New Retirement Budget Category

After a full decade of living on fixed withdrawal rate on our Day 1 retirement portfolio (meaning no budget increase year over year, even as our investments have continued to grow), we are moving into a new era of money streams that includes Medicare, pensions, and social security. I'll break these down a bit more below,  but the overall result of these new money flows is the creation of a new budget category we're labeling simply Miscellaneous, and today's post is about how we've elected to allocate that money this year.

Prior to the onset of Medicare for my husband upon his reaching age 65, we were spending $12,000 a year on just his medical premiums alone. This has now dropped to under $2,000 a year, leaving us with $10,000 in 'new' money to reallocate.

Also new are two modest pensions that add up to an additional $15,000 a year.

Still to come is Social Security for him upon reaching age 70, Social Security for me upon reaching age 62, and Medicare for me. We've gone back and forth about whether to keep our retirement budget as is and just lower our withdrawal rate, or keep our withdrawal rate as is and increase our annual budget to include these new revenue streams. My argument was why in the world would we pull less than our already modest pull, particularly in that it doesn't include the value of our home? My husband's argument was that we were already enjoying a nice retirement lifestyle, and it would leave a larger legacy for our daughters. 

It took some time, but I finally convinced him that the girls would be left with plenty of money regardless, so why not enjoy the opportunity to live it up just a bit more while we are still alive? Plus, I pointed out that we could always elect to pass along gifts of money to our daughters while still alive, rather than waiting until we both died, should we so choose.

So instead of throwing the additional $25,000 back into savings, we created a new budget category. I wanted to make a deliberate effort to spend the money both thoughtfully, and throughout the year, rather than all at once, because I believe there is value to contemplating our decisions, and then building in wait time. Otherwise, my concern is we will focus too much on 'what's next' rather than enjoying what already is.

So after much thought, here is how and when we've elected to spend this year's Miscellaneous allocations:

January

• Two Advanced Frame inflatable kayaks (upgrades to our current Intex inflatables)
• Sliding Coastal Door in upstairs Guest Bedroom to replace old and unsightly pocket door
• Repainting of all bathrooms after recent remodel
• Removal of Spanish style arches in our downstairs Primary Bedroom

February

• New family room furniture

March

• Two carbon fiber bicycles to replace our 16 year old aluminum frame bicycles

April - July

• Nothing in that we'll be taking delivery of our new family room furniture, plus be away on an extended RV trip

August

• Reupholster a small chair sofa in our living room, and our six dining room chair cushions.

September

• New washer, dryer, and dishwasher

October - November

• Nothing . . . money now all spent or allocated other than December below

December

• Holiday checks of $1,000 to each of our daughters

I haven't given any thought to 2022 at this point, because I really do want to enjoy and appreciate the above 2021 items, other than that I would imagine our year end giving to our daughters, plus some preferred charities, will continue to increase. Otherwise, what I'm really left with is a good deal of appreciation for the impact that having a well under 3% withdrawal rate has had on our portfolio in retirement, similar to how living below our means for 30 years got us to retirement well ahead of schedule. 

And not to be too simplistic, but I do think it's also a testament to how being iron-fisted in keeping expenses like groceries, utilities, and insurance in line, works together to leave additional funds for spending elsewhere.