I just celebrated my one-year anniversary of being retired. While retired life is very much as I had pictured it, there were also some surprises. This is my first in an I-don't-know-yet-how-many part series, reflecting on the first year.
Like most retirees, much of my retirement planning was devoted to figuring out how much money I would actually need to retire. I created elaborate spreadsheets, factoring in estimates of portfolio returns, inflation, life expectancies, and spending levels.
As you may have guessed, the "portfolio return" portion of this reality show was not really as good as the preview promised. Now that the market is down over 50% from its highs, I look back at my angst-filled posts of last year, when I had experienced declines of just 4%, and later 13%, as the good old days.
There's more than one way to skin a spreadsheet, and while the portfolio return isn't delivering, the spending part of the equation has outperformed. I never really believed the advice that retired life would only cost 70 to 80% of pre-retired life, so my retirement budget was a bit more generous. It turns out though, the experts were right. We spent much less in the first year of retirement than I had expected, about 75% of my last working year.
While we did spend more than we planned to on gas and dining out, we spent a lot less in all areas of STUFF. With my hard-earned retirement minutes, the absolute last thing I want to spend them on is shopping for stuff. I'd much rather read, exercise, visit with friends, or spend some time in the garden. Most of the things I enjoy doing don't cost a dime, and the proof is in the bank account.
Spending on household and garden items, clothes, even groceries was far less than we budgeted for (and yes, so was spending on booze.) We also spent a lot less on vacations, recreation, and even on utilities.
As the nest-egg shrank, we did become more aware of our outflows, but the truth is, we didn't really attempt any drastic cut-backs. About 40% of the budget is actually discretionary purchases. So, unlike the Fed, we do still have some tools left in our monetary policy tool-kit. If the economy continues to stumble along, we've got lots more room for budgetary improvement.
With all the economic turmoil this year, it was beginning to look like the only way to get the retirement spreadsheet to work again, was to die decades earlier. I must say the alternative, simply spending less, is a much more attractive option.