Warmest regards: The case of the runaway budget
By Pattie Mihalik
Before I retired I did a lot of planning.
Before I took that big leap into my retirement years I wanted to make sure I could do it.
I grew more apprehensive when two retired acquaintances admitted they were drowning financially and could no longer make it on their own. One had to ask family members for help.
That woman said she was able to manage in retirement as long as there were two of them paying the bills.
When her husband died, she couldn’t believe it when the Social Security Administration told her she would only be receiving one monthly check, not the two she was used to.
“They told me I could get Social Security based on his work history or on mine. But I could no longer receive two checks,” she said.
She was also incredulous that she never knew this before. She asked me to “write something” in my column to alert other women about what happens when a spouse dies.
“Don’t kid yourself into thinking expenses go down when it’s just one person in a house instead of two,” she said.
“The bills remain the same yet your income takes a hit.”
At the time she was 69 and had been retired from her factory job for four years. She told me she had to go back to work but the factory where she worked for years closed. She was able to find part-time work two days a week, but her health problems were making it hard to be on her feet so much.
As I listened to her I resolved to make sure I could manage before I cut the cords on a full-time job.
I was also leery because of what happened with my friend Carol.
When Carol and her husband were approaching retirement, they decided to move someplace warm.
But they weren’t going to be together. Both decided it was the right time to go through with the divorce they had been talking about for a long time.
When they sold their home, they split the proceeds. Between that and her pension from work along with Social Security, Carol thought she would be fine.
When she went to buy a house in Florida, she told me she was pleasantly surprised at the great house the Realtor said she could afford.
The Realtor sold her a wonderful place on a lake with a swimming pool and lush landscaping. It even came with its own canoe and pontoon boat and her own dock.
She bought at the height of the price bubble, but few knew the bubble was about to collapse.
When Carol realized her monthly mortgage payments were eating up too much of her income, she decided to sell the house and get something more affordable.
Unfortunately, no one was willing to pay anywhere near what she did to buy the house.
Eventually, the bank ended up with the house, and Carol became one more victim of the housing collapse.
But she did fine by getting another job and finding an affordable condo.
After listening to stories like that, I made sure I did my homework before I retired.
I called my friend Jan and asked her to help me make a budget of expenses I could anticipate when I moved to Florida.
I tried to think of every expense I would encounter.
“Don’t just plan on household expenses,” one friend advised.
“Don’t forget to budget for personal expenses like haircuts and what you’ll need from the drugstore,” she warned.
So I reworked my budget and thought I had covered all the bases. I could retire, I figured, if I planned carefully and stuck to my monthly budget.
I found a Realtor I liked and then found a modest but perfect home for one person. The Realtor tried to talk me into a bigger place, insisting I could afford a newer, bigger home with more amenities.
I was smart enough to know that as the size of our home grows larger, so do taxes and household expenses.
I stuck with the smaller home, thinking I planned as well as I could for my retirement years.
The other day as I was clearing out my desk I found the notebook with the budget I made before retirement.
I compared what I thought would be my monthly expenses with the reality of price hikes over the past 12 years.
My planning budget listed $12 a month for basic cable. I don’t watch much TV so I had the most basic plan Comcast offered.
A few years ago Comcast did away with that basic plan. Their cheapest plans now start at over $100 a month.
Taxes haven’t gone up that much here, but insurance has tripled, and of course, medical expenses continue to climb.
And I never anticipated having to spend $1,500 a month for flood insurance.
The bottom line is before retirement, no one can truly anticipate your living expenses years down the line.
What I tell others planning to retire is that retirement can be for many years, if you’re lucky.
Plan for any and all contingencies, because no matter how much you plan, there will be surprises.
There are good surprises, too — such as the daily joy of enjoying life in paradise.
While I don’t know what tomorrow will bring, I sure am thankful for today.
Contact Pattie Mihalik at firstname.lastname@example.org.