoyed your book as well. Best wishes on your continued journey.

  12. “Also, said garment was not free.” I have to ask, are you ok, Tanja? Also, saw the cnbc deal and actually scrolled by the video, did a second take, scrolled back up, and still had to hit play to hear your voice and confirm that it was you. Belt sander indeed!

    But seriously, to the questions at hand. It appears that my wife and I would spend slightly less to equal. Basically, when the mortgage is gone, it will be mostly if not completely replaced by health insurance premiums. This is why my wife and I are pretty confident at least one of us will work enough hours to get health benefits from work. If by chance we have enough money to quit well before 65, fine. But not a huge deal if 60 to 65 ends up being the “traditional” retirement.

    As for baristaFIRE…it’s just too risky for us. Or leanFIRE for that matter. We want a serious cushion. Should medicare for all actually take hold…fine, then new avenues may open up. But to work a job we wouldn’t like to get health insurance just so we’re not in an office; no thanks. And we need serious medical coverage with my MS.

    Naturally, I’m not saying others shouldn’t retire early from their careers for those options. But I do think a lot of people are not clear about what it all entails. Too many still focus on leaving something they hate as opposed to going to something they want.

  13. I’m glad that in your blog — and in your book, Work Optional — you challenge the simplicity of the 25x/4% rule. The 25 (or 30 or 35) multiple of annual spending number can be a helpful metric to measure PROGRESS, but it is insufficient for early retirement PLANNING. A plan has to account for numerous complexities which can’t be boiled down to a formula.

    On our FIRE journey, we used the Personal Capital Retirement Planner as a self-serve tool to build out a plan and measure confidence. We used its scenario feature to test certain decision paths (e.g. retire now vs. later, retire in the Bay Area vs. geoarbitrage to the Sacramento region). Separately, we also consulted financial advisors to deep dive on our plan, refine it, and make it “bullet proof.”

    I like to evaluate the confidence of our plan by as many metrics as possible. If they all align and are all coming up green, I know we are on the right track and I can sleep better at night. Since reading Work Optional, I’ve added the “Conservative Full Early Retirement Magic Number” to the list of metrics on my Retirement Readiness Excel dashboard!

  14. BaristaFIREing can make sense in some cases, i.e. my case (not US) as we do not really have private healthcare but only the state run mandatory option (with private additional insurance possibilities e.g. for getting a nicer room in the hospital or being able to choose a surgeon, but the basis can never be replaced) – and with working only part-time for around 10h a week at a mini-job, I fall below the income threshold of not being taxed at all (neither the employer) and have the chance to opt-in to health-care for really cheap, like 1/8 of what I and my employer are paying right now, with the exact same benefits. Paying for healthcare without a job at all is around 10x that amount (strange but reality).
    The best case of course is to have a mini job at my current work – only 4h a week for the threshold, but unfortunately not doable in this kind of work, but I am trying to figure out a way.

  15. Hi Tanja, I’m Joe. You mentioned in this post that you know of very few early retirees who do not have any active income. I’ve been early retired for 12 years and have had zero active income during this time. I’ve commented on your blog a couple of times, but thought I should introduce myself.

    I may not be the typical early retiree, but my costs in retirement have tripled in these 12 years. I owned my home outright even before retirement, so my housing costs are minimal, and yet still managed to triple costs! As an early retiree, there are many things you can plan for, but also many that you can’t, and honestly some things are just up to luck. I was single when I early retired, but now I am married with a child in kindergarten. My ACA healthcare premiums have more than tripled, partly due to adding a spouse and child, but also in large part due to premium increases. I have managed to only triple the premiums because I’ve downgraded plans every year, from the platinum plan the 1st year to an off-exchange silver plan directly with the insurer for 2019. Without these downgrades, my premiums would have increased more than 5x. Even as a single, my premiums would have increased 2.5x if I had kept the platinum plan.

    Health maintenance definitely gets more expensive as you age even with no major illnesses. More check-ups, more chronic issues, sports injuries, random events (appendicitis, abscess requiring surgery, etc etc). I spend about 30-40k on premiums and co-pays every year. I gave up a favorite sport just to avoid regular injuries.

    I traveled quite a bit even when working, but my travel costs have increased 4x or 5x. With a child in traditional public schooling, I plan travel according to the school calendar, so pretty much when everyone else is traveling.

    • My goodness! So many concerns re healthcare costs. Sounds terribly stressful. Best wishes for a healthy retirement from a sympathetic Canadian

      • Hi Anne, I agree it would be stressful for someone who didn’t over-plan. We are fine since I can easily afford the cost increases. But inflation and health care costs are two of the most important factors when considering early retirement, coming from someone who’s been early retired for 12 years. And as a consequence of retiring early, there are many more things that could happen in life that you never considered or could plan for (kids after retirement, health issues, child development, divorce, family requiring help, etc)

  16. I should add that another big part of that cost tripling in 12 years is the inflation beast. Not so noticeable over 3-4 years, but very noticeable now after 12 years. I am regularly shocked by how much costs (and salaries!) have increased since I retired. The same restaurant meals cost 40-60% more than when I first retired. Thankful I am inflation neutral on housing, as those costs have doubled around me during this time.

  17. Tanja, you are a perfect example of how lame the 80% type of rule is. You weren’t spending anywhere near 80% while working, that’s why you were able to retire early. That rule is probably only useful as a motivational tool for people who rarely have a thought about retirement.

    On the other hand, forecasting spending in early retirement is super difficult, precisely because early retirement typically involves a complete change of living. I’ll admit that the biggest reason I have not yet retired is that I have not yet decided what I will want to spend in retirement. You are wise to forecast (as noted in your previous articles) an escalation in in the comfort level of travel you will prefer as you get older. I am sure my preferences will also escalate over the next 40-60 years, but I don’t know by how much. For now its easier to keep taking a steady paycheck while the my savings buffer grows.

  18. If that’s true there goes my plans to early retire. I have to agree with RB40, this early retirement dream that I had is more of a FAD every day. THis is only for the fortunates who earn a lot of money and then can afford to work on their passions and call that FIRE. I’m officialy out unfortunately.

  19. I’ve always had a creeping feeling that I’d spend more in retirement, because every school holidays ends up being a bit ‘spendy’.
    That’s why I’m aiming for a FATfire retirement.

  20. If we manage an early retirement, we will spend at least the same if not more during that period. We’ll trade daycare for school and probably college expenses. If we travel a little more, that’ll cost more than we spend now because we don’t do a ton of travel now. If we have that much more time on our hands we’ll do more dog adoptions which costs a ton. None of our hobbies are going to be totally free and unless we pick are picking up a lot of work instead to fill the time, which kind of defeats the purpose of early retirement, that’s an added expense. Plus as you well know, medical care is going to require a large amount of wiggle room in the budget.

  21. You bring up some great points (as always) that you should not necessarily assume that your expenses in early retirement will be lower than your current expenses.

    I’m too far away to give this any serious thought, but I do have a “plug” projected ER expenses number I use to track against to measure progress. We’ll see if this plug holds any weight when the time comes, and a lot of that will come down to where my significant other and I decide we want to spend our money!

  22. For me, spending more in retirement due to travel expenses would be a definite possibility.
    I can do Lean fire if I stay home and do less (less activities, less exciting food, less travel), but I don’t see the fun in that.
    So, health permitting, I’m aiming for a medium-to-fat fire (though I’m a looong way from being FI).

  23. We set our expected yearly expenditures at what we spend annually now – (what we are saving in retirement accounts + saving in other accounts + paying against the mortgage to include extra payments) + about a $6000 fudge factor.

    I feel like I’ve mentioned this before but our biggest possible variable is does my 85 year old, in marginal health, MIL pass before we reach our expected retirement date 6 years and 10 months from now? If so, do her annual (and therefore our annual) healthcare expenses skyrocket in the next few years? If not, how much extra do we save to take care of her on top of what we’re spending now? And as an aside, I can’t tell you how creepy, morbid, and unsettling it feels to try and game plan a budget where someone dying is a planning factor.

    Our other biggest expense is property tax (high property tax area but we’re not moving) though our state is currently looking at legislation that would drop our property tax by 70%, which would make a giant difference to us, both from a saving perspective and from an annual expense perspective.

    Depending on how either of those go, we could either spend the same or drastically less than we do now in retirement. We don’t plan on traveling much if at all in retirement as we’re both tired of the road and we love where we live. We have a “hobbies” expense line that we expect will increase somewhat and expect that to be mostly offset by work expense decreases and otherwise come out of the $6000 buffer. I definitely agree with previous commenters that if the expected budget is completely blown by a couple hundred dollars/month, then you didn’t save enough.

  24. We plan to spend about the same and adjust our travel budget as needed. We are paying the mortgage off (this month…yay!) which will increase our savings rate. Then when we retire that amount (that previously went to the mortgage/savings) will be used for healthcare expenses.

  25. Very interesting concept. I hadn’t considered that we could spend less because we have less to spend. Although I will say that I will also not be contributing to retirement accounts (at least not in the same way), so that will be a lot less money needed on a monthly basis.

    I will definitely be traveling a lot as well – but no Ritz in Paris for me, haha. I don’t mind spending a bit on travel, but no need for such lavish things!

  26. I’ve always assumed that our expenses will not decrease in ER. For planning purposes, I usually look at 2 scenarios – a baseline of 100% of current expenses (with a bit of a buffer built in) and one that is about 133% of baseline to allow for any unexpected changes or increases (increases in cost of healthcare/a new mortgage/a new roof or car/travel/other emergency expenses). I’m not expecting that the higher budget will be the norm but I like to test the resiliency of my financial plan to withstand that increase and still ideally be withdrawing less than 4%. My partner and I are still working towards ER and know that we are much more conservative about our strategy of when to pull the ER lever than others but it helps us sleep at night. Thanks for another great post.

  27. I think you bring up some great points, but I also wonder about the flip side of this conversation. You mention having a big buffer is never a bad thing, and I absolutely agree…in theory. I’m in (probably) a somewhat similar situation to you and Mark before retirement in that my wife and I are pretty lucky and both have great jobs with high salaries, so our combined income is more than most. We have a high (tho not super high) savings rate (40-50% depending) because we are both pretty happy were we are and would like to retire early, but are not in a “hair’s on fire” rush.

    I so I sometimes wonder if I’m just willing to give more of a buffer BECAUSE I have this high salary and am able to. What if I was making more like what the average person in this country makes? What if the salary I had meant that maintaining the lifestyle I want AND have a high savings rate wasn’t as possible? If I’m giving myself even MORE cushion in my portfolio in that scenario…that just delays early retirement even further. So when you say there’s no downside to the cushion…on second glance there might be. Time. That time to get to 3% could make a difference to some.

    There’s no denying that the 4% rule has some risk, but I think for some people, it’s not that they don’t consider the risks, it’s that they think the benefits outweigh the risks. What does failing at early retirement mean? That you need to go back to work part time for a while? Or even get another full time job for a period of time? Yes, that’s absolutely a realistic scenario if you get hit with bad sequence of returns, but is it worth the chance that doesn’t happen? For many, I think it might be. Besides, failure at early retirement isn’t even real failure, you still were not working for a solid chunk of time. That’s something!

    When I look at our savings rate, I try to remind myself that I’m coming from a perspective of privilege. Many people who read and listen to these blogs would probably have a much higher rate with our income, but we are happy. That said, I’m sure my privilege sometimes influences how I consider these topics. These are all the reasons why personal finance is so…personal.

    As always, thanks for the interesting things to ponder, your posts always make me think deeper about these topics, which I greatly appreciate!

  28. Tanja, as always you give me something to think about. As an avid knitter and mom to a small black dog, I was so distracted by their lack of little sweaters… and THEN, I scroll down to see you’re in a knitting store for a book signing! Please let me teach you to knit at the next Cents Positive! PS I googled 1K United… UGH indeed…

  29. Hey Tanja and Mark, loving your blog that I found yesterday. I’m tryin’ to figure out if we are neighbors … I don’t call myself “retired” but did quit my job 8 years ago and paid off my mortgage in 2012. and … we might be neighbors. Though my primary home is still in SF as I short term rent the Tahoe place. Lot of what you’re writing about resonates though even though I don’t identify as “retired.” Can also attest that life can throw curve balls and that having house paid off is really a godsend at that point. Something for sure for everyone to realize is the best laid plans don’t necessarily go according to plan and there is definitely a leap of faith required here. Ah too much to write in a brief comment, hoping to connect with you ..

  30. Interesting article. I suspect that we’ll be spending less when I retire.

    One thing we seem to be forgetting about is that retirement is conducive to insourcing (DIY) on a lot of tasks that need doing. If say you change your own oil rather than paying someone you’ve saved that money. The opportunity to do that sort of insourcing increases with available time.

  31. Finally, some sanity in the FIRE movement. What is called LeanFIRE is like financial Russian Roulette. Too many unknowns in a 50-60 year retirement. Medical/Health Care being the major issue for you and loved ones, then Market returns, Lifestyle changes. If you reach 1M at 35 or 40 you can’t hang in another 5-8 yrs to double that to 2m and then possibly 5yrs more to reach 3-4M? Very unlikely 1M for 40K will see you thru 50-60yrs without lucky fairy dust. Stuff happens. We retired 55, later severe injuries and loved ones illness would not have survived a LeanFIRE. So who is betting on fairy dust luck? Thank God we didn’t. Oh, forgot, some want to LeanFIRE and work as a clerk for low wages. Like that makes sense. Need more reality in the FIRE movement as this article attempts to do.

  32. I agree the 70% rule is total trash and should be avoided but I disagree that you might be under savings for retirement. It depends on if you actually know what your spending and planning from there. Yes, you need to develop your budget for retirement which will be slightly different but overall if you aim for your current spending you should be fine. After all, if you pay off your mortgage prior to leaving your spending goes down and you aren’t saving for retirement (so both items can help with a buffer). In our case our spending went up slightly from around $33k to $35k but mostly that was expected. Also I’m Canadian so I totally get to side step this health care spending issue which helps a LOT but I paid more taxes during my working career for it.

  33. One thing that I have not seen in the comments here is the concept of working less at your current position. I have seen folks talk about that here and there. I also have a few co workers, new moms or folks with a sick family member, drop from full time to part time at the software firm I work for. I know not everyone’s position can do that, and who knows if mine will when I start thinking about retirement. I just read that ShakeShack is testing 4 day work weeks for their employees. It’s just a test, but I wonder if this will gain ground. Their rationale is the current tight work market, and this would be a major perk.

    Another commenter mentioned the idea of using PC’s retirement planner and score. I had used the planner, but it’s been a while. I agree that it’s more comprehensive, but I had not previously valued it enough. At the end of the day, we are planning on only retiring a little early, in our mid-50s depending on how the next 10 years go, and as fat as possible. Time will tell.

    • I am doing exactly this! Testing out 80% time now, might see if 90% works for me, too. I have another position on the radar that would allow 60% time. My retirement dreams don’t include the kind of extended travel that would preclude this (did that in my 20s, loved it and also had enough), and I like my job. So this is a very attractive option for me….it makes working until I am 55 not seem like such a slog, and retiring at 45 seem like a needless risk.

  34. It’s good to see these thoughtful conversations in the FIRE community. My husband retired last year at 53. I know 53 is old for FIRE but it was considered very young among many of our friends. We saved and invested for a long time and calculated we were under a 1 % SWR at the time my husband retired. Well life has changed a great deal in this first year of retirement! We’re traveling and socializing much more than when we had time to when we were both working. Although we were happy to travel inexpensively when we were younger, we now like more comforts in older age. And those comforts can increase the cost of travel if you decide to let them. Health insurance is another factor that we are immune to right now because I’m still working and premiums are covered by my job. I’ve negotiated for a flexible schedule at my job that’s allowing us to travel extensively and test out retirement. One thing I’ve learned from this first year of my husband’s retirement is we’re thankful to have funds to be able to say yes to many social and travel opportunities. I would hate to be retired and finally have time to do more things but have to decline many of the opportunities due to financial limitations. As long as I enjoy my job and as long as I can keep negotiating a flexible work schedule, I’m going to keep working. I am learning that retirement life and spending is dynamic and I think the early retiree who keeps earning in some way will be more comfortable and more content as life changes along the way.

  35. Our approach to travel is often to spend a bit more cash, or air miles, on the journey, and less at the destination itself. We like to make the journey as comfortable as possible, and then live like a local when we arrive. Living like a local usually means that part of the trip is cheaper. So we prefer to stay in an apartment in a residential area rather than a 5-star hotel downtown. We once flew first class from London to Seoul, and then stayed in a hostel! We like this compromise.

  36. It takes some work to know your estimated spending in the future. I do not use a catch-all number like a 4% or below 4% withdrawal Those blindside you. I build it fom ground up and quantify into dollars, each spend aspect of my life and track all incoming incomes sources to arrive at a capital sum that is reinvested. Some would say, its too tedious, takes too much time – I can almost hear them say it to me now. It has been my observation from years past that this understanding is just so very important and yet so grossly understudied. My goal is to establish a path towards increasing my families’ wealth in this and for the next generation. Being an engineer, details are important and my skill sets in cost determination come in very useful when building up my model. When I spent a few years in finance, i began to build financial projection models which has led me to this day where I can see a clear path towards future financial goals. I track and update assumptions as business and economic factors change so a certain dynamism keeps in the front of whats taking place. Basically, having this financial roadmap and regular monthly reconciliation gives me the confidence in my plan.
    I am now into what is most likely my last year of “work” in the normal sense of the word. Thereafter, it is like what you book is entitled – “work optional”. As I look back, it is possible that some folks would have been able to get by with an easier and simplier approach. But I think if we are to consider building up wealth (say into the HNW category), then details become crucial.

  37. I’m having fun reading your articles, especially because I know the ski resorts, grocery stores, maker spaces, and everything you are talking about!

    Anyway, I don’t call myself “retired,” maybe I’ll rethink that, but did quit my job eight years ago. I don’t have anywhere close to the investments necessary to live on as you are doing. My house in Tahoe is free and clear so that is nice, especially as it started producing pretty solid amounts of rental income in the past few years.

    You’re right of course that nobody can generalize about this because it all depends what people choose in retirement. That said, I was pretty shocked going from being an employee to living on business and rental income how inefficient my prestigious six figure income really was.

    Technically, I made a “good salary.” But after all the stuff they take out of your paycheck and the non-deductible nature of nearly all employee expenses, it didn’t add up to nearly as much as it first looked.

    A stark example is car expenses. I loved to ski then as now. When you have a full time job with face time in SF though, the options for longer stays are limited. So it was that crazy driving up for weekends and rushing back to sit at a desk by Monday morning. This is the amount of money I would guess I am saving now, driving 10,000 fewer miles a year and skiing way more days:

    500 gallons of gas at $4.30 per gallon (mountain tax and SF tax) – $2150/year
    Non-deductible parking near my office – $3000/year
    Depreciation on said vehicle each year from high mileage – $4000/year
    Increased maintenance of vehicle each year – $1500/year
    Increased tolls from driving back and forth – $200/year

    Adds up to maybe $12K per year or more.

    That’s to say nothing of the work wardrobe and shoes and – yes – makeup. The lunches and dinners out, the obligatory contributions to office parties, the money spent on a whole range of things where you have no time to choose a less expensive option nor time to look for it. The unconscious spending from the groupthink culture of consumerism.

    And all of that was coming out of AFTER tax income. Whereas now because my business and my rental are my life, there are far fewer expenses that are truly “personal.”

    How far does six figure income really go when so much of it is unnecessarily spent to comply with “face time”? You’re right about health care expenses being a bit of a wild card for retirees. On the other hand, there are many aspects of life that can be simplified with the right planning and get those personal expenses way way down.

  38. We have a hard time predicting expenses related to having kids. In our experience the expenses are super low for kids the first few years, and can start to increase around school-age, even for frugal folk like us! I imagine this will continue to increase, but then decrease as they become adults. So that’s a variable that is hard to predict.

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