This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.
One of the tenets of an early retirement plan, besides saving a good portion of your income is a low cost of living. Keeping my expenses low allows me to have more money to pay down my mortgage (for now) and when that’s done to invest – getting me closer to financial independence then if I lived a more “consumerist” lifestyle. I’m far from perfect in my lack of spending, I just make sure I meet my savings goals each month and spend the rest (this month, probably on an iPad mini).
What I’m wondering is how much my spending will change in retirement. At this point, I’m still around 12 years away from my goal of 45, about 20% done with my 15-year plan. I don’t really know what my interests will be by then, as they seem to change by the month these days. What I could see that would cause a significant change in my spending is as follows:
Expensive Hobbies: Right now, I don’t really have that many expensive hobbies. Most of them are more time intensive rather than dollar intensive. If, however I somehow talk myself into a super expensive hobby such as flying or yachting, I could see this being somewhat detrimental to my nest egg.
Health Issues: This (hopefully) will become a risk later in my life, but would still impact my financial well-being. Living in Canada with Universal Health Care (if it’s still around, which seems kind of risky to bet based on the financial burden the way it is being administered currently) reduces the catastrophic risk that ill health would create, but there may still be costs associated with being sick for an extended period of time. I’m hoping that by eating a healthy diet and staying in good physical condition will increase my probability of staying healthy for as long as possible.
Market Collapse: I’m not overly concerned about the stock market crashing, mainly because it’s more of an external problem and there’s not much I can do about this. I could insure my portfolio with long-term put options (a semi “black swan” strategy), but I’m hoping that mainly investing in dividend producing stocks will insulate me, which happened with the majority of stocks in the most recent market decline.
Bottom line though, I don’t really see myself spending more in retirement than I do now. I think I will continue to find time consuming, rather than money consuming interests to get involved in – mostly because I know my interests will continue to shift.
What do you see as threats to your retirement account? If you are already retired, has your spending gone up or down compared to what it was pre-retirement?