6 Replies Latest reply on Dec 14, 2015 8:56 AM by herbyreed

    Can I start spending my money?

    Ret.Teacher

      I was pretty a disciplined saver during my career, and have been retired from teaching for a year and a half. I believe I have more than enough to start enjoying some "upgraded" traveling or other large purchases, but would like some of your thoughts. Here's my situation:

      I live on my $4200. monthly pension, and the $18,500 I have in a checking account is about $7,000 more than I had when I retired. I have $300,000. in fairly conservative stocks and bonds, and the house (worth $480,000) will be paid off in a little over two years. I have a good Long Term Care policy in place, and good health insurance. I don't have siblings or relatives that I feel the need to leave an inheritance. I have been able to do some traveling and enjoy a couple of hobbies as it is.

      So the question again: Is it OK to start spending my money for those upgraded things like traveling, a nicer newer car, perhaps a mountain cabin. How do others deal with this "problem?" What should I be concerned with, or careful about, as I move forward?

        • Re: Can I start spending my money?
          eloh

          Congratulations. Sounds like you are doing well.  Everyone is different in answering your question.  You really don't give enough information for an external person to give you a reliable answer, ie., age, health.

           

          Reading between the lines of what you say, it sounds like you spent in a year and a half $7000 less than you got from your pension, so you can surely loosen up your regular budget.  If you can truly live off of your pension, the 300K could be used for big expenses- second home, bucket list, car, unexpected expenses, ie.,  new roof, etc. Perhaps you could categorize a safety net of $100K you would never touch, but think about using the rest spread out over whatever time period you want to plan for.

           

          Other things to worry about?- how reliable is your pension (Are your school/state finances stable unlike say Chicago)? Is it indexed for inflation? Do you have taxes, property, local, federal, accounted for?  Do you have a living trust (in case of incapacity)?  Is your house where you want to live "forever"?  Might you want to move closer to family/friends, to warmer climate, to single story house, etc.  Will that be cheaper or more expensive than your current place?

           

          Have fun, enjoy.

            • Re: Can I start spending my money?
              Ret.Teacher

              Thanks for your comments. They are very helpful. I like the idea of keeping a $100k “reserve.”

              To fill in some blanks:

              I'm 64 1/2, and in very good health. I did include my taxes and insurance in the budget figures. I have a living trust in place. I live in California, but I don't know how solid the CalSTRS retirement system is, after seeing Chicago and Detroit. I'll have to take a closer look at that. My pension has a built-in 2% inflation provision. Not compounded, but it's not nothing. No plans to move; I like my home, and I'll really only need to move when I'm no longer able to drive, given a location to far to walk to stores.

              I wonder what will become of the home, but that is something I hopefully will not have to deal with for quite some time.

              Frankly, I have such a history of being frugal, it seems like the challenge is to learn to spend a bit more. Not a bad situation.

                • Re: Can I start spending my money?
                  JerryD

                  Hopefully, you don't loosen up your spending too much. A new car is fine, especially if it is moderately priced and you hold on to it for 10 years or more. As you grow older, a new car should become less and less important and if you have public transportation much more so. Getting a new house might include insuring that public transport is available to lessen the need for a new car as you age.

                   

                  With an existing mortgage still around, a cabin might just extend that cost. Second homes can be quite expensive for the time one gets to use them. We have had RV's for years that we finally just plunk down a couple of hours away like a cabin and pay a moderate annual lot fee. An RV, even a large one, can be much more economical than a fixed structure. We recently bought a "new" one for about half the cost of it new and it probably will last us until camping isn't very practical any longer. Then who cares what it is worth. Not like a house with property. This approach costs in the low $1,000's each year versus the cost of a house and land.

                   

                  With Medicare age rapidly approaching, I hope that your medical insurance is covered. If going the Medicare route, make sure that you buy the absolute best supplemental policy because good health today is NOT good health tomorrow. And once you have a serious medical event which gets highly likely as we age, you are pretty much stuck with your original choice due to insurers forcing you through underwriting which is pretty much a denial for change.

                   

                  You're doing a great job!  GOOD LUCK!!!!   :-))))

                  • Re: Can I start spending my money?
                    eloh

                    Sounds like you have the bases pretty well covered.I can relate to the issue of loosening the purse strings.  My question to myself is whether the item I am buying improves my quality of life.  Upgrading my food (quality rice) and drink (single malts) falls into that category as well as nice vacations.  A prestigious car does not.Best wishes,El

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                    Can I start spending my money?

                    reply from Ret.Teacher in Money - View the full discussionThanks for your comments. They are very helpful. I like the idea of keeping a $100k “reserve.”To fill in some blanks:I'm 64 1/2, and in very good health. I did include my taxes and insurance in the budget figures. I have a living trust in place. I live in California, but I don't know how solid the CalSTRS retirement system is, after seeing Chicago and Detroit. I'll have to take a closer look at that. My pension has a built-in 2% inflation provision. Not compounded, but it's not nothing. No plans to move; I like my home, and I'll really only need to move when I'm no longer able to drive, given a location to far to walk to stores. I wonder what will become of the home, but that is something I hopefully will not have to deal with for quite some time. Frankly, I have such a history of being frugal, it seems like the challenge is to learn to spend a bit more. Not a bad situation.

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                • Re: Can I start spending my money?
                  jkom51

                  CalSTRS, I believe, is currently better funded than CalPERS. You're probably fine there, unless we have The Big One (I live in the East Bay, right off the Hayward Fault, LOL). Do consider earthquake insurance, however. It's not too outrageous from the CEA, although the deductible is large. But it's better than nothing, and as my DH pointed out to me, a home that is paid off means the homeowner now has 100% of the financial risk.

                   

                  We took early retirement and have been traveling locally in a circuit from Monterey to Mendocino for the last five years. Costs have gone up dramatically. I used to be able to get $150/night mid-level hotels; now it's more like $200-300/night. We love dining out, and have seen costs rise there as well.

                   

                  I'd suggest you not only reserve that $100K, but limit your increased spending on splurges to a certain annual percentage - whatever you feel comfortable with, say 15-25%.

                   

                  The trick with spending more is to continue to prioritize. Where would spending the money bring you the most enjoyment? After the first year, you can look back and consider what, if anything, you would change about those decisions.

                   

                  Have fun, and best of luck going forward.

                  • Re: Can I start spending my money?
                    herbyreed

                    Of course you can start spending your money.  But I would think hard about what you are spending it on and why.  What makes you happy?  Travel and the mountain cabin seem seem a bit contradictory for example. Owned property tends to tie you down more.  If "your thing" is to spend time fixing up and maintaining a mountain cabin, okay.  But if your thing is to see Europe or Asia or Africa, you might want to save the money you might spend on a mountain cabin and redirect it to being able to travel more.  You can always rent or borrow a friend's cabin if you want to try out that experience.  As for the newer car - one thing I think retirees should consider is leasing a car.  You get a new vehicle for less per month than buying and you don't have commuting miles so it should be easy to stay within the mileage limits.