Actual Spending in Retirement against expectations

Marvinman

Hello all,

I have looked through previous posts which have given a lot of helpful information around planning, inflation, spending, monitoring etc....  I will keep reviewing this helpful resource. 

However one thing I would be interested in hearing about is real life experience from those who have retired on how expectations around expenditure pre retirement compares to reality post retirement.  My own research throws up different methods of calculation of how you could estimate this (from a percentage of salary or holding a pension pot which is "x" times planned expenditure).  Obviously these are generic.  I fully accept that a lot is personal choice based on a desired standard of living, plans in retirement, whether you wish to work part time/have alternate income, unplanned life events etc...  I also agree that it is something one can work out with thoughts on expenses compared to income.  I have already done this and formed my own view of what I think would be required.

Having said that I would like to think some on this forum who are lucky enough to have retired have real experience of how they planned their own expectations pre retirement.  You will also now have a point of reference against which to compare whether what you "thought" you would need is comparable to what you "actually" need/expend.  It would be interesting to understand some of these experiences.   

By way of background I am age 43 and looking to finalise my plan for a retirement timeline.  I have circa £500K in a mix of a SIPP (£290K), ISA's (£100K) and the remainder in various stock/shares funds.  I also have part business ownership valued at circa £70K.  Current pension contributions are £40K/annum but likely to reduce down in coming 18 months to 2 years.  The wife has around £130K in a mix of SIPP and cash.  We have no children nor are any planned.  We are mortgage free with a property worth £350K and no need to pass down wealth to family members after we are gone.  Jokingly the aim is to pass away with £1 in the bank !!  

Any experiences or contributions would be most welcome.

dunstonh

Experiences will vary.  

Some people will spend less.   Some people will spend more.

For example, if you were a commuter then your costs of commuting would mount up.  You wont have those any more.  Whereas if you have very low or virtually no commuting costs, you wont have that saving.
You will have an extra 9 hours of the day available to you though.  And its what you do in those extra 9 hours a day which will matter.
Dine out more.  Go away on breaks more.  Or just sit at home and watch daytime TV.

Work out how much you spend on a working weekday over a period and average it to give you an approx daily rate.  Then work out how much you spend over multiple weekends or days off and average that to a daily rate.       If you intend to be active, then use the weekend daily rate as a guide.

jim8888

If you're brutally honest with your current spending I think you'll be in good shape to estimate where you'll be in retirement. While working, I was earning a Phd in denial about where my "additional monthly spend" was going, on things like eating out, impromptu weekends away, car repairs, house repairs, the real cost of holidays etc.. You have to be absolutely clear-eyed about where your money is going from month to month. When you have that fixed, the retirement budget becomes easier to manage. What's not easier to fix is how you'll spend your time in retirement and what that will cost - how many weekends away you might want to take, how much eating out, trips abroad (when allowed), what kind of car you want versus what you need, what will your pastimes cost and so on. But that's life, I suppose!

Albermarle

For example, if you were a commuter then your costs of commuting would mount up.  You wont have those any more.  Whereas if you have very low or virtually no commuting costs, you wont have that saving.

Or on the opposite side , if you enjoyed any non wage benefits at work , such as a company car, then your costs in retirement immediately go up ( assuming you get another car ) .

green_man

It’s actually quite a good question and not that easy to answer, and of course every case is different. 

I tracked my spending carefully in the 5 years leading up to retirement, so I had a good grasp of what I spent and which areas would reduce on retirement: as mentioned above, commuting travel, and other work expenses; mortgage costs etc. This is a good place to start.

What is a bit more difficult to judge is just what additional spends you will have.  You may start catching up on a load of house improvements you’ve wanted to do for ages. You may redesign your garden, or spend on garden furniture. Maybe you will go out more; go on day trips; visit relatives around the world. Maybe you’ll take you additional pastimes that cost money. Buy a new car/caravan. Maybe you’ll go on more holidays (obviously not the last 18 months but you get the point) etc etc.

Having enough is essential, yet working longer is depriving you of that time you will never get back. No one else can decide what works for you. Many aren’t in a position to even consider the possibilities.  I think you can also overanalyse and end up never retiring.  What I would say is clearly ensure you have enough for essentials (in which I include what holiday requirements, cars etc you want/need) once you have established that figure then strive for an amount above that you think you can be happy with for the rest of your life (this is the cream if you like). 

Linton

The best estimate I believe for day-to-day expenditure is what you are spending now with adjustments for the old expenses which will no long apply and the new expenses which weren't required in the past. 

The reason is that for optimal happiness I think one should aim to maintain one's standard of living throughout one's life, neither scrimping for the future nor sacrificing it for the present.  You dont need to know what is essential or an extravagence.  If it's what you are used to plan it to continue in the same way.

QrizB

Have you read the "squirrelled nuts" thread(s)? @Sea_Shell and the other regulars there have done a good job of explaining how they budgeted for retirement and what their actual retirement costs are.

I've got a simple spreadsheet called something like "where does all the money go" and I can account for 90% of my current household income and expenditure. It's the last 10% that's elusive.

(As an aside, I'm struck by how many MSE'rs who are talking of FIRE in their 40s are childless; I've got two Experiments and am quite pleased to be aiming for retirement in my late 50s!)

mat1964

I'm struggling with this question - I earn a good salary, but around 65% of that goes on my mortgage, other debts and fixed costs.  When I retire next year, the mortgage and debts will be paid off.  I had originally targeted £25k a year for our retirement.  I've now upped that to £30k a year - which will be possible.  I really still have no idea whether that will be enough.

SMcGill

Thanks for posting this thread. I’m also interested to see what the response is from people who have already retired, my impression is that I’ve seen a few posts in which retirees have said they’re spending less than planned but that might be skewed by Covid.

Stubod

..well we actually planned to spend a lot more in retirement than when we were working, but covid has put paid to that the last couple of years. I would say we are currently spending about the same as we did when working.

I recently completed an analysis of our overall spending since I started keeping records 30+ years ago, (I got bored..  ). I then calculated our total overall spend. Then using our initial starting spend I calculated our actual "inflation" over the years to the current day and this has worked out at an overall 1.1% per annum. (ie If you took the first years spend then increased it each year by 1.1% then the total expenditure created by this would match our "actual" expenditure over the same time period).

I did find this rather surprising as I expected it to be higher. Although another check showed that we had spent pretty much the same over the last 10 years as we did the previous 10 years, (inflation not included), so in real terms we have spent less.

All rather disappointing as we had actually budgeted to spend around 50% more during retirement....

Albermarle

(As an aside, I'm struck by how many MSE'rs who are talking of FIRE in their 40s are childless; I've got two Experiments and am quite pleased to be aiming for retirement in my late 50s!)

I have often thought that a disproportionate number of posters ( including new , non regular ones ) on this board seem to be single ( often never married ) and/or have no children. I do not have any statistics to show the % is any different to the general population, but it just seems like that . Almost everybody I know at work or in personal life, seems to be married, or at least divorced , and have offspring.