After I read this post over at Cash Money Life, I realized that I too, am an eat-out-aholic. In fact, it is the second largest line item in my retirement budget right after property taxes. Seems strange for a gal that won’t even splurge for a gardener or house cleaner, doesn’t it? (And I know it really seems strange to you Jacob!)
But here’s the thing. Just because you’re retired doesn’t mean you can’t spend money on anything you want. Yes, you need to determine how much you will spend each year so you will know how much of a nest egg you will need for retirement, but within that overall budget, you are free to mix your spending to match your desires.
When building a retirement budget, I believe you should start from the ground up. I do not subscribe to the standard rules of thumb that say you need x% of your previous income in retirement. Each person spends a different portion of his income, so standard guidance is useless. We spend about half of our previous income, but that’s because we saved a lot of our income and were paying much more in taxes when I was still working. So telling someone else with a totally different financial picture that he can live on 50% of his working income would be completely misleading.
Instead, you should start with your actual spending. Use that to project out your retirement budget, build in more if you want to spend more on travel or new hobbies. Add some in for the increased burden of buying your own medical insurance. Subtract a little for things you won’t need anymore, commuting costs, work clothes, take-out lunches, and contributions to your retirement accounts. Figure out exactly what your desired lifestyle will cost, don’t base it on some fictional, standard retiree.
You’ll come up with a total and that’s the only part of that budget that really matters going forward. Want to go on a more luxurious vacation one year? Well ease up on new clothes and dining out that year. Surprised to see you spent less on gas this year? Use that money to enjoy a few more concerts or shows next year. I was pleasantly surprised to receive a huge reduction in my property taxes the last couple of years, which not only took the sting out of the increase to my health insurance premium but also means we’ve been under our budget each year of retirement so far.
Our first year of retirement, we took “only” six weeks of vacation, but used the vacation budget to stay in some nice places. The second year, we saved on lodging by swapping houses for some of our trips, but got 12 weeks out of town in exchange.
You’re not locked into anything in that retirement budget except the total. Go ahead, eat out, travel, buy clothes, be whatever kind of –aholic you want, it’s your money you worked hard for it, now go enjoy your retirement guilt free.
This is an article from Retirement: A Full-Time Job