The Totally Unrealistic Expenses of Early Retirement

This is Part #2 to finding your retirement number. In Part #1, we talked about which retirement equation applies to you; which depends on the existence or not of retirement income and your approach to either drawing down investment principle or living off investment income. Regardless of the approach, though, determining your level of expenses in retirement is absolutely essential.

There’s an obvious component of guessing and projecting an expense estimate for a given month that is several years into the future, so it helps to do a bit of expense tracking today. I’ve been tracking my net worth for almost five years, but only started compiling monthly financial reports (with expense details) last December.

“You Get What You Measure” is a common mantra in the business world, and the same holds true in personal finance. If you measure and report your monthly expenses, you will be inclined to try to improve that measure over time. That is exactly what has happened so far, for me. When I started out, as you can see in the graphic below (which was painfully drawn to scale), I was spending $9,345/mo—that was something like 110% of my gross income.

Retirement Expenses Then-Now-Future

Now, some nine months later, my expenses have dropped 39%, to about $5,730/mo. Pretty good, but that drop is largely attributable more to a terrible starting base (like having a mortgage plus a rent payment) rather than great current situation.

For retirement, I think I can further cut our household expenses by another 65%, leading to monthly expenses of just $1,960/mo.

It’s kinda easy to throw $1,960 together in excel without any due process behind the number. So, below I’m going to talk about each of my expense categories, where we are today, and how we’ll get to goal.

But, before we do that, let’s talk a bit about why you should at all care about this.

Retirement Expense Guesses are Not Set in Stone

First, understand that this is a moving target. Life (or my life, at least) rarely goes as planned beyond any time horizon longer than twenty minutes from now. These numbers will necessarily change as my life changes—up and down. As such, I plan to revisit these estimates (although I might not make a whole new post) about annually.

Second, and this is critical, a lot of expense reduction cost money. Namely, reducing housing costs by eliminating a mortgage, paying off cars, or cutting utilities by buying solar panels. Expense reduction, in this regard, is self-reinforcing. As I cut expenses in one area, it frees up money to accelerate the paydown of those debts or increase investments, leading to more money to do the same. A virtuous cycle, and a reason why making some of these goals a reality is not entirely dependent on only my current income in excess of current expenses.

The Goal, In Stunning Color

Retirement Expenses Now-Future


Now: $2,900
Retirement: $400 (Drop of 86%)

The biggest factor in my ability to retire is to eliminate my mortgage payment. In my current home, with my mortgage balance around $440k, this will take a fifteen years or more. We currently have about $50k (conservative) in equity. Each month, equity increases by about $1,200 due to principle paydown (and that also goes up slightly every month due to lower principle balance). Once a year, around tax time, we drop a big chunk into the home (~$4-5k). In four years, we should have about $150k in equity.

I reckon, based on extensive perusing, our current home (in Virginia) would equate in many Florida (where we will retire) zip codes for $230-250k. If we sold our home in early 2020 and used the $140k (net of sale) and put in on a new home, we’d still be ~$100k short. So, the new plan is to move to Florida earlier than our retirement date, and continue working in my same field. This would mean much less of my money goes to interest and taxes, freeing up a nice pile for accelerated paydown.

No matter what happens, I’ll continue working until the mortgage is paid off. This could realistically occur in early 2020, but if it takes another year, then I’ll work another year.


Now: $800
Retirement: $100 (Drop of 88%)

Car payments. They can’t last forever. Once they’re paid off (late this year and the second early next year), they’ll get sold, and we’ll be buying an efficient used family vehicle in cash. We don’t drive a ton, and any work commuting will fall away. $100/mo should cover two tanks of gas (about what we use now) and insurance (we pay about $40/mo now).


Now: $450
Retirement: $450 (No change)

Grocery costs have been going steady in our household for some time now, so I think this level is our new normal. We would like to grow more of our own food. This past summer it was tomatoes and peppers, and now we have cilantro growing in the windowsill. We love the idea of sourcing our own food, so we’ll be gardening a bit more in the future. I’m not counting on any food cost reduction from this activity, though.

Groceries amount to about two-thirds of our food cost, with another third for dining out. This means we spend about $2.25 per person, per meal. We lump together anything purchased at a grocery store as groceries, though, so this includes pet stuff, baby wipes, medicine, disposable products, and much more. So, it’s probably more like $2/person/meal. I’ve shown its possible to eat for far less, and as we continue to cut out meat from our diets, I think this number might drop. As I said, though, I’m not counting on it.


Now: $225
Retirement: $150 (Drop of 33%)

We dine out a fair amount, and we love it. We’re not religiously anti-dining like a lot of FIRE bloggers. The key is dining at delicious-but-reasonable places on the cheap. Our favorites are places like Bahama Breeze or Carrabbas (both with great happy hours, generous portions, fantastic food, great atmosphere, and tons of discounted gift cards on

Using gift cards, going during happy hour, avoiding alcohol, or splitting the ridiculously-size entrée portions all allow dining to be not outrageously more than when cooking at home. No matter what you do, though, it’s still more expensive than cooking it yourself. But, the variety, convenience, and appeal of being served is a nice treat once or twice a week for a slight premium in cost.

I think we can still drop this amount, not by dining out less, but by being more efficient at it. Going during the day, using coupons, and even cutting out the happy hour beer specials (or maybe getting just one).

Medical Insurance

Now: $430
Retirement: $300 (Drop of 30%)

I’ve already done my due diligence on this. I can get our exact same medical plan for $270/month thanks to Obamacare subsidies. This might change for better or worse when we move in retirement, but it’s a good proxy.


Now: $320
Retirement: $100 (Drop of 69%)

These expenses are things related to home maintenance. Receipts from places like Lowes and Wal-Mart get bundled here. These costs are mostly due to us finishing our basement, so these will remain high for another few months while we finish that project out. We’ve vowed to not  buy a house with any major known upgrades/repairs needed. I procrastinate far too much in this area.

In retirement, I’ll have ample time to handle most repairs myself, but we’ll have to see if $100 is stable as retirement gets closer.


Now: $150
Retirement: $100 (Drop of 33%)

After seeing the success that my friend Vawt had with solar panels, I was sold. Once we’re in our retirement residence, this will be one of the first things we do. Also, my wife is a warm-body, and once we’re in a warm climate, we’re relatively comfortable having the house temp in the high 70’s.


Now: $100
Retirement: $100 (No Change)

We’re planning on homeschooling our kids. We might avoid some of the costs of child-rearing by doing this, but I acknowledge that this is a big unknown. To date, we’ve run drastically under the USDA’s cost estimates for child raising. As we hopefully add more kids to the mix, this is sure to go up. However, the marginal cost of children can really only go down, seein that we already have nearly every piece of equipment that we’ll need for subsequent offspring.

This is another item that is sure to fluctuate away from projections. However, I’ve surmised that children are about as expensive as the parents that raise them. I have some fun with ridiculous parental cost thinking in this post.


Now: $60
Retirement: $60 (No Change)

Our iPhone plans already run under $10/mo. Then, we have our internet package. I’m hoping for constant costs. As it were, these costs seem to only go down over time as the space becomes more competitive…we’ll see.


Now: $50
Retirement: $20 (Drop of 60%)

Cash was about $20/mo for a year until very recently. A little under-the-table basement labor is all this is right now. Not a permanent thing.


Now: $100
Retirement: $80 (Drop of 20%)

Travel hacking is the real deal. We started in late February (I personally love The Points Guy), and have accrued, on average, $518 in travel (hotels and flights) each month since then. So far, we’ve had a night in Nashville, a night in Baltimore, and a night in Miami at some great hotels. We’ve also flown to Fort Lauderdale for a crusie and to Minnesota for a wedding. We’re flying to Orlando next month, with a couple nights at a hotel. All of this is, of course, totally free. What’s more, we’re still accruing more nights and miles faster than we use them. All the while, my credit score has only gone up. Lastly, we’re probably not doing it as best as we could; we’re getting more efficient as we learn about the hacking trade.

The key to travel hacking is to stay organized. Get the minimum spend out of the way (without inflating your spending), mark it in your spreadsheet with a date to cancel (to avoid annual fees, if applicable), pay the balance in full, and ensure you keep track of all your rewards. The other key is to not get addicted to piling up all your points. Use them. Years from now, money will not really be a concern for you. Travel hacking is a way to still travel as you please at your current station in life.

There will still be costs for things like gas, cruises (which are stubbornly difficult to hack), and car rentals. However, these are miniscule against the benefit of free flights and hotels.


Now: $50
Retirement: $0 (Drop of 100%)

I’m still paying a bit out of pocket for commuting and some schooling stuff. My wife and I are still full-time students, and this won’t continue forever.


Now; $15
Retirement: $20 (Increase of 33%)

Entertainment expenses haven’t been much more than a Netflix subscription in quite some time. This might go up, but not significantly. There’s tons of fun stuff to do that does not cost any money or very much money.


Now: $60
Retirement: $80

I’d like to increase the amount of money my wife has at her discretion. So this might increase a bit.

So, What Is My Number?

In total, these expenses will amount to $1,960 per month. Across all writing efforts, I’d love to pull in $200 per month. I think this is very reasonable, and would really only require that I put in a little time each month toward doing something I will be doing anyway.

My portfolio currently yields 3.5%. However, as I move out of growth stocks and into more dividend payers, I see that yield climbing and holding steady at about 3.8%.

Using the equation from my previous postRetirement Formula

And plugging in these numbers:

Retirement Formula2

I need $555,789 in investable assets to retire. This is up from about $290k today. Using a simple savings calculator, and assuming $3,600/monthly contributions and an 8% CAGR, I’ll hit this number in 3.4 years. Not bad, and if I give myself an extra 1.6 years (five years total), I’ll have $150k buffer.

I’ve actually never calculated this before until right now, so this is interesting. Now that I know my “number,” and because my retirement savings are largely on auto-pilot, my #1 priority is to make those expense estimates a reality. I have five years to do it. I think I can. Even if I can’t, though, being a little late isn’t the worst thing in the world.

What do you think? Am I missing anything. Please comment below!

Thanks so much for reading Retire29.


Update (Two Months Later)

One of the best parts of why everyone should have a blog is to get feedback from other people. Nobody knows everything, and clearly I was a little aggressive in a few areas above. Based on a lot of great reader feedback in the comments, I’ve gone ahead and updated a few expense categories:

Housing: Up $50 (from $400 to $450) It became clear that I was really pushing the housing cost. This is strictly mandatory housing costs (insurance, HOA, property taxes), and does not include things like maintenance (that’s elsewhere in Home/Other). The increase in $50 is based on a  great comment from Tim, who schooled me that insurance and property tax might be higher than I expect in Florida. I had already expected slightly higher costs than we have now (on a % of home cost basis), but I’ll add a bit more for buffer.

Autos: Up $40 (From $100 to $140) After the cars are paid off, our only costs will be maintenance, gas, and insurance. Those three elements cost us about $200/mo on two luxury cars, so getting this down to $100 seemed reasonable (no commuting, regular unleaded cars, etc.). However, a couple folks brought up the replacement cost (to account for depreciation). Adding $40/mo would get me a new $10k car every 12 years.

Baby: Up $100 (From $100 to $200) $200/mo would be way more than I’d expect, but I suppose it is prudent to budget for more than I’m expecting, given the large unknowns in this area. Mrs. SSC, below, makes some valid points regarding the cost of clubs and teams, and for multiple kids this could turn into an amount large enough to budget for.

These changes combine for an increase in expenses from $1,960 to $2,150. This means my portfolio will need to be $609,666 to retire (with no mortgage or other debt), instead of $555,789. This won’t change the retirement date goal, as even this now-elevated number is still well within my buffer zone, as I expect my invested assets will be around $700-750k by mid-2020.


    • Clothes are not really a factor. We won’t need work clothes, and a new outfit can be had for less than $20 at Burlington or even less than that at a thrift store (still with tags). I haven’t bought clothes in forever, and doubt it is something I’ll have to deliberately budget for in retirement.

      As far as car, we put about 7-10k miles each year. To me, that sounds like I could make a car last at least ten years. I doubt money will be a concern ten years from now, but if it is, because I’m not drawing down principle (and it should grow, over time, these are all dividend paying stocks), I should have more than enough to withdraw for a new used car.


  1. This is a great breakdown – easy to digest, with excellent data. Thanks for taking the time to make it repeatable so I can do it for our family!

  2. Your number seem a little aggressive to me.

    For example, your car will wear out at some point and you will have to replace it, which can affect your cost for payments (if you finance it), insurance, etc.

    Once you retire, you may eat out more than you do now (I found that we do because we meet friends out) and you may travel more. You will also probably find you want a few toys to enjoy all those sunny days when you don’t have to work!

    If you carry life insurance, you may be able to get rid of that though because that’s only needed prior to being financially independent.

    All the best!
    Steve Miller recently posted…WordPress SEO: 10 Tips to Boost your Google RankingMy Profile

    • Hi Steve,
      Thanks for commenting! We already eat out quite a bit, at least twice a week, so I don’t think we’ll dine out more, per se. Rather, we’ll probably dine out about the same, but we’ll be able to do it smarter, with more planning (which turns out to be cheaper, from coupons and gift cards).

      Very good point on the car, but I think that cost will be very minimal. Right now we drive about 7k miles/year. For very long road trips, we usually rent a tiny car and spend nothing on gas. So, if a car can reasonably go 150k miles, then I think our car could last at least 15 years–even with increased driving in retirement. If a new-to-us car costs ~10k, then over 15 years that cost would only be $50/month or so.

      It might be reasonable to bump up the car number slightly to account for this, but not by much.


  3. I think you have a good handle on tracking the expense and can adjust along the way if needed.

    My $.02: It seems like your utilities and home expense will be too low. How about property taxes, insurance, or potential HOA costs? Also, at only $100 per month, that will be difficult to save enough for a “new” used car on occasion. If you are retired for 50 years and bought a car every 15 years, you would still need to have the money saved for that expense. I would bump the budget up a bit for those contingencies.

    Maybe this is why you mentioned the $150k buffer?

    • Property tax, in my experience, tends to run about 1% of home value over the year. Insurance would be about $500/yr. HOA is a big variable, could be $0, could be $150. I budgeted $400/month for housing to account for all of these on a $250k residence.

      In the event we need a new used car, it would certainly be infrequent, and would be paid with cash. But, we’re talking just $10k or so, my passive income should increase every year with increased dividends, adds to principle, and any side-hustling. I just don’t foresee $10k every 15 years to be a big contingency that needs advanced planning.

      Retire29 recently posted…The Totally Unrealistic Expenses of Early RetirementMy Profile

      • You have the distinct advantage of knowing where you want to retire. You can use that to validate aspects of your plan. Just moved out of FL to Chicago and some thoughts:

        1. Property tax – much higher in FL (Palm Beach County) than even Illinois. But you can test your 1% estimate (but mine were closer to 2.5%) by looking at the tax rates in some of the communities you are considering. Compare also what homestead / home owner deduction you get and compare to FL’s.

        2. Auto insurance costs in FL are high. FL is one of the few states with no-fault insurance that has spawned a healthy industry in fraud. You also likely cannot get a home and auto joint discount since most firms have pulled out of FL. There is a trick around this if you have to have your insurance with Citizens (the State insurance ‘company’) is to have your auto insurance company write up the policy. You are still covered by Citizens but that qualifies you for the joint discount. FL also puts a special hurricane tax on your auto insurance.

        3. Home insurance. This will vary a lot by where you buy in FL. The farther south the higher cost. Anywhere near the ocean is going to be costly and there is not a competitive market.

        4. Flood insurance. You don’t sound like you will have a mortgage and so you may be planning to skip this. I think you can if you don’t have a mortgage, but you should be factoring a house replacement cost regardless of it’s potential destruction in a flood.

        5. This will depend on how close you live to the ocean but everything metal rusts. Had a bike for about 2 years before serious rusting.

        6. I’m not an expert on solar power but I will tell you that the ‘Sunshine State’ motto is more marketing than reality.

        Hey, you have to start somewhere and I think you have a good start. But care needs to be taken assuming that what is will continue. Counting on Obamacare for example, seems to me a risky bet especially since one of our major political parties want to immediately rescind it if they take power.

  4. Do you consider things like haircuts? New clothes for you? College savings or increasing food costs for children? School supplies and such? Kids are our big unknown… we don’t want to deny them too much, like sports or instruments or art lessons if they are so inclined. We also account for house/yard maintenance. Dental? I’m just trying to brainstorm! 🙂
    Mrs SSC recently posted…This is how we do it: Estimating our FIRE budgetMy Profile

    • Hi Mrs. SSC,
      Thanks for commenting and for throwing out a few ideas.

      I cut my own hair, and the wife uses the “Wife” line for things like beauty supplies and haircuts, so that is counted for.

      New clothes? I have a pretty sizable wardrobe as it is, and most clothing can be gotten for very cheap–even kids clothes. I bought a Tommy Hilfiger tie, brand new, from a thrift store this year ($4.90). That’s the only clothing I’ve bought in a few years. If I need a shirt or shoes, I just buy from Amazon straight from the overseas source for pennies on the dollar. Same clothes, very fine quality.

      Plus, subsequent kids will have a lot of hand-me-downs. I never quite understood “clothing” lines on a budget; it is such a small amount.

      Kids are a big unknown, but so far, it hasn’t been expensive at all. In fact, we’ve made money and I see few signs of that changing significantly. You’re right about sports and lessons–those things will have costs. It might be reasonable for me to add $100 to the kids line.

      House maintenance is the “Home” line. Yard maintenance would go in that same place. Yard maintenance doesn’t really cost us anything. A couple bags of fertilizer every year, one gallon of gas, a few bags of dirt, and our yard looks quite decent. That might be $100-150/year total, so not something I really need to budget for.

      I’m on eHealthInsurance for dental plans, and there are lots of plans for $30-40 for us. So, that’s counted for in the health insurance line.

      I’ll probably add some on the kids line, but otherwise I’m not concerned on the rest. They sound like rounding errors and I’m going to have a pretty significant buffer.

      Retire29 recently posted…The Totally Unrealistic Expenses of Early RetirementMy Profile

      • Will you expound on how you get clothes through Amazon overseas? Do you go through a certain seller? Or use certain search words? Or go through another country’s version of Amazon?

  5. I think the numbers are doable but I would go the way of adding the buffer because things never seem to go to plan, especially when you try forecasting expenses this far out in advance. All you need is something to make a big change (Obamacare for example) and it could throw off the whole plan if you don’t have a good cushion.

    I love the analysis though! Very good information and makes me think about our situation a little bit more.
    Thias @It Pays Dividends recently posted…Weekly Dividend Payout #10 – Index Funds Are Nothing SpecialMy Profile

    • Hi Thias,
      Thanks for commenting. Yes, the buffer is essential. The above is really a base case, “stuff” will undoubtedly come up, which is precisely why the buffer is there–it would effectively be a huge emergency fund of several years of normal expenses.

      Perhaps the best part of this, though, is that even if things don’t go to plan, the absolute worst case scenario is that I just have to do a bit of work to cover any large emergency expenses. Not ideal nor easy to hop out of retirement to take on part time work, but certainly an avenue if the need arises.


  6. I think you’ve underestimated by $500-$1000/month based on your proposed lifestyle.

    The top offender is home. Your estimate will cover taxes and insurance and some basic maintenance. You need to remember that you’ll be replacing siding, roof, windows, landscaping, driveway, flooring, painting, furniture, insulation, etc. You could maintain those low levels for 2-3 years, but not indefinitely. I would bump this up to $300+ taxes + insurance + HOA if applicable.

    Your car expenses are probably half or less of what they need to be. At two fill ups a month your driving about 700 miles a month, which means at least $1200 annually in repairs/replacement costs, and probably more (I would estimate that we spend $2k per year on car stuff including insurance and taxes and we only drive about 300/month).

    Also, you’re homeschooling your kid(s), but not budgeting for sports or music classes or theater? I would add $50/month starting at age 4, and bump it up to at least $200/mo by high school.

    Your budget is devoid of a miscellaneous category to cover clothing (shoes count), sports equipment, personal care, gardening projects, dental, electronics replacement etc. I’m guessing these will come in at anywhere from $100-$300/month depending on your current spending habits.

    I’m not saying that $2k a month is impossible for a family of 3 (or more). Quite the contrary, I believe you could happily live on even less. However, the lifestyle you are proposing is about a $2.5-3k/month lifestyle.

    • Hi Hannah,
      Thank you so much for the detailed reply! A big part of me putting this out there was to identify areas where I may be unrealistic or too aggressive. Rest assured, I’m definitely not trying to set myself up for failure, so I will certainly take your suggestions into account. Particularly the kids area. I think I’ll update this post to take into account some (most) of your suggestions.


  7. Glad to see I convinced someone about solar!

    I don’t think I will ever get down to your numbers on a monthly basis. In fact, I show my projections to be close to double that much each month. My concerns with your numbers are household maintenance and repairs add up (air filters, breakdowns, tools, etc).

    I am definitely in agreement on using travel rewards to subsidize vacations. I hope that avenue stays viable for a few more years…
    Vawt recently posted…ERA AnniversaryMy Profile

    • Hi Vawt,
      Yes, I will probably update my numbers based a lot on the feedback heard in these comments. Thankfully, it won’t change my retirement date, since there’s a pretty big buffer built in there. I’m looking forward to life without an electric bill. Several years away (our current HOA doesn’t even allow panels), but we’ll definitely do it.


  8. I commend you on going through a detailed FI budget proposal. Many people don’t have budgets for the current month let alone an average month a couple years away. We’re still quite far away from FI and ballparking I’d say we’d need $3.5-4k per month of passive income which works out to $1.4 – $1.6 M (3% yield) to $1.05 – $1.2 M (4% yield) portfolio to generate that kind of passive income. So I haven’t done much forecasting on our expenses just yet. Although my plan is to get the mortgage paid off before we officially reach FI and my wife might continue to work which would add in about $3k in monthly income as a buffer. There’s so many moving parts now that I haven’t even begun to look at realistic expense scenarios. Wish you all the best!
    JC recently posted…Dividend Update – September 2015My Profile

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