210) Do You spend more or less during retirement?

An interesting topic for a long Debate.

A post in Facebook on the same question attracted many comments. Most people commented that the expenses will go higher.

  

So, what do you think?

The answer is not as simple as just higher or lower. Your expenses are different depending on your situation. 

The comments on higher expenses can be summarized into few main reasons:

1) More Time to Spend

More time to travel, eat, holiday. By staying more at home, the utilities are also used more. The water and electricity bills go higher. You will switch on the electrical items for longer period. Air-cond, TV, lights and internet are used more. When you are working in an office, the water and electricity are paid by the company you work for.The appliances at home are switched off.

As the saying goes, during retirement "Everyday is a Holiday". We tend to spend more during holidays.

2) Higher Inflation

Prices will go higher as time progress due to inflation. During your retirement, your expenses are higher even you buy the same things. Inflation rates are also different for different products and services.

3) Pay for More Things

While working for a company, you can claim certain expenses like travel and handphone bills. Companies also provide benefits like insurance, dental, medical and hospitalization. Company even give drinks, snacks, birthday celebration, sports facilities, uniform, t-shirts, paid holiday and annual company trips. 

When your retire, all expenses are to be paid by you. You cannot claim back any expenses.

4) Housing Loans
As the housing costs is getting more expensive, the banks had been extending the loan tenure until age 65 or even 70. This is to allow a lower monthly installment repayment by the house buyer so that he or she can be eligible for higher loan amount. House prices are increasing faster than income increments.

Even after retirement age, many people still have to pay for their housing loan. Any increase of interest rates will incur more expenses servicing the loan.

Housing loans repayments is a major expenses for most people. It is good if the house are fully paid up before your retirement.


5) Car Loans
As cars are also getting more expensive, the car loan tenure had been extended to 9 years. Higher installments are also due do higher car prices.

Car loans repayments is another major expenses for most people. It is good if the car is fully paid up before your retirement. Furthermore, having the convenience of a car also incur other costs like maintenance, road tax, car insurance, parking, etc. Consider taking public transport for your traveling.

6) Children Education
As more people are getting married at older age, they are also having children at a later age.

Education fees for the younger children are still required even after a person retired. As more students are getting higher education, having a tertiary education is longer a luxury, but a necessity.

More from this link:
https://highlevelrules.blogspot.com/2018/07/must-i-send-my-child-to-tertiary.html

Children's tertiary education are major expenses for most people. It is good if the children completed their studies before your retirement.

7) Children Expenses

Many people are still paying for the living expenses of their non-working children. As the cost of living is getting higher and increase faster than income, the younger generation is finding difficulty to survive on their own. Many young people still depend on their parents for the basic expenses. Only after many years working, can the younger generation to afford their own property.

8) Other Dependents
Aged parents or older relatives may still depend on the younger retiree. Many people are caught in the "sandwich generation" where they have to support their parents and young children. Refer to point above on children expenses.

Listed below are quick points of expenses and savings during working life and retirement life.

9) Lifestyle
Your lifestyle will be one major impact to your expenses. Are you willing to change your lifestyle to reduce the expenses? Are you still willing and able to work after the official retirement age?

10) Other Considerations
The are also other factors that is beyond our control. Among few considerations are the  impact of government policies, benefits to citizens, taxation, advancement of science, technology, healthcare and cost of medication.


Expenses During Working Life

- Transport to work
- Working clothes
- Outside food during lunch
- Children school, tuition fees
- Housing loan

Savings During Working Life
- Medical claim
- Insurance provided
- Travel claims
- Allowances
- Company Trip
- Notebooks provided
- Mobile & line subsidy

Expenses During Retirement Life
- Travel holidays
- Higher Medical insurance
- Higher Medical expenses
- More time to spend
- Expenses by staying at home

Savings During Retirement Life
- less on clothes
- less on makeup
- less on food
- less on expensive items

Do get a better understanding on your circumstances and prepare better for your retirement.

Here is an Excel file where you can compare the Cash Flow (income and expenses) during working and during retirement. 

Assume you retire today. What was your cash flow last month vs your cash flow for next month.

Another tab in the Excel file is for you to do your Yearly Income and Expenses for next few years.

Link to Cash Flow excel file:

https://drive.google.com/open?id=1c9m6z1g_WxOmxHDhaM7wQLsjqSuuy21P

Do take note that the expenses are based on current values. The inflation effect is not taken into consideration.

Prepare your expenses covering many areas.
Do compare before vs during retirement.
Do the annual cash flow for several years to understand your cash flows.