3 Ways to Avoid Downgrading Your Lifestyle After Retirement

3 ways to avoid downgrading your lifestyle after retirement

Last week, I got an interesting comment on my July cash flow update.

I like how you don’t seem to compromise quality of life for over-frugality!

This comment is interesting because quality of life is so subjective. We spend about $4,500 per month and that’s a very comfortable level for us. However, this level of expenditure is unthinkable to many middleclass families. I’ve seen comments complaining that it’s unrealistic to live on less than $100,000 per year, for example. On the other hand, I know other families who spend much less than we do. Justin’s family at Root of Good spends about $2,700 per month and they live a very comfortable lifestyle.  Of course, they live in North Carolina which has a lower cost of living than Portland.

Personally, I feel we spend a bit too much money. We can definitely cut back if we need to. About 50% of our monthly expense is due to housing. Once we pay the home off, our monthly expense would drop quite a bit. We could also reduce our discretionary spending like travel and eating out. Oh yeah, we only have one more year of preschool left. Once RB40jr starts kindergarten, we won’t have to pay for childcare anymore. Although, I hear there will be other expenses cropping up as he gets older.

Yes, it’s tougher to cut back as a family. If I was single with no kid, I’d probably live very simply like my brother does. He lives on about $1,250/month in Silicon Valley. That’s really cheap considering he is in one of the most expensive areas in the country. (#4 most expensive city in the US according to Kiplinger.) I guess I’m a miser at heart. Overall, I feel like we are at a comfortable level, but could cut back if required.

This level of spending is about the same as when I was working full time. We didn’t have to downgrade our lifestyle after I quit my full time job. However, it has only been 3 years and my retirement could last 40-50 years. Most retirees won’t run into trouble right away, but they’ll start to see some problems as they age and spend down their nest egg.

Avoid downgrading your lifestyle after retirement

My biggest fear in early retirement is running out of money. In reality, we won’t run out of money completely. If we see our retirement fund depleting faster than expected, then we would compensate by reducing our living standard. Hopefully, that won’t happen, but that’s what 50% of Americans will face in retirement according to the National Retirement Risk Index.

This is not surprising because our national saving rate is pretty dismal at around 5%. Even if you’ve been diligent and save 15% of your income, it would take 40 years before you can accumulate enough to fund a comfortable retirement. If you neglected to save in your 20s, had a divorce, or had some big medical expense, these factors can easily interrupt your retirement saving. No wonder, so many Americans are heading toward a lifestyle downgrade.

We all dream of traveling, picking up long neglected hobbies, and enjoying life in retirement. All this might not be possible if you can’t pay the bills. So how can you plan ahead so you can maintain your lifestyle in retirement? Here are 3 ways to avoid downgrading your lifestyle after retirement.

1. Work Longer

The obvious answer is to work longer so you can shore up your retirement fund. That’s what many financial advisors recommend. This is an early retirement blog so I can’t recommend sticking with your full time job for 4-5 more years as the solution. There is no way I could have done that with my old stressful job. The alternative is to work part time or become self employed. That’s what I’ve done and my quality of life improved tremendously. Even if you’re financially secure, it is still good to work a little bit to keep life interesting. If you find a way to make some income doing the things you enjoy, then that’s your ticket to early retirement.

2. Save More

Saving 10-15% of your income really isn’t enough. If you want to retire early, then you need to save a lot more. What if you can save 50% or even 70% of your income? Your retirement saving will get a big boost and improve the compounding effect. Just as important, you will put an artificial cap on your monthly expenditure. By saving more, you will keep your lifestyle in check. That’s exactly what we did and it enabled us to maintain our lifestyle when I left my full time job. We could have spent $10,000 per month to live a more luxurious lifestyle, but we choose to live a moderate lifestyle instead so I could retire early.

Note that saving more doesn’t mean you have to live a frugal lifestyle. You could focus on making more income also. If you can increase your income and maintain the same lifestyle, then you’ll be able to save more.

3. Think Creatively

Lastly, you should think creatively about retirement. There are many ways to maintain your lifestyle with a smaller budget. One option is to move to a location with a lower cost of living. That’s why Florida is such a popular retirement destination. There is no state tax and the cost of living is much better than up north. Moving overseas is also becoming more popular with retirees. You’ll get to explore other parts of the world and you can live comfortably on a smaller budget. Relocation isn’t really an option right now due to Mrs. RB40’s job, but once she retires, we’ll take a look at that option again.

Relocation is just one of the things you can do. I’m sure most families can trim their budget without compromising their lifestyle much. Do you really need 200 channels when you only watch the Games of Thrones? How about that gym membership to the gym you never go to? You could learn to cook other cuisines instead of going out to eat. Most of us are just too busy to be more efficient. Can you bike and take public transportation instead of drive? How about searching for cheap fun activities to do instead of going to expensive concerts and shows. In retirement, you’ll have more time to think about ways to save money without compromising your lifestyle.

Will you have to downgrade your lifestyle after retirement? What are you doing to avoid it?

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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24 thoughts on “3 Ways to Avoid Downgrading Your Lifestyle After Retirement”

  1. Nice article. Relocation is one of the most underrated forms of investment advice. Being creative is essential. There’s lots of other “creative” approaches, leveraging HSAs, self directed IRAs, ROTH IRAs (for kids college expenses, in certain circumstances for older parents).

    T. James

  2. Someone’s expectations are out of whack when their idea of a minimum middle-class spend rate is twice the median household income. It may not be good enough for them, but it’s plenty for me. I guess it depends upon objectives– do you want to get there quick as you can? Or do you want to cross the finish line carrying the most baggage?

    When I was living and working in silicon valley, my spend hit 15K per year when I moved out, so your brother and I are probably like twins (I might be able to guess which apartment complex he’s living in and where he buys groceries). I hit 33x of that when I was in my early 30s, and even though the need to save more disappeared, my low spending habit persisted, mainly because I never perceived value in the spending options in front of me.

    I’m not downgrading now, my lifestyle is probably set, or maybe it slowly creeps higher as I age. Working longer (aka trading free time for bling) is something I certainly won’t do, nor would I consider relocating outside of coastal California or doing the ‘share’ thing (like co-housing) because comfort is what I value most. For me Door#2 was all it took.

    • It sounds like your expenses is well under control. Great job!
      Coastal CA is nice. I would consider the central coast for a while if we can swing it.

  3. … my credit card bill this month was $4,500, does that count?

    (Very misleading because it has 2 airplane trips that will be reimbursed in the future, one business travel expense that has already been reimbursed, also has some unusual expenses like a Christmas vacation rental, a laptop, and a bike…)

    To answer your question: Work longer.

  4. My wife just told me she wants our kid to go to some expensive international school. I couldn’t believe my ears, given how frugal she usually is. This could set me back 5 years or more for my retirement plans.

    I think I need to have a serious talk with her 🙁

    • Yikes! The international school around here cost over $10k per year. You should check out the bilingual program in your public school. It’s easier to get into the Japanese program now. Tough to get into the Chinese and Spanish program. Good luck. 🙁

  5. Joe,

    Definitely agree that inefficiency is a huge suck on both resources and time, which creates this unfortunate catch-22 where people are too busy working to pay for their lifestyle, not noticing all of the inefficiencies that they’re spending money on. And it’s that money they’re spending that keeps them working so much.

    But if you’re able to take the time and really think through your budget and cut out the fat, you’ll likely find it takes very little to actually sustain you. Cutting out the fat then allows you to cut back on the working and enjoy a more harmonious and balanced life.

    Definitely agree on the Florida comment, too. Enjoying sunshine, warm weather, palm trees, beaches, and no state income taxes down here. Would certainly love to give Portland a crack at some point in time, but not while my income is high.


  6. I plan on upgrading my lifestyle in retirement or as I like to say execute my victory lap. Need to cut out unneccessary time wasters as well as expenses that just don’t make sense. I like your line ‘Many of us are too busy to be more efficient” which is very true. . The key is to slow things down, simplify, de-clutter and focus only on the things that really matter. I’ve struggled with the slowing down part but things are starting to come together finally. It’s funny that many people feel that you have to travel extensively to have a happy retirement when you can find most of the things you enjoy right in your own backyard. Retirement is like being a kid again, travel light and enjoy it for all it’s worth.

    • Simplifying your life is the key. You need to focus on what really matters. A lot of things we spend money on doesn’t make us any happier in the long run. Glad to hear things are coming together for you.

  7. This is a fear for us retiring and maintaining a comfortable standard of living we are enjoying today. We have concerns about significant events that could affect our ability to manage our expenses in retirement. This could be unanticipated costs for our children, parents, health related, and so on.

    This fear is what has kept us from leaving our employers and living off our next egg. We are working on eliminating that concern and building a bigger contingency fund for those kinds of financial events. We know we can buckle down our expenses if needed, but we would rather not.

    • I think one more year is perfectly fine. Just don’t keep pushing it out over and over. Life is short and I’m pretty sure you’ll be fine after retirement.
      Best wishes.

  8. Joe, awesome article! This is one of our fears and your three points are things we are actively doing, or going to do in early retirement. Our goal is to get over 50% savings before this year is over.

    One of our goals in retirement is to chase our hobbies more passionately and hopefully share with others. If we can make a little extra money at it, all the better!

    We used to spend well over $6,000 a month. We finally realized we were spending blindly and switched gears to save and retire early, but a few months in and we are already seeing big improvements! We are still living very comfortably and got our expenses down to $4,300 last month. Once we get past some of the residual costs of our old expensive lifestyle (luxury apartment rent that we will change in December/January), we will hopefully be saving 60-65%.

    Thanks for the inspiration,
    Mr. Retire by 35

    • 50% saving rate is really great. See, your lifestyle isn’t impacted that much by a 25% cut in spending. Most people just aren’t willing to work on it. Good luck on your journey.

  9. This is also a big fear of mine, and I feel that the best way to avoid having to downgrade your lifestyle is to make sure that you actually need and value all elements of your lifestyle. If you are able to cut back without pain, do it as early as possible. That way as you approach retirement you will know what you really need to live on, and can work until you reach that goal.

    • That’s how we approached it too. We never really spent a lot of money so it wasn’t painful to keep our lifestyle in check. We’ll probably cut back a bit when Mrs. RB40 retires, but I think a lot of that will come from natural progression – paying house off, childcare, etc..

    • That’s the perfect way to retire. Hopefully, she’s working part time and not spending 80 hours per week running the business. 🙂

  10. Thanks for the shout out, Joe! Yeah, we’re getting by VERY comfortably on $2,700/month for a family of 5. Some are like “sure, sounds reasonable” while others say “no, that’s clearly impossible and you’re lying”. Guess it depends on what you’re used to, as some working families barely make $2700 after taxes AND have to pay rent or a mortgage out of that amount (our house is paid off).

    As for your question on downgrading our lifestyle, I don’t think we have made any real sacrifices yet. We might drop to one car partially to save money, but mostly because we rarely use more than one car at a time when work doesn’t require it for the daily commute.

    Otherwise, we’re spending more on travel and fun stuff (like going swimming at the city pool more often). Longer term, I plan to spend some $ on some outdoorsy gear like bikes and a canoe or kayaks plus the car-gear to haul them.

    I think it’s important to plan all the fun stuff in your retirement budget so you can avoid the feeling of a cash crunch. Nothing worse than having tons of free time but not enough money to provide the fun things that aren’t free.

    • Going to one car is a great move. We did and didn’t miss the second car at all. Mrs. RB40 never liked driving much anyway.

  11. We have 2 boys that are now in college and you are right, once your kids get out of daycare / kindergarten, it does free up some cash. If your kids go to public school, it will be much less expensive than it was when they were in daycare. However, they will probably start getting into sports or the arts and this can get expensive (uniforms, dues, etc.).

    One of our sons was really good at soccer and ended up on a traveling team, that was costly. The funny thing is, after high school, he never played soccer again. Go figure.

    • You must be hurting with the college cost, though… I’m not looking forward to that at all.
      We’ll see how good he gets with sports. If he’s really good, then we wouldn’t mind spending some money.

  12. Joe, I didn’t realize you had a brother who lives in my neck of the woods. $1,250 per month, that’s pretty good. He must have roommates. I hear median rent in San Francisco is $3K per month.

    • Yes, he rent a room. That’s the only way to live affordably there. It will be much more expensive once he has a family.


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