Reflections on My First Year of Retirement (Part 1: Money)

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.

Thank goodness, as one commenter noted recently, frugal is the new black.  Yesterday, the New York Times said that conspicuous consumption is out, so I'm fitting right in.

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.

Related Posts:

    If I Weren't Retired, I'd Still Be Working

    The Market:  This Time is Different

    Retiring Into a Down Market--Part III (or Armageddon)

    And With This I Would Marry Him All Over Again

Comments

[Dreamer]

So how much did you spend in your first year?

[Dennis]

Love the observations, as always!

I am just hitting year one of my retirement as well, and the thought of going back to the work thing seems repulsive now ... freedom is worth any adaptation of lifestyle, although we too are finding our requirements are MUCH less than anticipated...

[Retired Syd]

Dennis: Well I'm glad to hear it's working the same way for you--I think those lusting after retirement will find that encouraging, that it's not just me!

Dreamer: I kind of figure the actual number is meaningless to the world since everyone's got such different lifestyles. So I've never really thought it would be helpful to publish actual numbers.

[Sylvia]

I've also been doing a balance sheet on how much I have to spend now that there isn't a steady inflow of money and how grateful I am - even with budget restrictions - to not be working. Indeed, it's that feeling of privilege and gratitude that I've been thinking about so much these days. Thanks for all of your good advice Syd; it matters.

[Dreamer]

No not meaningless at all - I wanna see how you managed to do it in your early 40's so I can do the same

[Judy @ Straw Cottage]

I've been following since the beginning and think you have settled into retirement quite nicely. Thanks for you great writing throughout the year.

Dreamer, Syd's before retirement income and my current income are very different, therefore we have different lifestyles and the amount needed for retirement would be very different. But, the fundamental principles are the same-save more spend less. If you want actual figures-go see Jacob at Early Retirement Extreme.

[Retired Syd]

Judy: Thanks so much for reading all this time, I really appreciate that and your comments.

Dreamer: Judy points out the difficulty with absolute numbers here--if you ever read Early Retirement Extreme (which I love, by the way), he says you should be able to live on something like $6k/year, a number that doesn't even pay my property tax, so that's the problem with absolute numbers, you have to adjust for your lifestyle, where you live, etc.

But once you figure out what you spend right now, and examine that budget for what things will increase (like health insurance) and decrease (like clothes, dry cleaning, and commute costs), you have your own personal retirement budget. Multiply it by 33 and that's how much you need in today's (pre-inflation) dollars:

http://retiredsyd.typepad.com/retirement_a_fulltime_job/2008/08/how-much-money-do-you-need-to-retire.html

[Dreamer]

@judy straw cottage - why are you responding for Syd?

Syd - yeah I read Jacob's blog - which I agree is great - but he is very extreme, so for me it is of limited assistance.

[Retired Syd]

Dreamer: Yes, I guess you could call me the not-so-extreme-early retirement.

By the way, I'm fine with anyone that comments on anything, my posts or other's comments, so Judy's reply is ok by me!

[Judy @ Straw Cottage]

I was responding for myself, providing a sort of compare/contrast thing. Yep, that's my name under there-sorry for any confusion.

[Fixed Annuity Guy]

very good post

[Gretta]

So what was it that you cut back? I am thinking things like trips to Target or Fred Meyer that having incoming cash flow lends itself to. If your food budget went up but your recreational budget is stagnant, what else did you cut?

[Retired Syd]

Gretta: Actually, our expenses for food didn't go up, only meals out.
As I mentioned, our expenses for household and garden expenses (stuff and repairs and maintenance that we used to pay for that we now do ourselves, including cleaning, painting, gardening, etc.) went way down. Also, while we traveled a lot more than when I was working, vacation expenses were a LOT less than I expected. Bargain hunting, home-swapping, and driving more than flying all helped.

I find now that I HATE shopping for stuff (stuff for the house, clothes, etc.), and frankly I don't need anymore stuff. I guess I used to do that for recreation. I don't think it's fun anymore, so that saves a lot of money.

[Andews Hayes]

Balancing expenses can be difficult at times. Spending less is the only choice to cut down on expenses. But quality should never be sacrificed. At the end of the day, what matters most is that you guys are happy. =)

[annuities rates]

Thank you for sharing your story, I truly love it.