Top retirement spending tips from our readers

As far as retirement budgeting “rules” go, I have set aside $100,000 in what I call my “Stuff Happens” account. It’s designed to get me through five years of unexpected, one-time expenses. My buddies took the same approach.

It’s clear that your friends know a good idea when they hear one.

These comments from Roger Bretting, a retiree from Houston, were among many comments we received in response to my recent column on what I call my “$400 rule”, an approach to household budgeting that I adopted at retirement. The rule states that on average, a retired couple will spend $400 more per month than expected. This turned out to be correct in my case. In my column, I invited readers, retired or soon to be, to share with me the rules, recommendations or strategies they have developed or adopted to refine their own spending and saving habits.

My thanks to everyone who took the time to write. Here are some of the most helpful ideas we’ve received, starting with a disclaimer.

Plan to be surprised

Interestingly, almost every reader has asked me to warn people approaching retirement: your expenses in retirement will likely equal or exceed what you spend while you’re working. In other words: take the conventional wisdom that you need 70% to 80% of your pre-retirement income to maintain your standard of living later in life and throw it away.

“My wife and I spend 50% more in retirement than when we were working,” says Bob Bailey, 77, a retired advertising executive in Evanston, Illinois. “There are two causes. First, we have time to travel, especially international travel. Second, we have volunteered in our community and discovered many needs; as such, our charitable giving has increased significantly .

Retirement expenses

Average annual household spending by age, among partially and fully retired households* with investable assets of $1 to $3 million:

Adds Kevin Baughman, 68, a retired pharmaceutical executive from Santa Rosa, Calif., “I didn’t see how I could spend less in retirement, given that I would have more free time. So I targeted 90%. As I got closer to retirement, I moved it 100%. My reality turned out to be closer to 110%.”

The only exception to this thought among the comments we received: a couple who retired to a small town in Alabama. Their strategy:

“We expected the cost of living here to be lower than in a third-tier city. However, we didn’t expect it to be noticeably lower. We live better than in town, in a nicer house, practice many more activities and spend less. We advise anyone considering retirement to consider moving to a small town, both for quality of life and financial reasons.

Keep the budgeting

If you are developing a family budget for retirement, great. But a number of readers have told us: This is not, or should not be, a one-time exercise. It is essential, they said, to refine your budget each year.

“My wife and I consciously look for ways to ‘cut costs’ every year,” writes HL Singer, 76, a retired CEO from Melbourne, Florida. Among their steps, big and small: reviewing and, if necessary, modifying (or simply canceling) streaming services and magazine/newspaper subscriptions; travel reservation one year in advance; prepare more meals at home; make better use of programmable thermostats; search for purchases, then wait for sales and coupons.

Mr. Singer says, “We’ve found that by constantly looking for ways to cut expenses and buying smarter, we can better grow our retirement savings and pension.

Leave room for maneuver in the budget

In my previous column, I laid out my personal retirement rule: calculate the household budget for the year, then add $5,000 (about $400 a month) for unexpected bills. This total will be closer to the income you will actually need. Several readers told me that my calculations wouldn’t work for all parts of the country (read: high-cost areas) and offered a better solution: just add 10% to the budget you produce first.

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“It seems like almost every month there’s an ‘extraordinary’ expense that blows the budget,” writes Michael Arvanetakis, 69, of Cypress, Texas. “My wife and I have been through this all our lives. Our rule is to add 10% to your budget, always.

Ronald Londe, 76, a retired energy stocks analyst in St. Louis, made a similar point. His rule: “During the month of December of each year, I draw up an estimate of the family budget for the coming year. On the total planned expenses, I add 5% for inflation and 10% for unknown events. I then adjust my “bucket” of income – mostly dividend-grade stocks – to generate the annual cash required.

Start a Bad Weather Account

Another way to deal with the unexpected: rainy day money. Mr Bretting, at the top of this column, is one of many retirees who say they have saved a sum of money expressly to cover unexpected bills in early retirement, when nest eggs are most vulnerable. His “Stuff Happens” account, he writes, has been a “mental lifeline.”

“In the two and a half years that I have been retired, I have paid $8,500 for damage caused by frozen pipes; $3,500 for my spouse’s dental problems (no dental insurance); $25,000 for my youngest who needs an extra semester of college to graduate; $1,500 for two accidental cell phone drownings; and $5,000 in flood damage to our sprinkler system and landscape.

He concludes, “I sleep better at night knowing there’s still money available for the next ‘Stuff Happens’ event.”

Fluffy and Fido? Maybe not

To finish,

Seneca, SC retiree Bruce Woods has more than a dozen financial strategies for retirement, but one rule stands out:

“If you have pets, don’t replace them,” he says. “My wife and I travel a lot more in retirement, and the bills for kennel care were over $1,000 a year. Get the pictures out of them and enjoy hairless furniture. You won’t miss the constant picking up and cleaning up after them.

Mr. Ruffenach is a former journalist and editor of the Wall Street Journal. Ask Encore examines financial matters for those contemplating, planning and living in retirement. Send your questions and comments to askencore@wsj.com.

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