On the heels of yesterday's post about articles that might scare people about how much they need to retire, Marketwatch took a look at h[ow much retirees are spending per month](https://www.marketwatch.com/story/reality-check-what-the-average-retiree-spends-a-month-2018-06-05?siteid=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A%20marketwatch%2Fpf%20(MarketWatch.com%20-%20Personal%20Finance%20News%29) on average today. This is line with my belief that this must be a bottom up exercise that should be useful but I concede it cannot be perfect.
The average monthly outlay per the article is $3800/mo. With a nod to the idea that this isn't perfect maybe it makes sense to pad that by 20% for expenses that fall through the crack in terms of what people keep track of. This takes the average up to $4560/mo. How much would you like to add for travel? This year we will have taken three road trips not very far from home that were each in the neighborhood of $1000 and we took one big trip that probably cost about $5000 all in but that was spread out at as we bought our plane tickets and rented our VRBO a couple/few months ahead of the trip. How different are your typical travel plans and what do you spend? What about unbudgetable one-off expenses like home or car repairs, vet bills and others? I would argue budgeting $1000/mo for these items.
This might work out to another $1500/mo so now the average is up to $5960. Uh oh.
Marketwatch says the average spent on housing is $1322/mo. If you've paid off your mortgage then that number should be much less unless you live in New Jersey or Illinois or some other place with very high property tax.
The rest of the list is a mix of things that are not necessarily grouped in an intuitive fashion but I do think the $3800 starting point is useful. I've disclosed this sort of budgetary view of our expenses which add up to about $4000/mo including a $1350 mortgage payment that will be paid of in three or four years. What are your monthly expenses? Which ones will decline, like housing expense, and which ones could you reduce if you chose to like a cable TV bill and so on?
The health care expense was listed at $499 which surprises me as it includes Medicare expenses. I saw a tweet from Ryan Stephens that said "85% of healthcare costs in the US go to treat preventable chronic diseases." I can't vouch for the 85% number but anyone paying the slightest bit of attention understands that blood sugar issues, high blood pressure issues and obesity issues are all wide spread and cost a lot to manage.
With a little bit of learning you can see that in some (many?) instances these maladies can be reversed with changes to diet and exercise. Are you spending a lot of money now on healthcare? Are you able to change habits (not everyone can) and if you are, are you willing to try? The financial benefit could be immense and go along way to reducing your fixed monthly expenses.
I think you can get a grasp of what your monthly number will be. It may change of course but getting a rough idea is plausible. It is even easier to find out what you're likely to receive from Social Security. If your expected benefit $3000/mo all in and your expenses are $6000 then you need to figure out where that $3000 will come from. Assuming the 4% rule for portfolio withdrawals implies needing $900,000 for $3000/mo.
Knowing your numbers boils down to simple spreadsheet work. Figuring out how to overcome a problem is more difficult. There are many ways to overcome shortcoming in this financial picture. The ones I have talked about include downsizing your house such that you pull cash out (would also lower ongoing housing expenses like utility bills and property tax) or moving temporarily to a foreign country while living off the cash flow from renting out your house here which allows Social Security and the portfolio to keep growing or getting some sort of a part time or post retirement job which could include monetizing a hobby.
If your gap is $3000 and you can create an income stream that pays $1000/mo then that could mean you can get get by on just a $600,000 portfolio assuming the 4% rule, at least for a while, $2000/mo is $24,000/yr is 4% of $600,000.
Complicating this is the possibility that Social Security gets cut by 23% in the mid-2030's. The 23% seems to be the number being thrown around but the exact year seems to change. Many people believe there is no way it will be cut. I don't care about trying to predict what will happen as opposed to being prepared if it happens.
It is now 2018 so you have along time to figure out to mitigate a possible cut in SS. There is absolutely no reason why this should sneak up on anybody.
As I always do, I will quote Joe Moglia who says no one will care about your retirement more than you. Hopefully you will learn some of what you need from this site as the years continue on.