When switching from working to early retirement, a lot of expenses can and will change. Part of a successful transition strategy is to plan accordingly and anticipate the changes so there are as little surprises as possible. Last thing you want to do is make the switch and realize your expenses are actually 10% higher than your passive income could support. One of the biggest expense to watch out for is the need to buy your own health care. Other factors could actually reduce your expenses such as reduction in gasoline usage, lower car insurance and maintenance fee, etc.
Probably one everybody does it beat the bush part of any solid retirement plan especially for early retirement you really have to gauge how much you’re going to spend after you retire so today i’ve gathered a lot of factors you really should go over just to make sure you know where your costs are going to land so that you can figure out if you have enough money to
Retire early the best way to practice and prepare for your early retirement of course is to lower your current spend right you can’t spend at a high level today and then just say oh after our retire i’m going to not spend on this and not do that it’s not going to happen because it’s really hard to adjust what i recommend to do is lower your current expenses it’s
Sort of like a prototype and staging yourself for the transition of course we can’t predict every single thing and after you make the transition there’s a lot of different things you still need to watch out for and your expenses are going to change still some more but at least if you lower your expenses and you’re sorta used to it there will be less surprises here
Are some things that may change in your burn rate after you transition into early retirement your gasoline usage is going to drop dramatically depending on how far you commute to work because you just don’t have the community more your public transportation is going to also reduce to a point where you’re only going out to get specific things that you need you don’t
Have to do it every single day and likely you’re going to just collect them all and make me do it once a week your current rates will likely go down if you update the estimated driving mileage are you going to have the maintenance is going to also go down to i row over here you will have an increased cost in terms of healthcare because then you have to actually pay
For it yourself rather than your employer subsidizing for most of it when you retire you’re going to have a much lower spending rate and probably a much lower passive income level therefore your income is going to be way down there and you would qualify for a lot of the subsidized affordable care act stuff so then you can pay a lot less my estimate for health care
Depending on where your passive income lives could range anywhere from about $1,000 that’s really really low to maybe $5,000 that’s average and if you’re much older it may cost something close to even $12,000 a year when you’ve retired early and you’re staying home a lot more or maybe you’re out and about all the time but you’re going to use your own facilities
A lot more so a lot of consumables are going to be used a lot more including coffee tea toilet paper lightbulbs and the light other consumables include electricity gas and water because you’re going to use your own bathroom you’re going to use a lot more electricity because you’re going to present wherever you’re sitting you’re going to have to be paying for that
Location you can also reduce a lot your work clothes cost and also your work lunches all those times where you don’t have enough time to pack for lunch you go out and you no longer have to do that because you’re always going to have something at home to eat instead sometimes your work clothes can be quite expensive depending on your profession but you can basically
Remove all of those because you won’t be buying any more of those like i said in reference to the healthcare if you are in early retirement your tax bracket will likely drop way down before i don’t know you could be like 25 33 percent tax bracket all of a sudden you make much less to the level of your exact burn rate and if your burn rate is really low that means
Your income bracket is really low if you’re in a really low tax bracket your mortgage tax deduction may not work as well for you because maybe before you’re able to get 25 percent deduction of the total tax you pay if you’re in a lower tax bracket maybe you only get 10% that’s a lot less benefit and therefore you might just want to pay it all off anyway because if
You’re in early retirement you can’t have a mortgage really it makes it a lot harder the obvious thing with early retirement of course is you’re going to have a bunch of extra time so you really have to plan ahead of knowing what you’re actually going to do some people when they retire at the age of 65 or whatnot they get bored and sometimes just go back to work
I don’t think anyone should do this you really need to find yourself and figure out what you like to do your hobby spending my increase because you have a lot more time to do it maybe you want additional gizmos or something to make your hobbies better you need more advanced equipment or whatnot you know on my channel i like to turn credit card so maybe if i were
Retired early then i would turn more credit cards i don’t know bake cookies make parmesan crisps design 3d models of stuff to print on my 3d printer and probably you can travel as much as you want as long as you want because if you’re in early retirement you have the passive income basically you don’t have to work and if you keep your expenses low enough even when
You’re traveling then you can just do it indefinitely you have the luxury of traveling on wednesdays and if your airline says eh and i’ll let me give you $200 credit for you know missing this flight and going tomorrow no big deal because you can do that and save some more money i hope this gives you more fuel more enthusiasm to save more not retirement all the way
In 65 sometime much earlier than that and it’s completely doable don’t forget to give me a like on this video comment down below let me know what you’re going to do on your early retirement because i’m always interested in what other people are interested in doing if you’re interested in supporting this channel i have an audible link over here patreon over here
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Transcribed from video
Estimating Early Retirement Burn Rate | BeatTheBush By BeatTheBush
