I Have Regrets About Retiring Early: 4 Expenses I Should Have Prepared For

brizmaker / iStock.com

brizmaker / iStock.com

Early retirement sounds like a dream come true, but it’s not all rainbows and roses for most people.

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“For most Americans, early retirement isn’t just a decision to take the longest vacation of their lives — it’s one of the biggest money mistakes that they will regret,” wrote economics professor and author Laurence J. Kotlikoff in a column for CNBC.

Kotlikoff wrote that the reason is simple: “We are, as a group, lousy savers, making early retirement unaffordable,” Kotlikoff said. “Financially speaking, it’s generally far safer and far smarter to retire later.”

If you’re planning to retire early, why not learn from the regrets of those who have done it before you? Here are four expenses early retirees say you should plan for.

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Cost of Living Increases

Jean Voronkova, who retired at 38 to Bali with her husband, said in a video on her YouTube Channel, “Your retirement funds are never as foolproof as you plan for.” She said this is especially true if your plans involve having enough to spend over 30, 40 or even 50 years in the case of early retirement.

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Voronkova said that in the last couple of years since she and her husband retired, the cost of living is soaring and prices have increased due to things like inflation, but they have been fortunate enough so far to be able to get through the financial challenges.

Charitable Donations

Joe Kuhn had a successful career as an operations manager and chose to retire at 55. Although 55 is older than someone in their 30s or 40s, it’s still considered early retirement by society’s standards.

On his YouTube Channel, Kuhn said that he and his wife agreed on about 85% of things when it came to spending, but there were some “pinch points.” For example, Kuhn said that before retirement they donated a lot of money. However, he saw fit to cut that amount in half after retiring, while his wife didn’t.

“You know, it seems obvious to me that if I’m not working, not bringing in the income that I used to have and living off savings we won’t be giving away the same amount. That seemed obvious to me; well, it wasn’t obvious to my wife, and that was probably one of the bigger arguments we had about money…”

Spending on Optional Things During Down Markets

Kuhn also talked about how he and his wife haven’t seen eye to eye on optional spending during down markets. He gave some examples of planned spending that he was willing to do when the markets were down, such as a family wedding and a new car, but says he does not believe that unplanned, optional spending should take place during down markets.

One example of unplanned, optional spending that Kuhn gave was spending $10,000 refurbishing the kitchen, such as replacing the cabinets, when there’s nothing wrong with the function of the cabinets but that they might be out of style.

“We’ve had some special one-time time costs we knew were gonna happen — the market’s down, inflation’s up — now’s not the time to do those optional things,” Kuhn said.

Kuhn made it clear, however, that he wasn’t trying to make it seem like his wife was at fault but rather that they weren’t of the same mindset regarding spending at times. “I’m not trying to paint my wife as evil here. It’s just that… there wasn’t that alignment on what spending would be like in a bear market and then in a bull market, so that’s a conversation I wish we would have done.”

Taxes and Roth Conversions

“This may seem small,” said Kuhn, “but I should have started Roth conversions one year earlier. In my first year of retirement, I was getting used to being a spender versus a saver.”

Kuhn went on to say that when you do a $100,000 Roth conversion with 25%-26% in taxes, it hits you kind of hard.

“Taxes are most people’s No. 1 expense in retirement, so have a plan for that,” said Kuhn.

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