Empty Nesters Spending Too Much, Saving Too Little

It would be great to also hear from people who've retired on a budget. How did you manage? Has it been easier or more difficult than you expected?

We are less than 3 years from retirement and met with a financial planner to create three budget scenarios. The kids are out of college, the daughter is married and we moved from Connecticut to living on the waterfront in North Carolina. Think that we've done the right things but never had a real plan. Will sit down with our planner in a few weeks and see what reality looks like.

Being from Wisconsin we did serious research, planning and travel for 5 years to figure out where we would go when we made the big escape. We aren't on a tight budget but cost of living was key to us because we travel a lot. We love the 1,500 square foot house we moved into that is not full of stuff. We just returned from a visit to someone who is trying to decide if she will move to another state when she retires. I don't think she has figured out that her house crammed with stuff that she will not part with is nothing more than a ball and chain.
We ultimately retired to a Del Webb community in San Antonio and have been thrilled with our decision. There is no state income tax so that money is going for a cruise. Diesel and unleaded are both $1.99 today so we save on gas. Fruits and vegetables are really cheap year around. Big red peppers were 50 cents each yesterday.
Property taxes are the 5th highest in the country but when you came from a state where the property taxes are the 2nd highest in the country they seem reasonable to us.

Starstruck, This might sound dumb but this is one thing I do. This is the first year we are both on Social Security and both get checks deposited. We also have one pension check and an inherited annuity that we have to pull out required minimum distributions. We then figure out what the maximum amount we can have as income per year to qualify for the Obamacare subsidy and we stay around $5,000 below that (just in case we win some lotto money, LOL). So we may only need to pull out $10,000 from an annuity. For the last two years we have gotten money back from Federal Income tax and State Income tax. I put all that money together and divide it by 12 and make one deposit to our checking account each month. I know if I put it in the checking account all at once I know it would disappear prematurely.

Our local grocery store has one Senior day a week. Once in awhile when we are low on a lot of things we load up and spend over $300 and get $30 off plus any regular weekly bargains. I do a lot of online shopping through Walmart, Costco and Amazon. Most of the time I get free shipping and it saves me time and gas and the luxury of delivery service. We also have a Service here in CT called Peapod. It is affiliated with Stop and Shop grocery stores. You go on line and pick out all the grocery items you want and pick a delivery day and time frame and they deliver it to your door! It is awesome! We have very hard water and need bottled water for our coffee maker and other needs. We have them bring 12-15 gallons at a time. When you first join they wave the delivery fee for about 2 months then if you order $100 of groceries, it costs about $6.95 for delivery plus I give the delivery guy a tip. Many times they still give you free delivery and give you a coupon code. The last time I got free delivery and $2.00 off because it was a Wednesday and I guess a slow delivery day for them. They also take coupons but I rarely use them.

Another thing, we are on a budget plan for our oil heat. Last year my oil price per gallon was $2.79 a gallon. I checked the website about a month ago and I was able to lock in at $1.99 a gallon! I was thrilled. We just sold a car we had. It was 10 years old and my Hub used it to commute to work. We don't drive that much and it just sat there. So now we will pay less car tax to our town and less car insurance because it is off the policy now. We still have 2 vehicles.

A lot of things are just common sense stuff. If chickens are on sale and you have a freezer, buy some good sized ones and have the butcher butterfly them. Ask to keep the backbone and organ meat (they will take it if you don't ask). Once they are flat from being butterflied, you can stack them pretty easily in the freezer. I cover them with foil to help prevent freezer burn. Once you cook the chicken, save the bones and put them in your freezer and make chicken soup once you have enough bones! It is so good and good for you! Buy what is on sale. Right now corn on the cob is 10 for $1.99. Buy it, boil it for 5 minutes, dry on a towel, wrap in saran wrap, vac pack or wrap in foil, then freeze. It will last a long time and you will appreciate it when the price of corn goes up in price!

These are just some of the dumb frugal things I do! Now if I could just figure out how to get my Frontier bill (Internet, Cable and Landline) lower. I just got off one of their SPECIALS and my bill went up. GRRRRR! Talked to them till I was blue in the face but got nowhere except for them to offer me some minimal service with practically no channels!

Any one with info on central or southern NJ, 55+ communities

I have been reading the attachment on this article for several days now. "Spending after retirement". These words keep going through my mind...""Households that spent more in the first two years of retirement were not exclusively high-income households; rather they were distributed similarly across income levels." Social security accounts for 76,8% of total income of retirees within 6 yrs of retiring. That means only 23.2% have saved enough for retirement years longer than 6 years. " (More than $80K for each year of retirement, if I understood it right)

6 years and most retirees are living on Social security only! Well, I know a few retiree's said finding a place they can afford to live with their Social security only, sticking to a firm budget, and keeping their savings for later to help them 10 years down the road.. I know many retiree's who spent what they had saved to receive medicaid so they have no medical expenses. Then there are others who want to spend it before someone else "takes it" I know a few who have cashed in every thing, and ingeniously found a way to keep Nursing homes from getting everything. Thanks Louise for keeping it real with posting helpful suggestions.

Interesting points. DeyErmand, I'm unable to locate the stats you mentioned. Are you saying that within six years most people's post-retirement income is 76.8% SS and 23.2% from other sources? Or that 76.8% of retirees have burned through their savings within six years, at which time SS becomes their only income? The first scenario doesn't seem terribly dire, but the second could be a very rough go, particularly for singles.

Susan & Louise: We are considering downsizing nearby, but have been astounded at how little difference the prices are between our (too large, but otherwise very liveable), 2500 square foot house and one that's 1500 - 1800 SF. After taxes and RE fees the cash-out potential hardly seems worth the effort.

By our reckoning, Hubbie & I should be in pretty good shape when we retire in the beginning of 2017 and start on SS a year after that, but the "expert" online retirement calculators are enough to drive a sane person around the bend. They really are all over the place with respect to how much income people will need. Some say the average household needs $1 - $2 million in retirement accounts. Are they crazy or is it me?

StarSong, My understanding from the website, and quoted (from the available PDF)., means most people "burned through their savings" in the first 6 years. I don't know if it is bad management of money, or what, but I know a lot of people lost investments in 2008. Others have lost money on their homes, that they were counting as "savings" for retirement. I have seen the medical bills that are not covered. So living very frugal, even with savings, seems to be the route to take the first 6 years. I will never save $1-2 million as my children's educations was important to me. That is what set me back.

We'll spend more in the first couple of years because we are going to relocate to another state and buy a new home. We're not moving old furniture across the states so we'll be at the furniture stores, slowly furnishing a new space.

We'll also likely take some trips after we retire and that kind of spending will be out of our usual budget.

We will not be going crazy on restaurants, new clothes that need dry cleaning, updated electronics or new vehicles.

We have thought carefully through what we'll do and hope that nothing (like poor health) changes our plans.

What made the retirement transition fairly easy is that we both put in as much money into 401k as we could. Each time we got a raise it went right into 401k. Towards the end of our working careers we each were putting in around 20%. We never saw the money, we never had it to spend so when we retired, we basically had the same money to live on as we did when we worked. I hoard money in certain ways like when we return cans and bottles the money goes into a piggy bank. Loose change goes into it too including $1 and $5 bills. Believe it or not it really adds up! When we shop we buy what is on sale. We do splurge quite often too. Take advantage of little rebates. Check with your insurance company to see if they can lower your rates if not, try another company. We have our house, cars and umbrella insurance through AARP and we saved a bundle. Look at all your incoming bills to see if any of them can be lowered. Sometimes it just takes a phone call. Sometimes lifestyle changes are needed. If you go out once a week to a fancy restaurant and spend $150 that would be $600 a month. Learn to cook really good meals at home or have a weekly pot luck at someone's house and bring a great dish. You can eat really good food, drinks and still have money in your pocket. If you look in your local paper you may find some free things to do in the area.

I am trying to figure out if this is a good idea or not. Maybe some of you have already gone through this. I have a 2009 Honda CRV that has extremely low mileage. The 2017 models will be out this year making my car 8 years old. The Hub sold his Honda CRV last week and his was 10 years old. He had almost 100k on it. My question is, does it make sense to trade in my almost 8 year old car with low mileage for a new car? The 2009 car will get a high value due to being in good shape and low miles. Plus, I would add in the money from the sale of the Hubs car to buy it. I might have to spend another $12,000+ to get a brand new car and hopefully it would last 10 years and I would be 72 by then. I am thinking that we have cash from the other vehicle we sold, the value of the 2009 and we'd have to pony up the rest. Or the downside is that my 8 year old car may start having mechanical issues and I have to start dumping money into it. UGH, vehicles! Hub also has a 10 year old pick up truck that is in good shape. Vehicles are nothing but money pitts. The other thing is that we don't travel much so the new car wouldn't get much mileage per year. We don't have much for public transportation where we live so a car is a necessary evil! We have never leased a car either but that seems to be like flushing money down the drain. But maybe someone could enlighten me on that subject too!

Drive the wheels off of it. My wife's CRV has 210k on it. My daily driver is a 24 year old Miata that I had purchased new in my late 30's. I still drive it to airport on business trips every other week. We haven't had a car payment since 2003. The same goes for our children in their 1996 Accord and 2000 Focus.

Louise, I second the other Art's comment. The worry about your 8 year old car "may start having mechanical issues" and have to "start dumping money into it" pales when you compare those bills to the car payments you WILL have to start dumping into it or the cash you had to come up with to pay the new car off.
The CRV is a very reliable vehicle, keep it until there is a REAL GOOD reason to get rid of it.

Louise I am always taking notes off of your posts. Any other suggestions on budgeting?? Keep the Honda! Don't trade it in on a new vehicle with payments! I bet with proper maintenance it will run another 8 years! Thx

Louise, I have a Honda that is 9 years old...my mechanic keeps wanting to buy it. He said that car will last 250k easily if you take care of it. Don't sell it. I also have a brand new car from another car,,,another brand , not that happy with it!!

Art, Art Bonds and DeyErmand,

Thanks for your comments and good thoughts on keeping the CRV. I mentioned your comments to the Hub and we will most likely hang onto it. One thing to consider is when you have an older car and are taking a driving vacation you can always rent a new car for the weekend or week if you have doubts on driving long distances in the older vehicle.

LOL DeyErmand, I will have to think up some more frugal ideas!

Here's another perspective on old vs. new cars. In the last several years, safety features once found only on luxury cars have found their way into more affordable cars. Such things as automatic braking, backup cameras and lane change warnings. Blind spot warnings are also a great feature. As we age, let's admit it, our driving skills are no longer what they used to be. These new safety features can save your life. The automatic breaking feature in my crossover has twice kept me from an accident when I was distracted and didn't see the car in front of me braking. I'm not advocating buying something you can't afford. However, I believe the available safety features on newer cars are well worth the added expense over keeping an older car maintained. Buying a 1 or 2 year old car with these features may be the more economical way to go.

Louise, my Lexus is 16 years old. 66,000 miles on it. It just made the drive from Florida to Minnesota with no problems. And I'll be driving it back in the fall. I always pay cash for cars and buy them gently used. Then I drive them until they drop. I think this one has a lot of life left in it. :-)

opinion: going gently used, if a change of wheels is a necessary task, can prove to be a wise choice, in the long run. we have done that most of our adult life. been lucky on over all cost of ownership & payments. we still go to the NEW CAR SHOWS for fun.

We have only one car, a 2003 Escape with nearly 100,000 miles and the mechanic says it easily has another 40,000. When I bought the car I wanted the most up-to-date safety features which were basically anti-lock brakes and side air bags.... So now we could keep the car but I agree with the comment above, safety features now are so worth it because we are all getting older and there are so many more distracted drivers. Even if we are careful the other driver most likely is using their cell phone, etc. Another thing to consider - you may not need more than 1 car in retirement, especially in an active adult community where so many of your activities may not even require an automobile. We have gotten along on 1 car for 5 years because we are either together or doing things at different times. Saves an awful lot of money - enough to buy a new car. Almost. I want the new safety features and hope I will figure out how to use them! That will be the challenge.

Like Carold, we only have one car. We had 2 older model cars ('97 Chevy Lumina & '03 Chevy Malibu) and downsized to one new car (Nissan Rogue) at the end of 2014. We have always tended to hold onto our cars for a pretty long time and loved the idea of not having car payments for literally years.. My husband has always been very mechanically inclined and was always very proactive about taking care of our cars. However, towards the end of the ownership of both of our older model cars, the expenditures for repairs to these cars started mounting up, and driving either one of them in terms of long-distance travel was really taking a chance, as well. Now that we are both retired, we felt that there was no need for us to continue to have two cars, and my husband doesn't always have to be under the hood of our car fixing one thing or another (as well as spending money taking it to the shop for things that he could not do himself)f, which has been a real bonus :) :) :) So I guess that you have to take everything into consideration, and weigh the pro's and con's of whether it makes sense to continue to hold onto your older model cars, or to just buy new.

This has turned into an interesting conversation on keeping or selling a car! I do like the idea of the new gizmo's like the auto braking, back up camera, and lane change warnings! However, the way people drive today I would consider an armoured tank! Went to our Department of Motor Vehicles about 20 miles from my house and what a nightmare! No one follows any rules of the road and you take your life in your hands! We were creeping along on this street two lanes going each way and all of a sudden a guy was standing on the yellow line ready to dart out in front of our car to go to the other side of the road! We were on our way home and at this point I was beginning to think we were were going to get into a major car accident or kill someone like the pedestrian. So much tailgating, running red lights, not using signal lights, cell phone use, speeding...

Here is an article on how vehicle sales are flat now. So I guess if you are in the market, now would be a good time to buy. You might be able to get a good deal. I have always heard at the end of the month the car dealers want to sell cars more than any other time of the month. http://www.newstimes.com/news/article/US-auto-sales-expected-to-fall-in-May-as-growth-7956598.php

DeyErmond,
Not sure if you sell stuff on ebay but here is another thing I do. Let's say your K-cup coffee maker dies. Mine did a couple of months ago. What I did was cannibalize the machine. I took off all parts that were easy to dismantle. The water reservoir, the drip pan, the filter thing inside the water reservoir and sold the pieces on ebay! I made around $50 on the parts. My new machine cost about $100. The parts sold in only days! LOL! I had considered selling the rest of the machine but didn't have a box big enough. Then I had a Maytag dryer that died. I had the Hub take off the control panel and the front door of the machine. I sold the control panel, can't remember how much but the door never did sell so I sent it to recycling. My Mom had an old gas stove and I took off her burner grates and oven knobs and sold them separately. I sold the grates individually. They all eventually sold, they were slow to sell! You can sell the boards from board games, the pieces as replacement parts. Sometimes you can make more with parts than with the original item. I get such joy when I sell something that, normally in the past, would have been trashed! The Hub is constantly amazed! You can cannibalize just about anything! A good name percolator you could dismantle the handle, the lid, the body and the cord could all be sold separately. Think electric skillet and its parts too.

Louise, that is when we bought our new car -- at the end of the month -- and we got a great deal. Also, it was just at the point that they were debuting the 2015 model cars, so then we got a even better deal, because the dealerships were looking to unload all of their 2014 model cars. So waiting until the end of the year is a great time to buy a car.

Louise, Thank you! I will research selling on Ebay.
Was wondering if Anyone has had any issues acquiring a loan after retirement, due to age?

Just a little info I would like to share:

1. Bed, Bath & Beyond will stand behind appliances purchased from them far beyond the manufacturer's warranty. I had a Cuisinart coffee maker more than 7 years out of warranty; they replaced it with no box or receipt, no questions asked. You may have to pay a small difference if there was a price increase.

2. Yes, when purchasing a vehicle the best time to get the best deal is at the end of the month or calendar year. But, you must take delivery before the end of the dealer's month. The reason I say their month is because typically their month will end on a Monday or Tuesday. If the end of their month is on Monday and you shop them on that Monday you must take delivery that same day. Check with the dealer for their end of month date.

3. Always ask for the In-Service Date on any new vehicle you're purchasing. The In-Service Date is the date it rolled off the assembly line. Most folks believe the warranty begins on the date you purchase the vehicle. Not so; it begins on the In-Service date. Today I could purchase a brand new 2016 vehicle that was actually built in June of 2015 and the warranty is already 1 year gone So to really evaluate the deal you're getting ask for the In-Service Date and compare the discounted price to the warranty already used up.

Thanks for these 'gems' of information Gene S.! Never heard about the In Service Date before! That is an eye opener!

@DayErmand: I don't do car loans but I had no problem getting a mortgage to buy a second home in Florida except for the idiots in underwriting who couldn't read a brokerage statement. I would expect that getting a car loan would be easier.

Thx Linda, I was wondering if age would factor in as "against" a retiree seeking a home loan.

DeyErmand, I can't imagine age working against you in a home loan. As long as you have the down payment and show proof of income should be no problem. If you don't pay, the bank will foreclose and they are the ones that will make out in the end. Plus, don't forget HECM (Home Equity Conversion Mortgage) loans that are through the U. S. Department of Housing and Urban Development. Some people want to leave the home to their children unburdened without equity taken out of the house. But for those who are interested in no mortgage payments this might be the way to go.
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmabou

I have not done a lot of investigating into this but looks like if you have a current home and want to move to another state then you sell your house, find a new house in a new state. Then with the conversion mortgage depending on age you pay a certain percentage and that might be 50-60% of the sale of your old home applied to your new home and the HECM will pay off the rest and that 40-50% is basically a loan against your home equity and is applied to the new home. You pay no mortgage but must pay taxes, HOA and any other bills associated with the upkeep of the home. If you currently have a home worth $250K you sell it and put down about half on the new home $125K, HECM pays the rest. You put $125K into the bank to spend as you like. You have no mortgage payments. I am a bit old school and like the idea of a paid off house but I also have no children to leave my home to so this idea does appeal to me. Some people upgrade when they sell their $250K home to a $500K home and put no money in the bank.

Dunno, DayErmand. I'm in my 70s.

Mortgage Question for retirees? Has anyone gotten a mortgage for a new home after being retired? I think there'd be a six month or so overlap, where I'd own two homes (getting one ready to move in, the other one ready to sell). I'd probably put down about 50-60% on the new home, and then plan on paying it off whenever I sold my existing home. Credit score is in the 800s. My income would be SS, 401K withdrawals, and some cash (no pension).

Has anyone found that the 55+ developers have any special arrangements with mortgage companies that facilitate getting a mortgage under these circumstances?

Kate, we've been trying to just that and it has been ridiculous.

Our current home in MN is paid for and we are buying a new home in TN. We are closing on the new home in mid July and have sold our current home with the closing scheduled for Sept. 1. We naively assumed it wouldn't be a problem getting a mortgage or at least a bridge loan as we have substantial investments and will clear more from the sale of our current home than the cost of the new one.

Boy were we wrong! As we are both retired and haven't started taking Social Security the lenders all look at it as if we have no income. They have looked at 'asset disapation' loans but will only take 60% of IRA/401k amounts and 70% of other investments then divide what's left by 360 (30 years of the loan). They use that amount as a mythical income and Your housing expenses can not be more than 40% of that.

Because we technically still own the current home that are including the taxes insurance and HOA fees on it as well as the mortgage etc on the new home in that 40% that they will write the new mortgage for. It doesn't matter that I could be drawing $1,800/month in SS, they won't consider it unless I'm already taking it.

We didn't want to have to sell any of our investments to cover 45 days between the closings but are resigned to doing it now. After investigating the probable capital gains we should be able to pull this off for about the same costs that mortgage origination fees and other costs would have been.

From some of the conversations we've had with through all of this it sounds as if this is becoming somewhat common.

Bob in MN

Kate, I had no trouble getting a mortgage to buy a condo in Florida after having been retired for several years. At the time, I owned my other home free and clear. I am now in the process of selling that as keeping up two homes at opposite ends of the country is just too much.

Can't comment on 55+ communities as that was not what I was looking for.

Kate, have you considered a HELOC as more or less a bridge between buying and selling? A heloc is predicated on equity in your current home plus any income. Rates are competitive with current mortgage rates. Although your payment is all interest, the monthly amount would be probably substantially less than a mortgage payment. And...the interest(like a mortgage) is still deductible. Just a thought, and one we have just employed. HOPEFULLY, our home will sell in a "reasonable" timeframe.

Thank you for the responses. I can see why a co-worker was anxious to purchase his retirement home while still working. While Linda was able to qualify, I am sure that I'd end up with all of the complications described by Bob. If there could be a glitch, I guarantee I'll stumble across it....the luck of the Polish :-).

I've noticed developers advertising HELOC loans. I need to do some more research on them. If they don't have a prepayment penalty or unusually high fees, that could be the answer.

Re HELOCs, interestingly enough, my same bank that gave me a mortgage had previously turned me down for a HELOC, probably because the banker pushed me to ask for more than I really wanted. But it was still less than the mortgage. So who knows? Maybe just depends on which side of the bed the banker got up on in the morning. I'm not sure there's any rhyme or reason to any of this.

Only way to tell if you'll qualify is to apply to be pre-approved. You have to pay a small fee for the credit check, but otherwise no cost or obligation.

Linda, I had absolutely no charges for application, or closing-on my HELOC. I do suppose there is wide variation bank to bank. I do have a bit of a pre-payment penalty if I repay within 1 or 2 years, however. The trick there might not be to retire the complete loan until after two years. And, what is nice about a HELOC is that you can be approved, and then just "park" the money, or not use it until ready. There is no interest until you actually use the funds.

doc stickel, I was referring to qualifying for a mortgage, not a HELOC. Only way to figure out if one qualifies is to apply.

Bob,
Have you considered taking the money that you need out of your IRA? If you return it within 60 days, it is considered a rollover and you won't have to pay taxes on it. Just have to notify your IRA custodian what you are doing that.

Jan, thanks- that is an option we have and are considering. Now that the closing dates are locked in it looks like tapping the 401K could be done within the 60 days hey give you

Del web. In Summerville we are going down too look very soon
What should we ask? About all hidden taxes and things we should know
Pl any help ? It looks great there from pics

Ann, we have lived at Del Webb in Summerville for three years and love it. Just remember that Pulte is not a custom builder and there will be issues with construction. Fortunately ours were minor and with perseverance were taken care of. We like many people here, chose it because of the lifestyle. Make sure you talk to residents as well as the sales staff while you are here. There are lot premiums depending on if you are on a pond or not. We had a modest lot premium but still added nearly $75000 to the base price of our house.

We came from MI so our property taxes are considerably lower here. If SC is your full time residence than you are taxed at a lower rate and once you have been here a year and over 65 your taxes are reduced further. Vehicles have a personal property tax every year based on value. We have a 2010 Fusion and 2011 Escape and the taxes for our 2017 tag are $328. Income tax is 7%. SS is not taxed and $10000 of other retirement income is not taxed. Overall our utilities are less. SC has the 3rd lowest gas tax in the country and our roads and bridges reflect that.

If you red the dueling Carolinas Blog you can find out a lot more about SC in general.

If you have other questions I can answer feel free to email me kmcoaker518@gmail.com.