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URL:  http://boards.fool.com/the-word-budget-means-different-things-to-30659426.aspx

Subject:  Re: include taxes when figuring withdrawal needs Date:  4/29/2013  9:29 PM
Author:  2gifts Number:  72136 of 75384

The word budget means different things to different people - so your budget may be all you need. Here is what I did and I feel confident the process will work for you. I tracked actual income and expenditures in quicken for several years. (While I don't see a reason to count pocket change every night, if you are putting more than 0.5% of expenditures into the "Unknown Stuff" - you are not going to know. Once you have this, you can project with no life style changes your living expenses. If you have work clothes (like nurses uniforms) you won't need those. If you wear suits, you won't need them as much, so in addition to lower clothing, dry-cleaning will end. We live in a place where retirees have lower property taxes. But if you will be traveling more, guess something like gasoline might go up. Once you retire, the funds you have been saving for retirement will drop from your spending.

Thanks. This is very similar to what I did to create our budget. I update it annually based on our actual expenses, and I have adjusted for expenses that will go away while adding in others. We have quite a bit of 'play' money in the budget, but that is the life style we want in retirement, so that is what I use in our budget. It is by no means close to bare bones.

?Do not forget healthcare costs. Medicare part B, which everybody pays starting at $104.90 per month in 2013. Most people need to have either a MediGap policy to cover the remaining deductibles and co-psys. (These co-payments are actually 20% of the total medical costs.) With big ticket items like a heart bypass costing well over $50,000 - 20% of the whole cost is not trivial. Another medical cost is Medicare Part-D. That is drugs. You do not have to sign up, but for every month you do not signup your future premiums, should you signup will increase by 1%. So for example if you delay just over 4 years - when everybody else is paying X per month for your Part-D plan, you will pay 1.5X. A healthy 65 year old may not have much in drugs. But in the last 5 years of life, most people have several drugs and not the cheap ones.

I am carrying medical insurance at close to what my COBRA payments would be, and that is more than I will need, but we have a bit of a unique medical situation now that may or may not continue, and so I'd prefer to carry the cost of the insurance assuming I have to pay the whole thing. In reality, there should be significant fat in that number.

Finally if there is a serious hole in your financial plans, the best solution is to keep on working - maybe you don't have the same job, maybe you earn a lot less - but you are earning something.

The plan is coming together nicely. The kids are graduating college in 3 weeks, and I have been curious to see if we could retire within 2 years after that, as we had been planning. Turns out that, according to the calculator and depending on if I use the number with or without taxes included, we can either retire in 3 or 4 years, so we're pretty darn close. And I'm using the numbers assuming we have NOT downsized, although we do plan to do that, and I have a budget with those estimates as well. I will be able to refine those once we actually do the downsizing, but that's probably 2-4 years out, knowing how long it takes us to do anything major like that.

All of this is excellent food for thought.
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