What Canadian Household Spending Patterns Teach Us About Retirement Planning

A Real-Look at Spending in Retirement

From the Canadian version of the Census Bureau comes this report.  Anything jump out at you about the info-graphic  below?

Notice the significant drop off in expenditures from Couples With Children to Couples Without Children. Spending drops from $88,088 to $64,952, a total decline of 26%.

What can you take away from this? Well, for one, if you have kids, as I do, you can easily see that it makes NO SENSE to measure your retirement adequacy on your household consumption while kids are living with you!  Housing, transportation, food, clothing, communications, education, ALL drop, by thousands.

Makes sense, does it not? After all, you’ll probably drop your kids from your cell phone plan. I know I’m going to drop cable once the kiddos are gone, as well. We won’t need the same size house we have now, or the number of cars we have, or the need to carry young drivers on our auto insurance policies…and the lists go on and on.

Downsize the house also means lower property tax and lower homeowners insurance.  I just pulled 6 hamburgers out of the freezer to grill tonight. When it’s just Charlotte and me, those 6 burgers will be reduced to all of 2.

And let’s be honest, are you really going to spend as much on clothes without kids as you do with them?  Of course not.  Just another example of spending going down.

What could you increase spending on? Well, obviously, you may travel a bit more, at first.  As you age, you probably won’t.  You will also be generous towards your grandkids.  But a lot of people make the assumption health care costs will increase greatly.  Is that true though?

I know when I was working at USAA my employee premiums for health insurance ran around $600 a month, if not more, AND we still hit our co-pays, deductibles etc.  So, I figure I was spending $1000 a month on health insurance.

Fast forward to Medicare enrollment.  We’ll each pay(in 2019 dollars), $135 for Part B, $35 for Part D, say $120 for Medicare Supplemental and another $50 or so for co-pays, deductibles etc. So, I figure about $8000 a year between Charlotte and me.

If my calculations are correct on health costs, then we’ll be spending $4,000 a year less in costs.  Eliminate our mortgage because of downsizing, reduce property tax by half, home owners insurance by half, auto insurance by half, food by 1/3 (because I will probably splurge on finer cuts of meat), never mind all the ancillary costs that go with kids, and man, oh man, we’re gonna party like it’s 1999!

So, moral of the story,  let’s take a real-world look at what YOUR spending will be in retirement. Don’t use assumptions based on generalizations.

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