[USER]

For those of you that either have or are looking to retire earlier (mid 40s, early 50s) did you add some type of buffer into your planned retirement expenses for uncertainty?

I’m not referring to inflation as that’s a mathematical formula, but more just uncertain expenses since it’s really hard to predict the next 10 years if not the next 40 years.

If so, what is that buffer as a % or dollar amount of the base expenses?

I’m also not referring to planned expenses such as increasing travel, or those that have a specific purpose because we’ll assume those are already in.

Or do you assume that any increased spending in the near term will be offset by less expenses post 65 (paid off mortgage, no health insurance premiums, less travel).

Realistically, age 45-65 would be my higher spend years, and then see that ramping down after 65.

I do not wish to include excessive healthcare expenses since will be covered under Medicare.

Also, I will receive a reasonable amount of SS in 60s which reduces the risk, but no pension or any other fixed income prior to this.

I’m not overly conservative but I do think a reasonable buffer makes sense and curious as to how you all approached?

I’ve never tracked expenses and finally just was able to come up with annual expense number based upon last year that will carry me into early retirement as I want to keep the same lifestyle, no more, no less up through 65.

I’m pretty frugal by nature if that matters, and actually realized I was approaching FI incidentally.

I did not plan to save x per year nor to retire at age y, just always spent what I wanted (most on experiences) and saved the rest, and it added up quit nicely over the past few years. I’m 42/F and married, but we keep finances separate.

Husband will continue to work and pay his half expenses (but obviously have an extra buffer here if needed for a specific hardship or unforeseen event).

[Taliah]

I have a goal buffer of one million over need. I’m not retired. Would like to by 55.

[Amy]

Not a buffer due to that exactly. But you obviously have to plan on at least 50years of retirement if you retire at 40.

As you may know the Trinity study which is the one that advocate a 4% withdrawal rate is only based on a 30 year time frame so you probably should plan on either taking less or having more.

[Steve]

So, are you retiring at 45?
I am yet to retire. But my calculations don’t have a specific buffer.

Instead I use conservative assumptions

1) 3.5-4% inflation rate
2) 7% investment return pre-retirement and 5% return in retirement
3) conservative monthly spend assumptions
4) no decrease in spending post-70
5) 3-3.3% safe withdrawal rate
6) over 95% success rate in Monte Carlo simulation

[Jason]

Less on surprise expenses, more on downside return contingency… Budget 1A assumes current standard of living, and I translate that into a withdrawal rate of ~3.5%.

Budget 1B looks at where we could reasonably trim expenses if inflation runs high or returns run low in the early years of retirement, and comes to a withdrawal rate of ~2.8%.

[Collins]

I always created a budget (and account) for everything I wanted, so house, retirement, vacation, boat, cars, etc. and never stopped contributing to them.

When I retired I had/have plenty set aside for what I expect I’ll want or need.

(If something unexpected comes along, like a trip to the moon, I will probably have to use the funds from somewhere else, but not my retirement fund, if that makes sense.)

[Ashley]

Don’t count on Medicare for all of your heath needs. Paying for long term care can be crippling – and you want options.

And even aging in place means you may need help with shopping, house cleaning, lawn work.

[John]

just get way richer than you ever thought possible and spend like before you had it + more in 1 or 2 categories that make you happy.

For me that’s travel and experiences

[Dion]

I calculated it two ways.
Fi and Ff
Financial independence. My living expenses are covered (I spend a little less than 4k a month.

I house hack and drive paid off cars)
When cash flow passed 4k I could change jobs if I needed to.

Financial freedom. Cash flow was at least 4 times my independence number. Now work was optional and I retired.

I invested in an asset class that benefits from o Latin. And included the 4X multiplier for price of mind.

[Author]

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