You really don’t need as much money post-retirement as you did while working

Three years ago, almost to the dot, I wrote a post called Post Retirement Needs & Wants are Hard to Envision in Debt Slavery  I’ve come across this again a few times since then, and it seems that though I found it hard, it was a damn sight easier for me than many people. So I thought I’d revisit the theme, with about a years worth of hindsight.

Artist: Rene Schute

Most people, particularly those who have been working for a while and got set into a certain lifestyle spending, lose the ability to think outside the box. yeah, I know it’s a terrible piece of management-speak that I heard all too often at work, but it seems uniquely apposite here. I can’t believe the number of times I’ve heard variations on the theme.

how on earth do you have a life on that little?

A lot of successful people seem to gain their sense of self-worth from the number on their P60 corresponding to their salary, and there’s a knock-on effect that means their sense of self-worth ends up connecting to their spending. They feel that life isn’t being lived to the full if they aren’t spending a similar amount in retirement as they were spending at work.

Now there’s nothing fundamentally wrong in identifying yourself with your spending, provided you can afford it, and most of these successful people can afford it. Many people become successful precisely because they identify themselves with their salary, I know I switched jobs a few times early on because I thought I was worth more than what I was getting, and stopped when I figured I had reached Enough. Identifying yourself with your spending, however, has a cost. It makes retirement in general, and early retirement in particular, scary.

That’s because you lose a bit of your sense of self-worth if you retire, since in most cases the maths dictate your retirement income is lower than working income[ref]a typical expected retirement is about as long as your working life, so unless you are saving nearly half your pretax salary you will retire on less than your working pay. Compound interest isn’t enough to do most of the heavy lifting here[/ref]. Early retirement in particular, is all about reducing your spending. It isn’t about earning more, because earning more is generally associated with lifestyle inflation, if only to compensate for the extra stress that usually goes with it. If you get your self worth from some of your spending, then reducing that is going to make you feel like shit and generally give you the willies. There are three things you can do about this

  1. Accept this is the way you are, these are the values you choose to live by, enjoy the spending and retire later!
  2. Examine your priorities, and ask yourself if your spending is really that important to you or if working is costing you more in loss of quality of life than the increased spending is improving your quality of life.
  3. Refuse to look at the situation and conclude that people who reduce their spending are living a miserable life of slumdogs

1 amd 2 are both valid and reasonable courses of action. While 3 may make you feel better, if you haven’t asked yourself the question and honestly considered the alternatives, well, you haven’t really got your head out of that box, have you? It’s not like you are committing yourself to course 1 or 2, but at least if you go for 1 then you know that you are living your values, that there are other options but on balance you know you prefer to work longer and spend more.

One of the problems is the classic one associated with all change. It is easy to see what you will lose with a change, but not so easy to see, and impossible to live, what you will gain with the change. The vast majority of the benefits of retiring I found were not to do with money. They were to do with the extra time I have, the vastly increased sense of self-determination, and the elimination of stupid rules and hoops to jump through.

Many people think they will dive into a frenzy of DIY which will save them a load of money, and good for them. I did repair a tractor starter motor and a few things. But I can’t be arsed with many DIY tasks – I still have a flat roof fund against the time when that will need redoing, I paid a chimney sweep rather than do this myself though it’s perfectly in my capability, and I still haven’t really convinced myself I want to paint the house. All of these are still choices and the balance may change in time. There are some things I will do if it’s too hard to find competent workmen or the labour cost would make it prohibitive but I haven’t run into too many of those yet.

My spending dropped because far too much of it was compensating for the stress and ennui of not being a free-range human being. And here’s a secret I can share with you – all the money in the world can’t compensate you for the deep loss of personal freedom that working for a living imposes upon you. Each one of us has 24 hours allocated to us every day, and about 8 of those we have to sleep. Of the remaining 16 half of them are sold to work. It’s a necessary evil, but over the course of three decades it is easy to end up with the words of Tyler Durden being all too true

Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need.

Now there’s no getting away from the fact that the transition from working to retired is a change, and a challenge to boot.

It made me nervous. More so in my case than most, I should imagine, I went from having a decent income to sweet FA, because I am not drawing my pension. Why not? Because I saved a shedload of money as cash, I had a year’s worth of salary under the tax-free threshold as cash and even after filling up 2012’s ISA I still had a load of cash left over.

And you can’t turn a profit on cash these days. So the best I could do with this cash is to live off it and defer my pension. Because the trustees in charge of my pension expect me to die 20 years after I turn 60, each year I defer my pension it gets bigger by 5%, though since I am running into tax that actually only increases by 4%. It would be mad to take that income now because where the hell else am I going to turn a 4% in real terms return on investment on cash after tax? What am I going to do with it, there’s no point in drawing it and saving it, or even investing it, because I am not such a smart investor that I can say I have a good chance of doing better than 4% real.

However, I have the ghost of Micawber on my shoulder, yelling out

You are spending more than you earn Wrong Way, Stop, TURN BACK NOW

He’s right in a narrow way and wrong in a big picture way. At the point of transition this gave me grief, I had just come out of three years of saving to get out, and wasn’t in the greatest place mentally.  I tried to maintain my net worth, becoming virtually catatonic for a short while after leaving. No, that isn’t living life to the full, but the time was productively used, it’s called convalescence, and that sort of thing takes just as much time as it’s gonna take 😉 Life is a dynamic balance – as so well summarised in Ecclesiastes on “a time for all things

However, looking back I went on holiday three times in the last year. So why is it that I needed less money after retiring? Was it as simple as Jacob ERE highlighted in his direct way – that for most people, the idea of living life to the full consists of

In general, if you ask the average consumer what enjoying life is all about, it distills to the following trifecta: buying tickets, going to restaurants, and shopping.

That’s it. Those three things are all there is to enjoying life. The uninformed opinion is that if you don’t have these these three things in your life, your life sucks. I know, because that’s what I used to think. And it’s also what consumers keep bringing up

Why is this so? Jacob linked to this post on Raptitude which makes an attempt to nail down why, where the author looked at what changed when he went back to work

We buy stuff to cheer ourselves up, to keep up with the Joneses, to fulfill our childhood vision of what our adulthood would be like, to broadcast our status to the world, and for a lot of other psychological reasons that have very little to do with how useful the product really is. How much stuff is in your basement or garage that you haven’t used in the past year?

The ultimate tool for corporations to sustain a culture of this sort is to develop the 40-hour workweek as the normal lifestyle. Under these working conditions people have to build a life in the evenings and on weekends. This arrangement makes us naturally more inclined to spend heavily on entertainment and conveniences because our free time is so scarce.

I’ve only been back at work for a few days, but already I’m noticing that the more wholesome activities are quickly dropping out of my life: walking, exercising, reading, meditating, and extra writing.

The one conspicuous similarity between these activities is that they cost little or no money, but they take time.

Suddenly I have a lot more money and a lot less time

I failed dismally to call this out in my post on post-retirement needs and wants, because I wrote it while still at work. I missed Raptitudes’ insight because I hadn’t lived it, but now I have lived it he’s spot on. He goes on to say

Can you imagine what would happen if all of America stopped buying so much unnecessary fluff that doesn’t add a lot of lasting value to our lives?

The economy would collapse and never recover.

All of America’s well-publicized problems, including obesity, depression, pollution and corruption are what it costs to create and sustain a trillion-dollar economy. For the economy to be “healthy”, America has to remain unhealthy. Healthy, happy people don’t feel like they need much they don’t already have, and that means they don’t buy a lot of junk, don’t need to be entertained as much, and they don’t end up watching a lot of commercials.

I recommend his post to those who say that reducing spending means not living life to the full. To wit –

Big companies didn’t make their millions by earnestly promoting the virtues of their products, they made it by creating a culture of hundreds of millions of people that buy way more than they need and try to chase away dissatisfaction with money.

Now if that’s really what you want to do with your three-score-years-and-ten then have at it, but do take the time out to ask yourself whether that really is what living life to the full means to you 😉

Me, I’m going to post this and then wander out in the neighbourhood and look at the bees skimming the clover and the flowers growing and the birds singing. It’s part of my investment in health insurance after MMM punched me in the face with his 23 1/2 hours article.

That’s why I need less money than I anticipated. It’s that I have more time. And no, it’s not as simplistic as time=money so I can do for myself what I’d pay others to do. That sounds smart but it’s bollocks. More time has an existential value in and of itself. It enables me to live better, so I don’t have to chase away dissatisfaction with money.

10 thoughts on “You really don’t need as much money post-retirement as you did while working”

  1. Interestingly I sit reading this in a big glass office building with the sun blazing outside, counting down the minutes until I can zoom off and rush to enjoy the 2 day break before back in on Monday to start it all again.

    I do have a question though; do you not find all your days start to roll into one when you have nothing you ‘need’ to do each day? Personally when I take ~4+ days off, time starts to absolutely fly by and no single day could be defined as actually having done anything really.

    I am worried that if I were to quit the job and live the MMM frugle but sustainable lifestyle, my time would drift by and i’d no longer be able to even say what day of the week it was..


  2. my time would drift by and i’d no longer be able to even say what day of the week it was..

    I’m still trying to get my head round the question “And this would be a problem because of what, exactly?” I suspect there are elements of the Calvinist work ethic behind seeing this as a problem 😉

    You could always get yourself one of these

    Inasmuch as it is a problem it’s more so on holiday. Even as an introvert I still have connections with people who are working, and just as steam gives way to sail someone with more flexibility in their time should fall in with those who don’t.

    Even as a sort of occasional communications technoluddite there are still a load of things eager to tell me the time and date, from the bottom right hand corner of my computer to my hi-fi streaming players. So you probably don’t need to worry about this.

    Personally when I take ~4+ days off, time starts to absolutely fly by and no single day could be defined as actually having done anything really.

    Something is telling you a message in there… In some ways retirement is like some of the better bits of the long school holidays, but with more fun and more power to make stuff happen in the world 😉


  3. > Of the remaining 16 [hours in a day]
    > half of them are sold to work

    It’s even worse when you include commuting and lunch/breaks, so 10+ hours are sold to work.


  4. I’ve been retired two years now and I recognise the issues you raise. I think the lack of temporal structure can be a problem, but it is easily solved by imposing your own structures (which can be revised at will) by virtue of the interests you develop.

    In my case, I have an academic interest that I follow and that requires a day per week (and a commute –lazily done on the top deck of a bus). I go running, and give myself a weekly schedule for training culminating in community participation in a Saturday Parkrun. I do have a programme of decoration and maintenance, rather slow but progressing. Every week I have a bread baking day and every day I usually spend 1-2 hours on finance, mainly reading.

    All these things are flexible and the only “Man” is myself or my family. It also leaves plenty of time (but not too much) for me to “stop and stare”. It’s all rather humdrum, I know, but I find it’s enough.


  5. I’m quite sympathetic to the idea of frugality driven early retirement espoused by Money Moustache, that Jacob guy and Early Retirement extreme but then I step back…have a squint…and it does seem to be rather similar to the life style enjoyed by the long term unemployed with a few kids on housing benefit

    I think I’ll work a few more years and enjoy something a bit better thanks

    It helps that I quite enjoy my job of course


  6. @george Commuting is a bear – after my hur and a half each way commute in London I made sure I had < 15 mins each way to work 😉 Lunch, well, you have to eat sometime!

    @Sg I love the top deck of London buses, it's such a different sight of the city. And beats the Tube, though you have to be a Londoner or ex-Londoner to have any idea of if the bus is going where you want to go – the routes seem pretty random and meandering.

    @Neverland I have to say I find it a bit hard to picture ERE and MMM watching the US equivalent of the Jeremy Kyle show from behind their undrawn curtains!

    It take all sorts, and to be honest for people who enjoy their jobs it would be a bit nuts to retire, early or otherwise! For me I found I wasn't using the money effectively – among other things a lot of the stuff and gadgets I bought in the last few years I've only really worked out how to use effectively since finishing work, because of the time issue.


  7. Sorry for the late comment, but reading this just now really prompted me.

    I do agree that retirement generally means more time, but for many people, it’s not just on account of less time working. Children having grown up and leaving home (when/if eventually they do) can have a significant impact on life balance for many people in the 50+ age range. It becomes a phase in your life when there is opportunity to do all those things that were foregone when the children were younger or family budget was limited by spending on school shoes, etc, etc.

    I may be bucking the trend, but retirement for me has involved spending more on myself rather than less. I am fortunate to have a good occupational pension and I’ve saved wisely over the years and did very well in the housing market (buying my first house as a sitting tenant helped). I don’t really have a penchant for gadgets, gizmos or shopping (but I wouldn’t condemn anyone who does get pleasure from owning such things.) But I will admit that the biggest item of my annual post-retirement expenditure (at least twice as much as spending on food or energy) is what I call entertainments & experiences. This includes theatre, ballet, opera, sports season tickets, and anything else I enjoy doing. I have time to enjoy these in retirement & I take the view that life is all about experiencing it – and that’s what I want to do in my remaining years. I can accept that walking, exercise & countryside are all cheap means of enjoying life. And I do all of these. But I also want other types of enjoyments too – and many of these have a relatively high cost. I learned an important lesson a few years ago. I agonised beforehand on spending a lot of money (about the amount that I would normally have spent on a 2 week holiday) in taking my son to watch a European cup final match. In hindsight it was money well spent. My only regret is that I didn’t splash out more and take other family members too. My son & I will never forget the experience – we still talk about it now. Those shared – and oft times fulfilling – experiences are what build memories not just for yourself, but with family and friends.

    I spent £12 last week to sit in a hot, sweaty hall for less than 30 mins listening to a woman reading a poem. Expensive perhaps? I didn’t even have a gizmo to show for it afterwards. But you had to be there, to appreciate how electrifying Maxine Peake was in reading Shelley’s Mask of Anarchy at the Manchester International Festival. I was left thinking about it for days after. In my view, money well spent.

    I suppose I’m just wanting to suggest that whilst frugality has it’s place and usefulness, it’s important to have an idea of what gives your life meaning (and that’s different for all of us) and that doesn’t always mean we’ll potentially spend less in retirement.


  8. I wouldn’t be brave enough to assert that you don’t need as much money in retirement.

    It is a matter of personal choice/needs and very much influenced by one’s intentions at [particularly early] retirement.

    Let’s get rid of a technical point: If you spend £X while you are still at work, then you would almost certainly have been earning £X+++ because you needed to save. Also, once retired, if you continue to spend X, you need income of only £X— because you are (hopefully) dipping into invested resources.

    So the issue is do you spend less? Personally, I found myself spending just about the same – admittedly on a different mix of expenditure. There’s something psychological about having a certain amount to spend every year, and then finding yourself with significantly less…..

    Importantly, whatever your spending plans, you need to allow for inflation. Some pensions are inflation proofed to a degree, but one’s own savings aren’t really.

    Personally, my biggest ‘savings’ came from not buying any more furniture, ornaments, household items and general “stuff”. Also having the time to shop around for best deals on utilities/insurance…

    But it has been my habit to make up for this by spending more on travel/holidays, plus the occasional foray into the luxury of multi-rosette Michelin Guide restaurants or similar….

    Overall, my strong advice would be to work all this out to your own preference before you ‘go’. You CAN go and then live within what your spreadsheet tells you, or (as I prefer) get your spreadsheet to inform you how much you NEED, and fix your retirement date to match.


  9. @Monekeynut I was hoping to challenge the automatic thinking here, where everybody thinks automatically they will be spending the same amount retired as while working. This is not a premise that final salary pensions were based on, and they served people well for a couple of generations, although those generations did tend to pay their mortgages down. FWIW I spend stupendously less (by over a half) retired as when I was working. I don’t really know why – just that a lot of crap that really seemed to matter then doesn’t now. Not paying a mortgage also makes a huge difference. What matters to me now is drinking better wine, and ideally a little less of it 😉 I thought travel would really matter to me, but I’ve taken the opportunist role and hitched a ride on other people’s jobs and shot pictures for them just to see things I wouldn’t have seen otherwise.

    I wasn’t overspending, I didn’t build up debts when I was at work, but I bought a lot of shit and spent stupid amounts of money on desperate short holidays trying to pack it all in because I had to get back to work.

    I couldn’t agree more with your statement

    work all this out to your own preference before you ‘go’.

    . The trouble is it isn’t so easy to do, Heisenberg’s uncertainty principle holds. While working, you are looking through the eyes of a worker bee. If you retire well, you will change, and unfortunately some of that change is unknowable.

    get your spreadsheet to inform you how much you NEED, and fix your retirement date to match

    I would counter this with just one fact. Each and every day that rolls by, your life is getting 24 hours shorter…

    Britain is a rich country. We live like kings compared to previous generations and indeed to other parts of the world. One of those riches is having this choice – work longer and spend more, or retire early and spend less. I probably worked a little too long 😉

    However I do take the point from both you and Jane that for some people this change is not so dramatic as it was for me. Perhaps I was a daft spender, perhaps I was desperate for distractions to dull the pain. I don’t think after living it for a year I am missing something – this fall in spending happened for me.


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