How do you estimate lump sum expenses in retirement for 40 years?

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Bennie
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How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

So it is necessary to have a monthly budget *and* estimate one-time, larger, lump sum expenses, such as a new car, a new roof, but also less predictable items, such as lawyer fees, storm damage not covered by insurance, expenses for a new hobby, maybe medical procedures and recovery (home health care for a limited time), an unexpected vacation/travel/trip, supporting a needy family member who falls on hard times, a generator, addition to the house, new furniture, etc. etc.

How do you adequately and rationally estimate such expenses and others that are not included in the monthly budget for 30 or 40 years into the future (which is what proper retirement planning does)?

Any examples of strategies that worked and some that did not and what you/or the person in the story did to get out of trouble would be very valuable, too, if you have any to share.

Thanks for any input! :beer
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by KlangFool »

OP,

1) What have you being doing for those expenses before your retirement?

2) Why should there be any difference during retirement?

3) Please answer those two questions.

In my case,

A) I have a large emergency fund (120K) to deal with those expenses.

B) A large percentage of my annual expense is discretionary by not having a big expensive house or other big fixed expense.

C) Hence, I could spend from my emergency fund first and then cut my discretionary expense to refill the emergency fund.

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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by rich126 »

Just do your best to prorate them over the expected time frame. For example if you typical spend $30,000 on a car and it lasts you for 10 years then budget 30K/(12*10) or $250 per month. You can throw in an inflation adjustment. Roofs might last 20 years or whatever, do a similar thing.

This is also why you add in padding to any budget.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

KlangFool wrote: Fri Jun 09, 2023 3:31 pm OP,

1) What have you being doing for those expenses before your retirement?

2) Why should there be any difference during retirement?

3) Please answer those two questions.

In my case,

A) I have a large emergency fund (120K) to deal with those expenses.

B) A large percentage of my annual expense is discretionary by not having a big expensive house or other big fixed expense.

C) Hence, I could spend from my emergency fund first and then cut my discretionary expense to refill the emergency fund.

KlangFool
Thanks, KlangFool! That sounds very reasonable.

To answer your questions:

1) partly I reduced my retirement nest egg to cover large expenses before retirement, but all of the nest egg will be accounted for in the retirement calculations and hence cannot be touched unless it was pre-planned - that is why I need to know how much I need to put into the larger expense bucket to be reasonable

2) see 1)

Overall, I really like your plan and it would be mine. Not the same amounts maybe, but have an emergency fund and grow it / replentish it from leftover discretionary monies at the end of each month. I just don't have any experience and am not sure if my emergency fund and my leftovers are big enough to cover the lump expenses that may come up. That is why I was curious to learn from people who have figured this out sucessfully already and learn from mistakes of others as well (before I make, hopefully different ones, at least, of my own - ha ha).

I know our budgets and lives can be very different, but some things are the same and we can learn from each other some.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

rich126 wrote: Fri Jun 09, 2023 3:41 pm Just do your best to prorate them over the expected time frame. For example if you typical spend $30,000 on a car and it lasts you for 10 years then budget 30K/(12*10) or $250 per month. You can throw in an inflation adjustment. Roofs might last 20 years or whatever, do a similar thing.

This is also why you add in padding to any budget.
Thanks, rich!

Yeah, I'm trying. :beer
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by backpacker61 »

rich126 wrote: Fri Jun 09, 2023 3:41 pm Just do your best to prorate them over the expected time frame. For example if you typical spend $30,000 on a car and it lasts you for 10 years then budget 30K/(12*10) or $250 per month.
That's exactly what I've done; looked up the price of a car similar to what I think I would buy and divided by the number of months I might expect to have it in service. Budget that much for every month.
rich126 wrote: Fri Jun 09, 2023 3:41 pm Roofs might last 20 years or whatever, do a similar thing.
I just budget 1-2% of the value of the house for annual maintenance.
I also set a monthly budget for hobbies, travel, dining out, and hope that those won't get too out of hand.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by randomguy »

backpacker61 wrote: Fri Jun 09, 2023 3:54 pm
rich126 wrote: Fri Jun 09, 2023 3:41 pm Just do your best to prorate them over the expected time frame. For example if you typical spend $30,000 on a car and it lasts you for 10 years then budget 30K/(12*10) or $250 per month.
That's exactly what I've done; looked up the price of a car similar to what I think I would buy and divided by the number of months I might expect to have it in service. Budget that much for every month.
rich126 wrote: Fri Jun 09, 2023 3:41 pm Roofs might last 20 years or whatever, do a similar thing.
I just budget 1-2% of the value of the house for annual maintenance.
The other way of going is to take like 15 years of expenses and see what you average. It will probably be similar going forward. Sometimes it will be a roof. Sometimes a car. Sometimes hitting your deductible. And so on. Personally I just go I have been spending ~80k/year for the last 15 years, I will find a way to make things work going forward spending 80k. I will adjust what I am buying for things like cars, furniture, roofs,... to fit the amount of money I have. Things like emergency funds smooth out the numbers a bit but it is just mental accounting. If I buy a new car this year I can spend 30k from the EF or just spend say 5k less over the next couple of years as I replenish. If you enjoy making spreadsheets you can have a lot of fun with this. Or you can go close enough and do something that you enjoy more.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

randomguy wrote: Fri Jun 09, 2023 4:00 pm Or you can go close enough and do something that you enjoy more.
You made me laugh!!! :sharebeer

I think I will make a spreadsheet, though, to be honest. :mrgreen:
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

backpacker61 wrote: Fri Jun 09, 2023 3:54 pm
rich126 wrote: Fri Jun 09, 2023 3:41 pm Just do your best to prorate them over the expected time frame. For example if you typical spend $30,000 on a car and it lasts you for 10 years then budget 30K/(12*10) or $250 per month.
That's exactly what I've done; looked up the price of a car similar to what I think I would buy and divided by the number of months I might expect to have it in service. Budget that much for every month.
rich126 wrote: Fri Jun 09, 2023 3:41 pm Roofs might last 20 years or whatever, do a similar thing.
I just budget 1-2% of the value of the house for annual maintenance.
I also set a monthly budget for hobbies, travel, dining out, and hope that those won't get too out of hand.
Wow - yes, that is what I was looking for: 1-2% of the value of the home for yearly maintenance. That is a lot for me cheapskate, but I need to be realistic in retirement. Things are gett'n serious. I felt like, while I was working, saving was more important than reapairs but this can't go one forever. Only one burner of my stovetop (out of 4) is still working, ha ha. :P Has been that way for years.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by jebmke »

Just ball park some numbers. Any specific line in your expense plan will be wrong.

I put is a slug of capital each year for all this stuff. On top of that, I added a 10% contingency for all the normal expenses that I probably forgot to plan for.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by TomatoTomahto »

I’m not recommending this, but you asked for strategies that worked, and I expect that our strategy will work fine. We (or more accurately, my wife) just worked much longer than many younger BHs seem to think is appropriate. We have enough assets to withstand almost anything short of a financial apocalypse or medical advances that have us live to age 200.
I get the FI part but not the RE part of FIRE.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by quantAndHold »

I just guess. Some things you can predict, some things you can’t, and anything you’re predicting over 10 years out is going to be wrong, anyway.

More seriously, we know what our normal living expenses are. Beyond that, we allocate about $30-40k for “other”. Some years the “other” is travel. Sometimes it’s home repairs and remodeling. Sometimes, a new car. Last year, most of it was medical expense. Most years, it’s a combination of those things. Having that much slop also allows us to spend less if the market isn’t cooperating.

My general point is that if your budget is tight enough that you need to be able to predict everything in advance, you probably need to save more before you retire.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by jebmke »

quantAndHold wrote: Fri Jun 09, 2023 4:44 pm I just guess. Some things you can predict, some things you can’t, and anything you’re predicting over 10 years out is going to be wrong, anyway.
Can't predict the amount and can't predict the timing. This year we are getting hammered with at least three big capital expense items - probably 30-35% over our normal run rate.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by ncbill »

Bennie wrote: Fri Jun 09, 2023 3:27 pm So it is necessary to have a monthly budget *and* estimate one-time, larger, lump sum expenses, such as a new car, a new roof, but also less predictable items, such as lawyer fees, storm damage not covered by insurance, expenses for a new hobby, maybe medical procedures and recovery (home health care for a limited time), an unexpected vacation/travel/trip, supporting a needy family member who falls on hard times, a generator, addition to the house, new furniture, etc. etc.

How do you adequately and rationally estimate such expenses and others that are not included in the monthly budget for 30 or 40 years into the future (which is what proper retirement planning does)?

Any examples of strategies that worked and some that did not and what you/or the person in the story did to get out of trouble would be very valuable, too, if you have any to share.

Thanks for any input! :beer
One of the things I did which mitigated someone those lumpy expenses was to move into multifamily housing over two decades ago.

Our development could then negotiate on volume...the last roof replacement cost each unit only an extra $100/month, spread over 5 years.

And since I got stuck with ALL the yard work as a kid I like not having to do anything outside that I don't want to do.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by jebmke »

ncbill wrote: Sat Jun 10, 2023 8:09 am
Bennie wrote: Fri Jun 09, 2023 3:27 pm So it is necessary to have a monthly budget *and* estimate one-time, larger, lump sum expenses, such as a new car, a new roof, but also less predictable items, such as lawyer fees, storm damage not covered by insurance, expenses for a new hobby, maybe medical procedures and recovery (home health care for a limited time), an unexpected vacation/travel/trip, supporting a needy family member who falls on hard times, a generator, addition to the house, new furniture, etc. etc.

How do you adequately and rationally estimate such expenses and others that are not included in the monthly budget for 30 or 40 years into the future (which is what proper retirement planning does)?

Any examples of strategies that worked and some that did not and what you/or the person in the story did to get out of trouble would be very valuable, too, if you have any to share.

Thanks for any input! :beer
One of the things I did which mitigated someone those lumpy expenses was to move into multifamily housing over two decades ago.

Our development could then negotiate on volume...the last roof replacement cost each unit only an extra $100/month, spread over 5 years.

And since I got stuck with ALL the yard work as a kid I like not having to do anything outside that I don't want to do.
That is part of my longer game. At some point, keeping track of a larger property, depending on a car for transportation etc. are things that I keep in mind as I plan to unwind our current retirement location. For me it is less about cost than it is about hassle and lack of capability (driving). In fact, I'm willing to see our normal run rate rise to mitigate these in the next phase.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

jebmke wrote: Fri Jun 09, 2023 4:24 pm Just ball park some numbers. Any specific line in your expense plan will be wrong.

I put is a slug of capital each year for all this stuff. On top of that, I added a 10% contingency for all the normal expenses that I probably forgot to plan for.
Thank you, jebmke!

"a slug", eh? :D

I will have to re-do my spreadsheet with that number. :sharebeer
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

TomatoTomahto wrote: Fri Jun 09, 2023 4:43 pm I’m not recommending this, but you asked for strategies that worked, and I expect that our strategy will work fine. We (or more accurately, my wife) just worked much longer than many younger BHs seem to think is appropriate. We have enough assets to withstand almost anything short of a financial apocalypse or medical advances that have us live to age 200.
Thank you, TomatoTomahto!

I like your point. I like it a lot. I am re-considering retirement. I like to have enough not to worry about it. Like I said, good point. 8-)

It's nice to have a job and have the option!
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

quantAndHold wrote: Fri Jun 09, 2023 4:44 pm I just guess. Some things you can predict, some things you can’t, and anything you’re predicting over 10 years out is going to be wrong, anyway.

More seriously, we know what our normal living expenses are. Beyond that, we allocate about $30-40k for “other”. Some years the “other” is travel. Sometimes it’s home repairs and remodeling. Sometimes, a new car. Last year, most of it was medical expense. Most years, it’s a combination of those things. Having that much slop also allows us to spend less if the market isn’t cooperating.

My general point is that if your budget is tight enough that you need to be able to predict everything in advance, you probably need to save more before you retire.
Thank you, quantAndHold!

You and TomatoTomahto give me something to think about: keep working. Not great, but being low on funds is not somthing I want to go back to. Been there done that when I was young. Nice to have a job and have the option to keep generating income. I have ideas for retirement, too, but I could combine them or wait.

This forum is great! Thanks again for taking the time to chime in and give your view! Appreciate it a lot. :sharebeer
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by jebmke »

Bennie wrote: Sat Jun 10, 2023 8:18 am
jebmke wrote: Fri Jun 09, 2023 4:24 pm Just ball park some numbers. Any specific line in your expense plan will be wrong.

I put is a slug of capital each year for all this stuff. On top of that, I added a 10% contingency for all the normal expenses that I probably forgot to plan for.
Thank you, jebmke!

"a slug", eh? :D

I will have to re-do my spreadsheet with that number. :sharebeer
Heh heh; I don't recall the specific number that I put in my pre-retirement planning sheet.

Capital is one of the three expense categories I track. Just looking at the history I have, it seems that the average year is $11.5K.

Note, this would not include some large one-times that crop up now and then like having a bunch of trees removed or having all the trees pruned - it is only capital assets.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Jovby »

TomatoTomahto wrote: Fri Jun 09, 2023 4:43 pm I’m not recommending this, but you asked for strategies that worked, and I expect that our strategy will work fine. We (or more accurately, my wife) just worked much longer than many younger BHs seem to think is appropriate. We have enough assets to withstand almost anything short of a financial apocalypse or medical advances that have us live to age 200.
I have a time or two wondered if I should plan for the medical advances scenario. That could wreck havoc on social security, pensions, and annuities.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by backpacker61 »

Bennie wrote: Fri Jun 09, 2023 3:27 pm an unexpected vacation/travel/trip,
This line item is one I struggle with. I don't think travel in retirement is really "unexpected"; it's one of the facets of retirement that I look forward to quite a lot. But how much to budget for it? I go on infrequent trips now while I'm working, but in retirement I visualize myself going both on much longer trips and to take them more frequently. And the cost will go up as I expect that as I age that I will want more "creature comforts" than when I'm younger.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

jebmke wrote: Fri Jun 09, 2023 4:49 pm
quantAndHold wrote: Fri Jun 09, 2023 4:44 pm I just guess. Some things you can predict, some things you can’t, and anything you’re predicting over 10 years out is going to be wrong, anyway.
Can't predict the amount and can't predict the timing. This year we are getting hammered with at least three big capital expense items - probably 30-35% over our normal run rate.
Thanks, jebmke!

That is what I am afraid of - or more accurately, am trying to predict to plan for: how much (30-35%) and how often (every year? once every 5 years, 10 years?? etc.) - just to be complete in my financial plan. Need to put some number and frequency there. Can't just put 0 amount and 0 years. And that is not something I have tracked all my life, like my monthly expenses.

KlangFool asked "how did you handle it before?" - good question - lately I have been taking it out of my retirement nest egg - when I was younger it was mighty uncomfortable: using credit cards, trying to pay back in 30 days but not always, cutting groceries and other expenses I would not be able to cut today.

That's why I started this thread. To think forward into retirement on how this will work out.

I saw your otehr post, too, about moving to a less expensive upkeep home. Not sure I want to do that. Not everyone has to. I had family die in their own home with their (nice new) car in their carport, able to still drive and enjoy their independence. Not everyone has to cut back (due to health reasons) and if I don't have to, I probably won't.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

backpacker61 wrote: Sat Jun 10, 2023 8:32 am
Bennie wrote: Fri Jun 09, 2023 3:27 pm an unexpected vacation/travel/trip,
This line item is one I struggle with. I don't think travel in retirement is really "unexpected"; it's one of the facets of retirement that I look forward to quite a lot. But how much to budget for it? I go on infrequent trips now while I'm working, but in retirement I visualize myself going both on much longer trips and to take them more frequently. And the cost will go up as I expect that as I age that I will want more "creature comforts" than when I'm younger.
Thanks, backpacker61!

Other may wonder, too. What I am referring to is a scenario where you have family living very far from you and someone may get very sick or have an accident and suddenly you travel back and forth a lot to help. This kind of travel can happen and is not planned or predictable.

Pleasure travel is under control, of course, and predictable mostly. Unless someone suddenly changes their attitude towards it.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by rich126 »

randomguy wrote: Fri Jun 09, 2023 4:00 pm
backpacker61 wrote: Fri Jun 09, 2023 3:54 pm
rich126 wrote: Fri Jun 09, 2023 3:41 pm Just do your best to prorate them over the expected time frame. For example if you typical spend $30,000 on a car and it lasts you for 10 years then budget 30K/(12*10) or $250 per month.
That's exactly what I've done; looked up the price of a car similar to what I think I would buy and divided by the number of months I might expect to have it in service. Budget that much for every month.
rich126 wrote: Fri Jun 09, 2023 3:41 pm Roofs might last 20 years or whatever, do a similar thing.
I just budget 1-2% of the value of the house for annual maintenance.
The other way of going is to take like 15 years of expenses and see what you average. It will probably be similar going forward. Sometimes it will be a roof. Sometimes a car. Sometimes hitting your deductible. And so on. Personally I just go I have been spending ~80k/year for the last 15 years, I will find a way to make things work going forward spending 80k. I will adjust what I am buying for things like cars, furniture, roofs,... to fit the amount of money I have. Things like emergency funds smooth out the numbers a bit but it is just mental accounting. If I buy a new car this year I can spend 30k from the EF or just spend say 5k less over the next couple of years as I replenish. If you enjoy making spreadsheets you can have a lot of fun with this. Or you can go close enough and do something that you enjoy more.
By the time I have 15 years of expenses in retirement I might be long gone! And despite being very detailed in my job, I've never had a budget, balanced checks (back when they were used more often), etc. I did do some estimates and right now I'm trying to figure out expenses since I''m new to being married and money tends to disappear more often :shock:
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

jebmke wrote: Sat Jun 10, 2023 8:27 am
Bennie wrote: Sat Jun 10, 2023 8:18 am
jebmke wrote: Fri Jun 09, 2023 4:24 pm Just ball park some numbers. Any specific line in your expense plan will be wrong.

I put is a slug of capital each year for all this stuff. On top of that, I added a 10% contingency for all the normal expenses that I probably forgot to plan for.
Thank you, jebmke!

"a slug", eh? :D

I will have to re-do my spreadsheet with that number. :sharebeer
Heh heh; I don't recall the specific number that I put in my pre-retirement planning sheet.

Capital is one of the three expense categories I track. Just looking at the history I have, it seems that the average year is $11.5K.

Note, this would not include some large one-times that crop up now and then like having a bunch of trees removed or having all the trees pruned - it is only capital assets.
By "capital" you mean large, 0ne-time expenses or the buffer account you keep?

Yeah, I had 6 very large pines come down on my property in 2022 during a snow storm and it cost 6K to clean up by a professional tree service. Insurance does not cover debris removal, apparently, only property damage, so I was stuck with that bill.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

ncbill wrote: Sat Jun 10, 2023 8:09 am
Bennie wrote: Fri Jun 09, 2023 3:27 pm So it is necessary to have a monthly budget *and* estimate one-time, larger, lump sum expenses, such as a new car, a new roof, but also less predictable items, such as lawyer fees, storm damage not covered by insurance, expenses for a new hobby, maybe medical procedures and recovery (home health care for a limited time), an unexpected vacation/travel/trip, supporting a needy family member who falls on hard times, a generator, addition to the house, new furniture, etc. etc.

How do you adequately and rationally estimate such expenses and others that are not included in the monthly budget for 30 or 40 years into the future (which is what proper retirement planning does)?

Any examples of strategies that worked and some that did not and what you/or the person in the story did to get out of trouble would be very valuable, too, if you have any to share.

Thanks for any input! :beer
One of the things I did which mitigated someone those lumpy expenses was to move into multifamily housing over two decades ago.

Our development could then negotiate on volume...the last roof replacement cost each unit only an extra $100/month, spread over 5 years.

And since I got stuck with ALL the yard work as a kid I like not having to do anything outside that I don't want to do.
Thanks, ncbill!

Glad for you! :sharebeer Seems like you are mighty comfortable and pretty secure in your finances. I get the not-wanting-to-do-stuff-you-were-forced-to. Totally understand. Nice to be able to shape our adult years ourselves! :D 8-)
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by KlangFool »

Bennie wrote: Sat Jun 10, 2023 8:39 am
KlangFool asked "how did you handle it before?" - good question - lately I have been taking it out of my retirement nest egg - when I was younger it was mighty uncomfortable: using credit cards, trying to pay back in 30 days but not always, cutting groceries and other expenses I would not be able to cut today.
Bennie,

I do not know your situation. But, I do not understand why you think you have a problem.

A) My annual expense is about 60K per year. This is with 15K annual mortgage payment.

B) I pay off my mortgage last year. So, I still plan to spend 60K per year. But, I have another 15K goes into the discretionary portion of my expense.

C) Out of my 45K annual expense before mortgage, I guess about 35K is fixed expense.

D) So, with 60K of annual expense, I have 35K per year fixed and 25K discretionary.

E) When I retired, I plan to use the VPW to increase amount of money to spend each. Preliminary calculation with my current portfolio size is about 75K to 80K per year.

F) Let's assume that it is 75K per year. Then, I have 35K fixed annual expense and 40K discretionary expense.

G) In my case, most of my annual expense will be discretionary and it is large. So, I do not see a problem. I can spend it on whatever that is higher priority for me.

H) I think your problem is you count too closely. I have only 2 pools: fixed and discretionary.

If you want a more detailed response, please provide your budget and numbers.

KlangFool
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Mr. Rumples
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Mr. Rumples »

I wrapped my own head around this after serving on an HOA board. I have an "operating budget" and a "capital improvement" budget. The latter includes categories like a new heat pump, driveway, roof and so forth. Designating an amount to meet the funding when the anticipated need arises is not perfect of course, just an idea. I do cheat a bit in the system since I have a 22 year old vehicle and the money to get a new one is available in cash. The operating budget includes discretionary expenses and there is money left over as these have gone down with age. There are a few hiccups and unanticipated expenses, but nothing earth shattering. I just need to get by for the next 20 years.
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Bennie
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

rich126 wrote: Sat Jun 10, 2023 8:50 am
randomguy wrote: Fri Jun 09, 2023 4:00 pm
backpacker61 wrote: Fri Jun 09, 2023 3:54 pm
rich126 wrote: Fri Jun 09, 2023 3:41 pm Just do your best to prorate them over the expected time frame. For example if you typical spend $30,000 on a car and it lasts you for 10 years then budget 30K/(12*10) or $250 per month.
That's exactly what I've done; looked up the price of a car similar to what I think I would buy and divided by the number of months I might expect to have it in service. Budget that much for every month.
rich126 wrote: Fri Jun 09, 2023 3:41 pm Roofs might last 20 years or whatever, do a similar thing.
I just budget 1-2% of the value of the house for annual maintenance.
The other way of going is to take like 15 years of expenses and see what you average. It will probably be similar going forward. Sometimes it will be a roof. Sometimes a car. Sometimes hitting your deductible. And so on. Personally I just go I have been spending ~80k/year for the last 15 years, I will find a way to make things work going forward spending 80k. I will adjust what I am buying for things like cars, furniture, roofs,... to fit the amount of money I have. Things like emergency funds smooth out the numbers a bit but it is just mental accounting. If I buy a new car this year I can spend 30k from the EF or just spend say 5k less over the next couple of years as I replenish. If you enjoy making spreadsheets you can have a lot of fun with this. Or you can go close enough and do something that you enjoy more.
By the time I have 15 years of expenses in retirement I might be long gone! And despite being very detailed in my job, I've never had a budget, balanced checks (back when they were used more often), etc. I did do some estimates and right now I'm trying to figure out expenses since I''m new to being married and money tends to disappear more often :shock:
Thanks, rich126!

I think what randomguy meant was to average the last 15 years of data to see what you need on average per year - for the lump-sum, surprise expenses very year.

Wow - not to cramp your style - really, sometimes something works for someone and I can't see it, but it is best for that person and not to be disturbed! - but your response has me curious: how are you engaged in the bogleheads forum and detailed in your job and at the same time without a budget? :?:

In my experience money goes out like raindrops in the ground unless you look and know where it goes. It is also good to know where it goes, so you can take care of yourself and make sure you have what you need when you need it, and there is no stress. That is where I am coming from. A budget has always been fun for me, since it meant independence and safety for me, and the ability to give myself some mad-money to spend freely, after the bill were paid, and I can be sure I am ok. :D
Last edited by Bennie on Sat Jun 10, 2023 10:46 am, edited 1 time in total.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by HomeStretch »

I tracked our expenses for 5-7 years prior to retirement, made a couple adjustments and determined our annual living expenses in retirement to which I added:
- 3% of house value for periodic maintenance, repairs/mechanical replacements, small projects (no more large renovations are planned), new landscaping, electronics, etc.
- 1/10 of the cost of new cars (we buy new, hold ~10 years)
- adjustment for healthcare expenses (higher in early retirement with ACA coverage, lower once Medicare starts).
- grossed up expense # for estimated income taxes

This gave me my starting point for average annual expenses in retirement. We then worked a bit longer to build a cushion. Glad we did as we retired in late 2021 at a market high and then our portfolio value dropped by ~20% a few months later.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by ThankYouJack »

I simply add up expenses that come out my checking account and paycheck (insurances) each month in a spreadsheet. Takes literally about 2 minutes a month. Been doing it for about a decade so a lot of bigger expenses (like a new car) are already baked in.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by KlangFool »

Bennie wrote: Sat Jun 10, 2023 9:19 am
In my experience money goes out like raindrops in the ground unless you look and know where it goes. It is also good to know where it goes, so you can take care of yourself and make sure you have what you need when you need it, and there is no stress. That is where I am coming from. A budget has always been fun for me, since it meant independence and safety for me, and the ability to give myself some mad-money to spend freely, after the bill were paid, and I can be sure I am ok. :D
Bennie,

Meanwhile, some people save 1 year of expense every year without a budget.

A) My checking account is my bill paying account.

B) I keep a buffer of 15K in the account.

C) I deposit about 5K per month from my paycheck into that account.

D) When my checking account is far below 15K, I spend less and let my 5K deposit to bring up the account.

E) When my checking account is far above 15K, I know I can spend more.

F) Why would I need a budget?

G) Please note that a large portion of my expense is discretionary.

H) If sometime I need to spend a lot more, I have another tier 2 buffer of 120K. I spend more now and spend less later to refill that 120K buffer.

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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by jebmke »

Bennie wrote: Sat Jun 10, 2023 8:53 am
jebmke wrote: Sat Jun 10, 2023 8:27 am
Bennie wrote: Sat Jun 10, 2023 8:18 am
jebmke wrote: Fri Jun 09, 2023 4:24 pm Just ball park some numbers. Any specific line in your expense plan will be wrong.

I put is a slug of capital each year for all this stuff. On top of that, I added a 10% contingency for all the normal expenses that I probably forgot to plan for.
Thank you, jebmke!

"a slug", eh? :D

I will have to re-do my spreadsheet with that number. :sharebeer
Heh heh; I don't recall the specific number that I put in my pre-retirement planning sheet.

Capital is one of the three expense categories I track. Just looking at the history I have, it seems that the average year is $11.5K.

Note, this would not include some large one-times that crop up now and then like having a bunch of trees removed or having all the trees pruned - it is only capital assets.
By "capital" you mean large, 0ne-time expenses or the buffer account you keep?

Yeah, I had 6 very large pines come down on my property in 2022 during a snow storm and it cost 6K to clean up by a professional tree service. Insurance does not cover debris removal, apparently, only property damage, so I was stuck with that bill.
By "capital" I mean high value, fixed assets that have a useful life more than a year. Car, expensive toys (my birding scope), replacing the heat pump.

This year is by pure coincidence a "big year." We have to replace the liner on the pool. We learned early this week that we need to drill a new well. It is also time to do a refresh on the chip & tar driveway.

The well could probably wait a year but I don't particularly want to play Russian Roulette with our water supply. The existing well is 43 years old and many similar ones in the area have been replaced.

Some large items are discretionary in some years. Like the years we did a lot of home renovation. But the year the heat pump died was not something we could control - it had to be replaced.

Next up is probably a replacement for my car. While it is low mileage (130K) is is a 2008 model year and eventually time will catch up with it.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by CloseEnough »

Bennie wrote: Fri Jun 09, 2023 3:27 pm So it is necessary to have a monthly budget *and* estimate one-time, larger, lump sum expenses,
This is MUCH easier, and likely much less important, than the recent question you asked about how to estimate long term care expenses.

Reality is in a 40 year retirement, in my view, if your plan has an appropriate amount of buffer, these expenses will not move the needle much, will be rounding error over that period. Think about the potential huge range of outcomes based on market performance, sequence of returns, etc. which will swing your numbers more than these one-time expenses.
Last edited by CloseEnough on Sat Jun 10, 2023 11:00 am, edited 1 time in total.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Wanderingwheelz »

backpacker61 wrote: Sat Jun 10, 2023 8:32 am
Bennie wrote: Fri Jun 09, 2023 3:27 pm an unexpected vacation/travel/trip,
This line item is one I struggle with. I don't think travel in retirement is really "unexpected"; it's one of the facets of retirement that I look forward to quite a lot. But how much to budget for it? I go on infrequent trips now while I'm working, but in retirement I visualize myself going both on much longer trips and to take them more frequently. And the cost will go up as I expect that as I age that I will want more "creature comforts" than when I'm younger.
I don’t know what you consider creature comforts or at what age you consider yourself old, but my wife and I (age 50+/-) jumped in the car one day to see a whole bunch of state and National parks last fall. It ended up being almost a month, and once I figured up all of the costs when we got back home it was about $4,500 (figuring we needed to eat even at home, and burned some gas too) which was about 1/5 of the budget I envision for travel once we no longer have earned income.

We stayed in Hampton Inn type accommodations or lower where it made sense, drove a reasonably full efficient vehicle, ate well but not fancy even fixing our own lunch sometimes, paid for some “extras” to add memories, etc. We were careful what we spent, but not to the point of harming our having a great time.

What this taught me was we can travel a ton in retirement as long as we limit resorts and five star hotels, expensive meals, and high end transportation like first class tickets or a Suburban for road trips.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

KlangFool wrote: Sat Jun 10, 2023 9:03 am
Bennie wrote: Sat Jun 10, 2023 8:39 am
KlangFool asked "how did you handle it before?" - good question - lately I have been taking it out of my retirement nest egg - when I was younger it was mighty uncomfortable: using credit cards, trying to pay back in 30 days but not always, cutting groceries and other expenses I would not be able to cut today.
Bennie,

I do not know your situation. But, I do not understand why you think you have a problem.

A) My annual expense is about 60K per year. This is with 15K annual mortgage payment.

B) I pay off my mortgage last year. So, I still plan to spend 60K per year. But, I have another 15K goes into the discretionary portion of my expense.

C) Out of my 45K annual expense before mortgage, I guess about 35K is fixed expense.

D) So, with 60K of annual expense, I have 35K per year fixed and 25K discretionary.

E) When I retired, I plan to use the VPW to increase amount of money to spend each. Preliminary calculation with my current portfolio size is about 75K to 80K per year.

F) Let's assume that it is 75K per year. Then, I have 35K fixed annual expense and 40K discretionary expense.

G) In my case, most of my annual expense will be discretionary and it is large. So, I do not see a problem. I can spend it on whatever that is higher priority for me.

H) I think your problem is you count too closely. I have only 2 pools: fixed and discretionary.

If you want a more detailed response, please provide your budget and numbers.

KlangFool
Thanks so much for the detailed example! One question I would have: is that before or after taxes? Not really important because everyone's numbers (needs) are different anyway.

Let's say there are 1K after tax dollars discretionary every month. That is 12K per year. So, yes, my 6K tree storm clearing might be covered, but it means 6 months of not a single dollar to spend on a postage stamp, or 12 months of 1/2 discretionary spending per month. I just don't want to get myself in a pickle after I announce retirement at work. So I am giving this more than a passing thought now. That's all.

The problem is that I did not trck these "extras" over the years, so getting a 15 year average, as randomguy suggested would give me some confidence but I don't have those numbers handy. Hence the request for input from others. Thanks so much again for yours!!
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Hacksawdave »

I save past budgets and roll forward based upon percentage change. I do not see benefits going too far forward by rolling many years in the spreadsheet. You can roll forward by creating a spreadsheet and adding several compounding years by using a formula like this for a 4% inflation example: (=prior year cell * 1.04) and stack the years for as many years as you want to see.

For example, a $5,000 monthly budget in 2023 will compound into a $7,697 monthly budget by year 2033.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by KlangFool »

Bennie wrote: Sat Jun 10, 2023 10:52 am
KlangFool wrote: Sat Jun 10, 2023 9:03 am
Bennie wrote: Sat Jun 10, 2023 8:39 am
KlangFool asked "how did you handle it before?" - good question - lately I have been taking it out of my retirement nest egg - when I was younger it was mighty uncomfortable: using credit cards, trying to pay back in 30 days but not always, cutting groceries and other expenses I would not be able to cut today.
Bennie,

I do not know your situation. But, I do not understand why you think you have a problem.

A) My annual expense is about 60K per year. This is with 15K annual mortgage payment.

B) I pay off my mortgage last year. So, I still plan to spend 60K per year. But, I have another 15K goes into the discretionary portion of my expense.

C) Out of my 45K annual expense before mortgage, I guess about 35K is fixed expense.

D) So, with 60K of annual expense, I have 35K per year fixed and 25K discretionary.

E) When I retired, I plan to use the VPW to increase amount of money to spend each. Preliminary calculation with my current portfolio size is about 75K to 80K per year.

F) Let's assume that it is 75K per year. Then, I have 35K fixed annual expense and 40K discretionary expense.

G) In my case, most of my annual expense will be discretionary and it is large. So, I do not see a problem. I can spend it on whatever that is higher priority for me.

H) I think your problem is you count too closely. I have only 2 pools: fixed and discretionary.

If you want a more detailed response, please provide your budget and numbers.

KlangFool
Thanks so much for the detailed example! One question I would have: is that before or after taxes? Not really important because everyone's numbers (needs) are different anyway.

Let's say there are 1K after tax dollars discretionary every month. That is 12K per year. So, yes, my 6K tree storm clearing might be covered, but it means 6 months of not a single dollar to spend on a postage stamp, or 12 months of 1/2 discretionary spending per month. I just don't want to get myself in a pickle after I announce retirement at work. So I am giving this more than a passing thought now. That's all.

The problem is that I did not trck these "extras" over the years, so getting a 15 year average, as randomguy suggested would give me some confidence but I don't have those numbers handy. Hence the request for input from others. Thanks so much again for yours!!
1) It is after tax.

2) Then, your problem is your discretionary portion is too small.

3) In my case, with the discretionary at 3K per month, I can get it done in 2 months or spread over 4 months.

4) You have zero safety margin in your plan. Hence, your plan and budget failed regularly.

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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

CloseEnough wrote: Sat Jun 10, 2023 10:21 am
Bennie wrote: Fri Jun 09, 2023 3:27 pm So it is necessary to have a monthly budget *and* estimate one-time, larger, lump sum expenses,
This MUCH easier, and likely much less important, than the recent question you asked about how to estimate long term care expenses.

Reality is in a 40 year retirement, in my view, if your plan has an appropriate amount of buffer, these expenses will not move the needle much, will be rounding era over that period. Think about the potential huge range of outcomes based on market performance, sequence of returns, etc. which will swing your numbers more than these one-time expenses.
:D Don't recall asking about long term care expenses... I might have... lots on my mind these days. I guess I am not a long term care planner. I hope my house will pay for long term care, should I, God forbid, need to go there. When that money runs out: medicare. I know it is not good care, but it is what it is.

The "appropriate amount of buffer" is what I am trying to stick a number on. You are right, of course, market perfromance, inflation, sequence of returns, asset allocation, all move the needle a lot, back and forth, one hopes. I just don't want to plan on one budget/number and after I pull the plug at work I find out that I need another. My annual withdrawl/budget numbers must include lump sum expenses. Trying to get ideas of how to obatin such a number for me here.

Thank you so much for chiming in on this!! :sharebeer
Last edited by Bennie on Sat Jun 10, 2023 11:38 am, edited 2 times in total.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

KlangFool wrote: Sat Jun 10, 2023 11:13 am
1) It is after tax.

2) Then, your problem is your discretionary portion is too small.

3) In my case, with the discretionary at 3K per month, I can get it done in 2 months or spread over 4 months.

4) You have zero safety margin in your plan. Hence, your plan and budget failed regularly.

KlangFool
1) Thanks!

2) Yes. Thanks! That is what I am finding with all your input. Just slow to catch up but better slow and pre-retirement, than after.

3) Thats sounds much better! Good for you!

4) Yes. I think I was so happy when my monthly was in the green, that I was eager to allocate "leftovers" to mad-money and live a little bit. Now I need to re-examine this and allocate more to pro-rated bigger expenses that were left out. The child in me, waiting for pocket money (after I subtracted all the required payments first) is not going to like this, since discretionary spending will be reduced.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

jebmke wrote: Sat Jun 10, 2023 10:15 am
By "capital" I mean high value, fixed assets that have a useful life more than a year. Car, expensive toys (my birding scope), replacing the heat pump.

This year is by pure coincidence a "big year." We have to replace the liner on the pool. We learned early this week that we need to drill a new well. It is also time to do a refresh on the chip & tar driveway.

The well could probably wait a year but I don't particularly want to play Russian Roulette with our water supply. The existing well is 43 years old and many similar ones in the area have been replaced.

Some large items are discretionary in some years. Like the years we did a lot of home renovation. But the year the heat pump died was not something we could control - it had to be replaced.

Next up is probably a replacement for my car. While it is low mileage (130K) is is a 2008 model year and eventually time will catch up with it.
I see. Thanks!

Sorry you have all that to take care of this year, but it will be nice when it is new and shiney again! :D

My truck is a 2000 with 230,000 miles on it. Love it! Low personal property taxes on it, too. :wink: It did have some repairs in the 3K range last year but I paid it and it runs great again. It cost us 10K in 2010 and no repairs since, so I think it is still good for the costs, including the repair. Rust on it is ok, not too bad.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by CloseEnough »

Bennie wrote: Sat Jun 10, 2023 11:15 am

:D Don't recall asking about long term care expenses... I might have... lots on my mind these days. I guess I am not a long term care planner. I hope my house will pay for long term care, should I, God forbid, need to go there. When that money runs out: medicare. I know it is not good care, but it is what it is.


Thank you so much for chiming in on this!! :sharebeer
My apologies, you did not ask about long term care!! Guess I too have lots on my mind these days :happy
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by idc »

How far are you from retirement? In my experience, if you're far, a ballpark approach is the most practical. If you're close, you can be more granular, since there will be far fewer unpredictable variables. I am semi-retired, and here is what I did:

1. Tracked all my expenses over the last 5+ year
2. I broke them down into a few separate categories after removing stuff that is not relevant (college for kids, work related, taxes, savings, etc):
a. essentials: you need to eat, pay bills, property taxes, maintenance, etc.
b. travel - with a wide range
c. medical - pre and post 65
d. expected lump sum: car every few years, new roof once, one off house renovations

I made the following assumptions:
- up to age 65 (go go years)
- the travel expenses will be super high, like >4X what I have done prior to retirement
- will replace two cars relatively more often
- roof replacement
- age 66-80 (slow go years)
- travel will slow down to 2.5X current expenses
- cars will be replaced less often likely with cheaper options
- one house renovation
- some of the essential expenses will be reduced - you tend to buy less stuff (clothes, latest tech, etc)
- age 80 - and beyond (no go years)
- travel will slow down to 1.5X current expenses
- only one car replaced less often and cheaper option
- reduced essential expenses even more

With all these, I entered them in your preferred retirement projection software. I tried a few, and currently using Pralana, Plan Vision and Fidelity's Full View, but there are a few other similar ones out there. You could try to implement your own Excel model too.

These are inexpensive options, will give you a fairly good idea of your cashflow, including impact of social security, taxes, RMDs, etc. It will give you not only piece of mind, but also the option to plan some Roth conversions, etc. And will also give you a very good idea how much cushion you have, plus the flexibility to know where to cut on those expenses, such as less travel, cheaper car, etc, without restricting yourself too much.

A few notes:
- I heard from multiple sources that as you age your expenses will go down, with the exception of medical expenses, which can be roughly planned
- I assumed long term care will be taken care off by the real estate equity I have, which represent a few multiples of the expected expenses.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

Hacksawdave wrote: Sat Jun 10, 2023 11:09 am I save past budgets and roll forward based upon percentage change. I do not see benefits going too far forward by rolling many years in the spreadsheet. You can roll forward by creating a spreadsheet and adding several compounding years by using a formula like this for a 4% inflation example: (=prior year cell * 1.04) and stack the years for as many years as you want to see.

For example, a $5,000 monthly budget in 2023 will compound into a $7,697 monthly budget by year 2033.
Thanks, Hacksawdave!

I guess if you use actual budget that you roll forward, your lump-sum expenses are included. Good for you!
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Bennie »

idc wrote: Sat Jun 10, 2023 11:51 am How far are you from retirement? In my experience, if you're far, a ballpark approach is the most practical. If you're close, you can be more granular, since there will be far fewer unpredictable variables. I am semi-retired, and here is what I did:

1. Tracked all my expenses over the last 5+ year
2. I broke them down into a few separate categories after removing stuff that is not relevant (college for kids, work related, taxes, savings, etc):
a. essentials: you need to eat, pay bills, property taxes, maintenance, etc.
b. travel - with a wide range
c. medical - pre and post 65
d. expected lump sum: car every few years, new roof once, one off house renovations

I made the following assumptions:
- up to age 65 (go go years)
- the travel expenses will be super high, like >4X what I have done prior to retirement
- will replace two cars relatively more often
- roof replacement
- age 66-80 (slow go years)
- travel will slow down to 2.5X current expenses
- cars will be replaced less often likely with cheaper options
- one house renovation
- some of the essential expenses will be reduced - you tend to buy less stuff (clothes, latest tech, etc)
- age 80 - and beyond (no go years)
- travel will slow down to 1.5X current expenses
- only one car replaced less often and cheaper option
- reduced essential expenses even more

With all these, I entered them in your preferred retirement projection software. I tried a few, and currently using Pralana, Plan Vision and Fidelity's Full View, but there are a few other similar ones out there. You could try to implement your own Excel model too.

These are inexpensive options, will give you a fairly good idea of your cashflow, including impact of social security, taxes, RMDs, etc. It will give you not only piece of mind, but also the option to plan some Roth conversions, etc. And will also give you a very good idea how much cushion you have, plus the flexibility to know where to cut on those expenses, such as less travel, cheaper car, etc, without restricting yourself too much.

A few notes:
- I heard from multiple sources that as you age your expenses will go down, with the exception of medical expenses, which can be roughly planned
- I assumed long term care will be taken care off by the real estate equity I have, which represent a few multiples of the expected expenses.
Thanks so much for the detailed reply, idc!

Wow - you think you are gonna slow down with 65? :D I would put the go-go time frame to 75, 75-85 slow-go, and then no-go after that. *And* if you are so inclined, you can shift that out further with vigorous excercise. We have a cross-fit studio here with dedicated coaches. I don't want to compete - that is not my bag - but I figure if I can walk on my hands and climb up a rope, I won't need assistance to get out of a chair - ha ha!

I tried Pralana Bronze and was not impressed. It was their free version and had programmers' notes in some tabs and headers, looked pretty unfinished to me. What version are you using? Do you like yours? I had another thread on that here viewtopic.php?p=7252254&hilit=calculators#p7252254
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Leif »

Just build a spreadsheet. You probably know your expenses, but if not do some research. Of course don't forget new car expense, based on what you normally pay and frequency of replacement. Also, don't forget maintenance your house. I added a cell to put in estimated inflation to see the results over the years. Income sources as well could be added to get an idea of your long term cash flow.
Last edited by Leif on Sat Jun 10, 2023 12:55 pm, edited 1 time in total.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by backpacker61 »

Wanderingwheelz wrote: Sat Jun 10, 2023 10:45 am I don’t know what you consider creature comforts or at what age you consider yourself old, but my wife and I (age 50+/-) jumped in the car one day to see a whole bunch of state and National parks last fall. It ended up being almost a month, and once I figured up all of the costs when we got back home it was about $4,500 (figuring we needed to eat even at home, and burned some gas too) which was about 1/5 of the budget I envision for travel once we no longer have earned income.
Thanks for replying.

I am early 60's and don't consider that quite old yet.

I was thinking of travel costs in my 70's and possibly 80's. I don't have an issue flying economy now, but in 10-15 years, I might not want to make that choice. The difference in airfare between economy and business class is huge. I would also likely upgrade overnight accommodation at that point. On my most recent trip, I used some backpacker accommodation (hostels).
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Sandtrap »

TomatoTomahto wrote: Fri Jun 09, 2023 4:43 pm I’m not recommending this, but you asked for strategies that worked, and I expect that our strategy will work fine. We (or more accurately, my wife) just worked much longer than many younger BHs seem to think is appropriate. We have enough assetsect to withstand almost anything short of a financial apocalypse or medical advances that have us live to age 200.
+1
Stage of life and lifestyle changes as well as health "black swans", and family dynamic "perfect storms" can sink most spreadsheet projections, and make 25x seem marginal.

Much depends on each person's financial structure that includes pension income streams or not, and how much one relies on only an outside portfolio for income. For the later, 30-50x is not unreasonable at all if from a non employee perspective.

Per Nassim Taleb's excellent book on "Black Swans", it is not a question of if but when one's finances will be hard tested during one's retirement and aging years.

Life does not fit on a spreadsheet or flight plan.
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by idc »

Bennie wrote: Sat Jun 10, 2023 12:18 pm Thanks so much for the detailed reply, idc!

Wow - you think you are gonna slow down with 65? :D I would put the go-go time frame to 75, 75-85 slow-go, and then no-go after that. *And* if you are so inclined, you can shift that out further with vigorous excercise. We have a cross-fit studio here with dedicated coaches. I don't want to compete - that is not my bag - but I figure if I can walk on my hands and climb up a rope, I won't need assistance to get out of a chair - ha ha!

I tried Pralana Bronze and was not impressed. It was their free version and had programmers' notes in some tabs and headers, looked pretty unfinished to me. What version are you using? Do you like yours? I had another thread on that here viewtopic.php?p=7252254&hilit=calculators#p7252254
You're welcome :)
It really is a personal preference on how you're considering age bands. The salient point I am making is that most of your expenses, except healthcare, will likely decrease as you age. And healthcare can be a relatively known entity. And if health care suddenly gets more expensive, it is clear to me that travel will become less of a priority anyway. And I don't expect this to be my immutable forever plan either :) Will adjust based on what's going on for sure.

I debated quite a bit with myself about all this. It is clear to me that I will be more likely to enjoy my opportunity to travel and enjoy life more while younger than as I will age. Yes, you can stay and continue to work, presumably till the day you die and will give you more peace of mind. And if you love what you do and does not stress you out then more power to you. It took me some time to switch my mind off the rat race, even past the point I was financially independent. Not easy to do and I am still in the process of doing it. That's why I am partially retired now. I tried taking on a one year sabbatical as a trial run and did not work psychologically. I went back working part time, theoretically full time, but with my skills it feels like a part time job in which I easily over perform and without any of the stresses related to corporate life. I am having so much fun when someone at work looks at my consultant title (supposed to be an inferior position) and they discover I am running circles around them :) So liberating and fun, I am so lucky to be able to get such gigs as part of my transition in retirement. But I digress :)

In terms of software, I use Pralana gold. It can be very intimidating for someone who's not familiar with Excel. Very powerful, but very easy to make mistakes if you don't know what you're doing. Plan Vision is excellent because it is a lot less intimidating and you can have a once a year 40 minutes session with a very knowledgeable human to check your math.

Good luck :)
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Re: How do you estimate lump sum expenses in retirement for 40 years?

Post by Broken Man 1999 »

We will continue to cover lump sum expenses the same way we cover them today: Distribute the funds from our investments in our TIRAs.

I know we will need a new roof in the next couple of years, and perhaps a new vehicle.

Our portfolio is capable of providing funds for both in down years, up years, sideways years, whatever years. We do not set aside funds for any particular expense coming due, expected, unexpected, our TIRAs will support our expenses.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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