How will your expenses be impacted when you retire?

THE INSIDE SCOOP ON RETIREMENT

By Rick Hoogendoorn

THE IMPACT ON EXPENSES

If you are worried about when you can retire, this section may be a great help. Most retirees I spoke to said their day to day expenses went down dramatically after they retired. However, some also reported the extra time they had sometimes translated into more time to spend money.

PAM: "Don't be afraid. You don't need as much money to live after you retire as you did when you were working because everything changes. Your clothes, your habits, everything."

RICK: "The cost of working is no longer there?"

PAM: "That's right. Clothes cost me a lot."

JOHN: "Well, you think you're going to need about the same as you’ve been earning, but in reality, when you recognize that you're not paying Canada Pension, Unemployment Insurance, and all the other insurance coverage, your taxes are probably going to be half of what they were when you were earning. I think I was surprised that I needed so little to live comfortably and still travel. To be fair I wish I'd retired earlier. I retired at 58, and I think if you could make 55 and you could afford it, it's worth it."

GINNIE: "I don't need as many clothes, and I really can get by on a lot less money than I thought I could. I've got time to think about spending my money. There's a lot less impulse buying because I have time on my hands."

RICK: "So if you had known that, would you have retired earlier?"

GINNIE: "Yes, I might have. I retired when I was 57 and I could have retired when I was 55. Ya, my biggest concern was that I wouldn't be able to get by on less money."

RICK: "Where do you find the most savings?"

GINNIE: "Definitely clothes, number one. You know, it's amazing how much you can spend on that. Clothes. Gas."

CAROL: "I have 75 times as many clothes as I'm gonna need, and now I understand why little old ladies of 85 years old are walking around in polyester flair pants, because they haven't bought anything. I've got enough clothes in my closet, if I choose to keep them and not give them away, that will last me until I’m 100. So I think that if I had to do it over again, I'd stop buying clothes about five years before I quit work, or anticipated leaving work, because you just don't need the clothes that you need when you go to work. I've got a whole drawer of pantyhose; some new, some used. The last time I had pantyhose on was about 3 months ago and it was only once. Twice since I stopped working. You just wear slacks. But then I intend to be a kind of dress down kind of person rather than a dressed up person."

I asked Earl what he did with the clothes he didn't need, and he mentioned a novel way of recycling his unneeded neckties.

EARL: "I have used them, and my tomatoes look really great because they needed to be tied up and I tied them with an actual tie knot, just slipped them around there."

RICK: "A properly tied necktie?"

EARL: "A necktie…which is on the tomato plants. Looked really quite neat, even after they'd been watered 100 times."

RICK: “You don't need your ties anymore, so that's a great use for them.”

EARL: "Well it was symbolic, getting rid of them, because I always hated wearing a necktie."

MAUREEN: "It costs so much less when you're retired because you don't have the transportation. You don't have the coffee. You don't have to have the clothes and the everyday expenses when you go to work. You've always got your hand in your pocket for somebody for something. When you're home it's just the few people at the door that want you to contribute to something, where you can say no. At work you couldn't really say no."

RICK: "You felt obligated?"

MAUREEN: "That's right. Your food is ten times less. I grow my own vegetables and stuff now, and I shop because I have the time."

RICK: "So you have the time to be frugal whereas before you didn't?"

MAUREEN: "You had to rush home and put something on or pick something up because it was so much easier. Ya. And you don't have to buy new clothes. You don't need the pantyhose every other day and stuff like that."

PAT: "I spent more money when I was working because it was there. 'Oh, this is a bargain! I'll have to have it!' There's not a thing we need in the way of material goods now."

RICK: "Did you find that the transition from working to not working, from a money standpoint, was somewhat traumatic?"

EARL: "Yes, it was. But at the same time it costs a lot less to live when you're not working in terms of transportation and clothing and entertainment, the whole thing. You know, it costs less to live when you're retired, but still it's hard to balance that out because the transition is not carefully thought out. It's something that you grow to live with. It requires a period of adjustment.

ANNE: "It's fun. It's a challenge. It's like a game. 'Okay, okay. So you really don't need that, okay. So we won't get that.' It's almost like how far can I go into the month just relying on basic needs. So it's fine."

RICK: "But while some expenses go down, don't you also have more time to actually spend money?"

ANNE: "I was worried about that, but I haven't found that so much because I look at ways to save. Instead of buying a book, now I go to the library all the time. And if I go to the bookstore I just go to look at the new titles and then I'll get them from the library. So I seem to have gotten into that mindset. And also for me it's the clothes I don't need to buy. You don't need that anymore."

RICK: "One person I spoke to said she now understands why old ladies wear polyester flair pants. Because they haven’t wanted or needed to buy any new clothes for years."

ANNE: "Well, that's true. You just don't need that type of wardrobe anymore, so that's certainly one way that you do save money. Wear all your old shoes that might be out of fashion. For women that's a big thing. It was almost like purging, you know, it was part of the retirement thing. So basically what I've got left is really what I will wear."

The Reporter’s Notebook

How much will your expenses drop? How much can you make them drop? And as Carol wisely suggests, quit buying work clothes a few years before you actually retire!

Financial planning, estate planning, retirement planning, insurance planning, tax planning, insurance products, segregated funds, and tax preparation services mentioned herein are offered through Cheri Crause & Associates Inc. .