Author Topic: What do you do when you overspend in retirement?  (Read 4959 times)

deborah

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What do you do when you overspend in retirement?
« on: April 02, 2014, 04:42:03 AM »
Before I retired, I worked out exactly what I needed to live on. Not at true mustaschian levels, but quite frugal. And this is what I have been spending for the past few years.

However, this year (July to June) has been one thing after another. Dad got cancer, so I needed to drive 7 hours to his place twice a month. Got cruise control in my car, because my knee was aching for a couple of days after driving those distances. Bought something expensive I have wanted for years that was within budget before the rest happened. Went on a holiday to the middle of nowhere (within budget), and my car died and cost a lot to fix (including a 4 hour tow). The breakdown was because the mechanic had not tightened the gearbox plugs when he changed the oil. The car has been very expensive since the breakdown as the new mechanic has found other things that hadn't been done right. Now my dentist says my teeth are going to cost a heap to fix.

So my budget has really taken a pounding, and I will probably spend about twice what I budgeted.

So do I just say, "life throws curved balls occasionally", write this year off as a curved ball, and start again next year with the "normal" budget. Or do I try to recoup? Because I retired with a bit more than I needed, I can afford it. But maybe it is setting a bad precedent if I don't try to recoup.
« Last Edit: April 02, 2014, 11:42:38 PM by deborah »

arebelspy

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Re: What do you do when you overspend in retirement?
« Reply #1 on: April 02, 2014, 07:21:30 AM »
That's a fairly personal question based on you, how much your risk tolerance is, the amount your buffer was, and is, etc.

Personally I'd be cutting back at least a little.  One key to ER longevity is flexibility. 

Run your scenario through www.cfiresim.com and see where you're at.
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Thegoblinchief

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Re: What do you do when you overspend in retirement?
« Reply #2 on: April 02, 2014, 07:29:04 AM »
I would cut back. I'd rather sacrifice a little than have to un-retire.

My budget had large buckets for travel and capital improvement that act as buffers for bad years. We'd love to spend the full travel budget every year, but if something comes up, that's the first thing to get cut.

Alternatively, if you're already doing a side job during retirement, maybe crank a few more hours a week into that?

deborah

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Re: What do you do when you overspend in retirement?
« Reply #3 on: April 02, 2014, 01:38:43 PM »
As I my budget has slack built in, I don't need to un-retire.

Catbert

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Re: What do you do when you overspend in retirement?
« Reply #4 on: April 02, 2014, 02:09:38 PM »
How long have you been retired?  If you've been retired for quite a while (7 years +) and this is the first expensive period then maybe cut back a bit for awhile until you're back on track.  No need to worry too much however. OTOH if you've only been retired a couple of years then you may have underestimated what it really cost you to live. If so you'll need to regroup...cut budget, work part-time or something.

I've found that every year brings a few non-recurring and seemingly unexpected expenses (e.g., new roof needed, totaled car, trashed rental house, great vacation, major dental work).   I've built a big buffer in my retirement income to accommodate these event.

arebelspy

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Re: What do you do when you overspend in retirement?
« Reply #5 on: April 02, 2014, 03:37:12 PM »
As I my budget has slack built in, I don't need to un-retire.

Yet.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

ch12

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Re: What do you do when you overspend in retirement?
« Reply #6 on: April 02, 2014, 06:08:24 PM »
As I my budget has slack built in, I don't need to un-retire.

Yet.

http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/

but also

http://www.mrmoneymustache.com/2012/06/07/safety-is-an-expensive-illusion/

The fear of having a crazy year where one thing comes after the other is what makes me semi-certain that I'll do a bit of part time work once I'm FI. Just a tiny bit of active income makes all the bumps go away and will give me peace. I think about Leapforce at home for $13.50/hour. http://frugalparagon.com/2014/02/05/why-the-frugal-paragon-loves-leapforce-at-home/ I also have a skill set that can get me ~$60,000/year 100% remote (not as good as some people on this forum). Active income may not be required by math/logic, but it may be required as an anxiolytic.

Nords

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Re: What do you do when you overspend in retirement?
« Reply #7 on: April 02, 2014, 06:58:37 PM »
So do I just say, "life throws curved balls occasionally", write this year off as a curved ball, and start again next year with the "normal" budget. Or do I try to recoup? Because I retired with a bit more than I needed, I can afford it. But maybe it is setting a bad precedent if I don't try to recoup.
Recouping is one option, and probably a conservative one.

Another option would be to pretend that you're going to ER tomorrow, run your current numbers through cFIRESim or FIRECalc, and see what new budget works.

La Bibliotecaria Feroz

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Re: What do you do when you overspend in retirement?
« Reply #8 on: April 02, 2014, 07:02:24 PM »
That's exactly how I feel about Leapforce--just putting *something* toward the family makes me feel good. I actually (finally) got promoted to Preferred Rater, which was a pretty significant raise. I often recommend it to people who are between jobs, too--you can't beat the flexibility.

As I my budget has slack built in, I don't need to un-retire.

Yet.

http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/

but also

http://www.mrmoneymustache.com/2012/06/07/safety-is-an-expensive-illusion/

The fear of having a crazy year where one thing comes after the other is what makes me semi-certain that I'll do a bit of part time work once I'm FI. Just a tiny bit of active income makes all the bumps go away and will give me peace. I think about Leapforce at home for $13.50/hour. http://frugalparagon.com/2014/02/05/why-the-frugal-paragon-loves-leapforce-at-home/ I also have a skill set that can get me ~$60,000/year 100% remote (not as good as some people on this forum). Active income may not be required by math/logic, but it may be required as an anxiolytic.

CarDude

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Re: What do you do when you overspend in retirement?
« Reply #9 on: April 02, 2014, 07:11:31 PM »
I'd revisit the numbers and pretend I was about to ER again. I did that several times throughout a variety of life changes, and it helped tremendously.

deborah

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Re: What do you do when you overspend in retirement?
« Reply #10 on: April 02, 2014, 11:39:07 PM »
Looked at cfiresim and it says I am OK. In fact, there is more in my savings than there was at the beginning of the year (this year has been a really good year).

I was always very nervous about the amount I had for retirement, so I waited for an extra couple of years, and have quite a buffer. cfiresim is saying that even if I spend as much as I have this year (about twice my budget) I would still be OK for all but 7 out of 113 times.

No, I haven't been retired for long (this is my fourth year) but I had the same expenses as my budget for the five years before retirement. I guess I am worried that my budget is too low, particularly since my car will probably need to be replaced next year and I wanted to go overseas next year (a tour that was last offered 5 years ago is being offered again).

MrsPete

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Re: What do you do when you overspend in retirement?
« Reply #11 on: April 03, 2014, 05:52:16 AM »
No matter whether you're retired or still working, you're going to have years that're easy financially . . . and years that're tough.  If I were in your shoes, I think I'd handle it like this:

- Revisit the part of the budget that deals with replacing cars.  Visiting your dad is a need, and you'll feel better about it if you're doing it in a reliable car.  Since you're not working (and presumably not driving on a daily basis), your car might last you well past a decade, but it's going to need maintenance and eventually it's going to need replacing.  Be sure you're diverting X amount each month into a savings account so you're ready for these expenses.

- If you can't afford to do things you want -- like take the occasional trip, what's the point of being retired?  I say sign up for the trip you want to take . . . BUT since you've "been spendy" in the last year, look for a new, temporary income flow to supplement the cost of the trip.  It's almost summer, and seasonal stuff may be coming along.  For example, there's a ballpark near us that hires people for the summer.  I wouldn't mind taking money for parking or serving beer in a casual atmosphere, where I could wear shorts and tennis shoes to work, especially knowing that the job'll end in the fall.