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Tuesday 16 August 2016

Calculating My Retirement Cost Of Living

Wow, very mature Stealthy Wealth,
very mature... 
I have stated before that the first step in determining how much you need to retire, is to determine what your retirement cost of living will be. So with this in mind I had a look at our current budget and used it to get an estimate of what our expenses would be during retirement. This would then be the starting point to work out what sort of lumpsum we would need before we could do the Big R.

So how do you determine what your cost of living will be in retirement? Well I proceeded as follows... I started off with our household's current monthly expenses. From there I tried to determine which of the expenses would still be relevant if we were to retire. Then, from there I did my best to think of any additional expenses which would come into effect once we start retirement (maybe the missus and I join the bowls club or something like that :))

I am also hoping that I get some feedback from all of you - maybe I forget something obvious, or you think joining a bowls club is a total waste of money!

So here we go... First up our current monthly expenses.

A List Of Our Current Monthly Expenses

Below is a list of expenses that is on our current monthly budget. I have put some comments in, but sho, some of these warrant a blog post all on their own - which I will hopefully get to some day....

Bond Repayment StealthvilleThe run of the mill bond repayment for our primary residence
Stealthville LeviesSectional title, so the usual. Also covers insurance of the building.
Stealthville RatesTshwane wants their cut too
Bond Repayment Sandton ApartmentThis is the bond payment we have for our apartment in Sandton which we are currently renting out
Sandton Apartment LeviesWe do seem to like our sectional titles
Sandton Apartment RatesCity of Joburg, not to be outdone by City of Tshwane
PetrolFor when the Stealthmobile and my scooter get thirsty
Bank FeesAll accounts have them - maybe one day....
Medical AidUnfortunately this is kind of a must in South Africa
Medical SavingsWe on a hospital only plan, so we generally run our own Medical Savings Account (meaning we don't pay anyone a fee for the same thing!). This one deserves a post on it's own.
ElectricityKeeping the PC on and the coffee brewing, allowing me to type this!
ToiletriesMrs Stealthy Wealth is in charge of this department...
SchoolingThis is to cover Nursery School. Not relevant yet, but will be pretty soon. After nursery school, primary school and then high school - deserves a post on it's own.
GautrainA world class service enabling 0 traffic for my missus and allowing her to do something productive to and from work.
EntertainmentWe do spoil ourselves on occasion
MiscellaneousStuff breaks, hair needs to be cut, car guards need to be tipped, and other random shit.
CellphonesYak yak (maybe my wife talks more than me, maybe she doesn't.... I will leave it there)
InternetAllowing me to get these words to all of you!
Domestic WorkerUsed to have one weekly, but after we moved to Centurion we went without one for 7 months due to all the extra time I had. However with Stealthy Junior imminent we have settled on getting someone once every two weeks which I think is a decent compromise.
Short Term InsuranceDeserves a post on it's own. Investigating and working toward becoming "self insured" 
Life InsuranceOur imminent child bumps this priority up!
ClothingI refer you to the wardrobe picture in this blog post. Enough said :)
InvestmentsExtra into Home Loan, ETF's, Shares etc.
Stealthy Junior SavingsI plan on putting money away every month for my son. A post on this will come out soon.
TFSA ContributionsMan I love these! A post on this is on my Todo list
Car SavingsWe plan on running the Stealthmobile for a very long time. But I know that at some point it will also want to retire - although I haven't told him yet that early retirement for him is out of the question :) So we are putting a little money away each month so that one day, when it is time, we can welcome Stealthmobile Mark II without incurring any debt. Also used towards maintenance.
Household MaintenanceTo keep Stealthville running smoothly

Relevant Expenses

Ok so that was a list of all our current expenses. Next I worked through each of them one by one, and then made a call if the expense would still be relevant in our retirement in 2030.

It is difficult to predict what things will be like in 2030....

Centurion in 2030 or just a bad movie?

Anyways here we go:

ExpenseStill Relevant? Comments
Bond Repayment StealthvilleNo - Woohoo. plan to have this paid off by the time 2030 comes around
Stealthville LeviesYes - This one is not going anywhere
Stealthville RatesYes - Whatever Tshwane's name has changed to by then, I am sure they will still want their money
Bond Repayment Sandton ApartmentNo - This bond will be paid off by 2030
Sandton Apartment LeviesN/A
We will possibly sell this apartment at some point, depending on tenant behavior and how much time, effort and maintenance it requires. However if we still have the apartment, any costs will be covered many times over by rental by the time 2030 rolls around. So I am not factoring this cost in.
Sandton Apartment RatesN/A
Same as above. If we still have the apartment, any costs will be covered many times over by rental
PetrolYes - We will still need to get around - maybe by then cars are electric.....who knows. Either way I am budgeting for petrol, or whatever the futuristic equivalent may be...
Bank FeesYes - I guess this one is not going anywhere.
Medical AidYes - More than likely still required...
Medical SavingsYes - We will still be doing our own savings. Although if all goes well and over the years we manage to grow these savings large enough, we may no longer require this expense. But I will leave it in for now.
ElectricityYes - Maybe we all solar by then...
GroceriesYes - Still yummy!
ToiletriesYes - Still the wife's department
SchoolingYes - By 2030 Stealthy Junior will be 14 and CEO of his own company in high school doing stupid stuff to impress girls.
GautrainNo - Done and dusted with the work commuting
EntertainmentYes - Tickets for the annual early retirement conference?
MiscellaneousYes - Stuff will still be breaking, hair will still need cutting, car guards.....you think they will still be around? 
CellphonesYes - I am sure there will be a monthly fee for the cellphone wrist implant that people now use to communicate. Need one for myself, Mrs Stealthy Wealth and Stealthy Junior
InternetYes - It will be so awesome if this blog is still going in 2030!
Domestic WorkerNo - Definitely will have more than enough time to do the housework, and a 14 year old son who will be big enough to wash the dishes. And the car. And mow the lawn. May as well vacuum the carpets, mop the floors, do the washing, cook dinner and service the car. Awesome!
Short Term InsuranceYes - By 2030 I hope to be self insured but will possibly keep 3rd party insurance for the car. Will possibly also keep household contents, or maybe not.... But leaving it on in case.
Life InsuranceNo - The point of life insurance is basically to protect and look after the family in the event you are no longer around to earn an income. But if we make it to early retirement then we should have enough money to last us. So if I were to keel over whilst ascending Polly Shortts on my 10th uprun, I know that the family is sorted.
ClothingYes - Mostly running gear and PJs :) I guess Stealthy Junior will also be hitting his growth spurt round about now and outgrowing his stuff pretty quickly!
InvestmentsNo - Don't see myself contributing anything extra as our pot should be large enough.
Stealthy Junior SavingsYes - We will probably continue putting money away for a possible University education or similar.
TFSANo - Done contributing to these.
Car SavingsYes - Will continue with this as Stealthy Mobile Mark III may be required and maintenance will still be required.
Household MaintenanceYes - Still needed.

Additional Retirement Expenses

Ok so now I know which of the current expenses will still be relevant in our early retirement. But we also need to think about any additional expenses there might be which we do not currently have.

Immediately I am thinking we would probably want to holiday now and then. Now I am not talking a 3 months in Paris, London and Rome type holiday, but a 7 day trip to the coast is always very lekker, or a few days in Stellenbosch doing some wine drinking tasting . So I will add an item for saving towards holidays.

I said the bowling club thing at the start of this post as a joke, but maybe we will want to join some sort club/community/society to keep us out of trouble. So I will add an item for any possible membership expenses.

Hmmmm, I really thought there would be more in this section, but I think it's just those two...

Final Budget

Okay, so now I have what I think is a complete list of early retirement expenses. Next up is to try put some figures to the expenses. For this I will use current expenses, some guesswork, a bit of common sense and some good old thumb sucking. Without further ado, I present to you, the Stealthy Wealth Early Retirement Budget!

Stealthville LeviesR1646
Stealthville RatesR410
Bank FeesR100
Medical AidR3365
Medical SavingsR500
Short Term insuranceR400
Stealthy Junior SavingsR600
Car SavingsR800
Household MaintenanceR400
Holiday SavingsR800

This gives a grand total of R21 621/month required for the three of us to live during retirement. Yuck, what a horrible number! I will rather call it R22k/month. This works out to R264k per annum.

This is of course what it would cost us if we were to retire today. These values will obviously be significantly more by the time 2030 rolls around, and I will need to adjust them for inflation. I will be effectively chasing a moving target - but that is a calculation for another article...

Also worth mentioning, the above budget includes some nice to have items such as holidays. memberships, new clothes every month and the like. If times were to get tough we could easily cut out R800 for holidays, R300 from memberships, R500 off the grocery bill, around R200 from clothing and probably another R200 from miscellaneous items - this gives about a R2000/month saving. I reckon we could live pretty comfortably off under R20k/month if the need arose. It gives me some comfort knowing that we have a little wriggle room.

Missing something obvious? Being stupid?

So that was a useful exercise! Although I think I have been quite thorough, it is of course entirely possible that I overlooked something, or I am cooked in the head with regards to some of the figures that I came up with? If you spot something ridiculous please be so kind as to let me know...

Also I would love to hear if anyone else has attempted estimating their cost of living in retirement. What sort of figure did you get to?

Till next time, Stay Stealthy!
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