(Corrects spelling in paragraphs 9 and 10 to Hinden instead of
By Lou Carlozo
CHICAGO Aug 20 You can play with retirement
planning calculators from now until you're 90, but it's unlikely
any of them will factor in expenses like a $1,000 custom-made
satin-and rhinestone stage outfit.
That's the first thing that Aurora Flores, 60, bought when
she retired last year after 20 years in public relations. The
New Yorker kicked her world music band up into high gear,
performing internationally and spending most of her spare cash
on items like traveling between shows and that sparkly stage
It paid off. Flores had fun and actually made money taking
her Latin music band, Zon del Barrio, on the road. But the suit
is a symbol - not only that new adventures await those who leave
their day jobs - but also that the expenses of that first year
of retirement are often higher than expected and unpredictable.
That's good to know because virtually all of the retirement
calculators require workers to guesstimate the amount they will
spend in retirement. Many people lowball the figure for the
first year, when new retirees outspend their expectations with
celebratory trips and hobby supplies. Spending tends to slow
down later, as retirees age, settle into routines and travel
Flores estimates she spent about $112,000 in her first year
of retirement; that's 75 percent of the $150,000 that was her
last annual salary, a typical first-year percentage, say
experts. But, like with Flores, not all the money goes to
utility bills and blood pressure medication. Much of it is an
upfront investment in lifestyle change.
For all the research done in the name of retirement
planning, there is scant data on actual expenses of first-year
retirees. People between the ages of 65 and 74 spend 33 percent
of their budgets on shelter; 12 percent on health care; 13
percent on food (with one-third of that on eating out); 5
percent on entertainment and 17 percent on transportation
including leisure travel, according to the U.S. Bureau of Labor
Reuters asked some retirees how they spent their money
during that first year, and found a breadth of answers.
CRUISES AND CROWNS
"If you've worked for 40 years, as my wife and I have done,
you think, well it's time to have a little fun," says Stan
Hinden, a former Washington Post columnist and the author of
"How to Retire Happy." He and his wife took a one-week $15,000
cruise to the Caribbean when he retired, and admits that "I had
not included the cost of travel or fun in my budget. It took us
about two years to figure things out, and we really had to slow
down our spending."
Part of that was necessitated by first-year health expenses,
common among retirees who have given up employer insurance but
are too young for Medicare and Medigap coverage. Even though he
had Medicare, Hinden recalls needing two crowns in his first
year of retirement, an expense Medicare didn't cover. Talk about
a big bite: It cost him $2000, entirely out of pocket.
Hinden tells preretirees to plan on spending more than 80
percent of their last year's income in their first year of
retirement so they are ready for both the fun and the unexpected
Half of the respondents in a recent Employee Benefit
Research Institute survey said they spent more in early
retirement than they did before they stopped working.
For some retirees, debt will be a factor too. The average
new retiree now has outstanding mortgage and credit card debt
equal to about 10 percent of net worth, according to the AARP's
Public Policy Institute.
LIFE IN THE FAST LANE
Richard Alan Brown of Highlands Ranch, Colorado, refers to
his March 2012 retirement from pharmaceutical sales as "changing
lanes" - perhaps because he had new cars on his mind.
"New toys were necessary," he said, noting that his wife
Beth's car lease expired and he had to turn in his company car.
They spent $55,000 on a 2011 Jeep and a 2011 V6 Chevrolet
The couple also threw a "Changing Lanes soiree" for about 75
guests at The Broadmoor in Colorado Springs, a luxury resort and
hotel by Cheyenne Lake, that set them back between $12,000 and
"When you retire with a great benefits package, you think
you're king of the world for the first year," says Brown, 61,
who was making $148,000 in the final year on the job.
But the Browns actually planned carefully for that
first-year splurge - running numbers with a financial adviser
and dialing back regular expenses, including downsizing from a
single-family home to a townhouse.
They spent 75 percent of their combined incomes in year one
and expect to spend less in year two, in part because he's
spending much of his time writing a book and in part because the
couple saves on travel by driving 40 minutes away for recreation
in the Rocky Mountains. "It's just a tank of gas for us."
UPSIZING THE HOUSE AND THE BUDGET
Not everyone cuts spending or downsizes in retirement. Tony
Lopez, 59, of Yorba Linda, California, and his wife Celia, 57,
tapped their savings to put down $132,000 - more than double his
last salary - on a four-bedroom home they share with their
daughter, son-in-law and three grandchildren.
The couple commutes to a vacation home in Texas and waits
for Celia to retire from her job as a kindergarten teacher so
they can visit Rome and the Vatican. Says Tony, "That's when
we're going to take the big trip" - and spend the big bucks.
(Follow us @ReutersMoney or here;
Editing by Linda Stern)