How much more will you spend in retirement than expected? My rule: $400 per month


You should inform readers of your “$400 rule”. Maybe they have their own rules.

This is my brother Stephen speaking. Yes, I have a “rule” regarding retirement and savings. I’m not suggesting that it’s something as big as, say, the “4% rule”. (It’s the one related to annual savings withdrawals.) And my research, admittedly, involves a small sample. (Just me.)

Still, I think it’s interesting how this “guideline” (a better word) worked out in my retirement. What follows is therefore a brief explanation and request.

In fact, my guideline is borrowed. Several years ago, as I neared retirement from full-time work, a person – and I’m afraid I can’t remember who it was, but I’m happy to give you credit if you’re reading this – told me, “You’ll spend about $400 a month in retirement beyond what you think you’ll spend.”

I remember thinking: This sounds silly. Surely I can craft an annual retirement budget that doesn’t miss the $5,000 mark.

And yet…more months than not, my wife and I end up with one bill, or a combination of bills, that totals around $400.

Changes in expenses

When asked to anticipate how their spending might change in retirement—and whether spending has actually changed—pre-retirees and retirees surveyed said:

How much more will you spend in retirement than expected? My rule: $400 per month

These are bills outside of what we would normally expect: the garage door spring and cable that broke and had to be replaced; the family member who applied for financial assistance; x-ray and dental fees for a sudden toothache (my wife and I don’t have dental insurance); the little tree in our yard that ultimately was dying and needed to be removed; the storm that damaged the screens on our porch; the rock that hit and cracked our windshield; a request from a charity that we thought we should honour. The list continues.

Yes, surprises are a part of life and budgets always need some wiggle room. But in preparing for retirement, I had never seen or heard of a hard number on how much wiggle room my particular budget might need. Hence my retirement “rule”: When you’ve finished estimating your annual expenses later in life, add about $5,000. This total should be closer to what you will actually need.

(Of course, my rule is based on spending where my wife and I live in the Southeast; I imagine the number could be a little bigger, or smaller, elsewhere.)

As to the request: My brother may be right. If I have a retirement rule based on my experiences, I bet other retirees have it too. So if you have developed a rule or guideline for future life, we would love to hear from you. Hopefully, we’ll include some of your insights in an upcoming column.

My wife and I are recently retired and our adult children are pushing us to adopt a dog to help us stay active, physically and socially. My question is about pet insurance. Can you point us to an unbiased guide to this type of coverage?

Interesting question. Pet insurance is becoming more popular and more expensive, according to the North American Pet Health Insurance Association.

In 2020, 3.1 million pets in the United States were insured, according to the association. (Of that total, 83% were dogs and 17% cats.) That’s almost double the number of pets insured in 2016. In 2020, a dog’s average annual premium for accident and illness”, as opposed to “accident” protection. only,” was $594, down from $518 in 2016.

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What is your rule or guideline for the future life. Talk to us below or send us an email askencore@wsj.com.

(Cats, by comparison, are a bargain: The average annual premium for accident and sickness coverage was $342 in 2020, up from $321 four years earlier.)

For more information on this insurance, see the National Association of Insurance Commissioners. Here, among other resources, you will find “A Regulator’s Guide to Pet Insurance”. Although this report is designed primarily for insurance managers, it offers consumers a good, unbiased overview of this product: how it works and what to look for.

And…your kids might be onto something. A number of retirees over the years have told us that having a pet has helped them meet people and make new friends.

I will be 62 this year and I want to apply for social security as soon as possible. What is the earliest date I can do this?

We must first make a distinction: when you become eligible for benefits, and when you can apply for benefits.

According to the Social Security Administration, you must be 62 for the entire month to be eligible to receive benefits. The agency considers you to be 62 for an entire month if you were born on the first or second day of the month; otherwise, you do not meet this condition until the following month.

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Do you have a question about retirement planning and life? E-mail askencore@wsj.com.

As for the application for benefits, you can do so up to four months before the start of your retirement benefits. The Social Security Administration offers a good example of how this all works on its website, as follows:

Let’s say you turn 62 on December 2. This means that you meet the “full month” requirement and can start your benefits as early as December. Using the four-month rule, if you want your benefits to start in December, you can apply in August.

Still, let’s say you were born on December 3 or later in the month. In this case, you do not meet the “full month” requirement. Which means you can start your benefits in January 2023. In other words, in January 2023 — again, in the eyes of the Social Security Administration — you’ll be 62 for the whole month. And, to finish the example, if you want your benefits to start in January 2023, you can apply in September 2022.

Mr. Ruffenach is a former journalist and editor of the Wall Street Journal. Ask Encore examines financial matters for those contemplating, planning and living in retirement. Send your questions and comments to askencore@wsj.com.

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