City vs. Suburbs: A Tale of Two Retirements

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Locale can affect spending habits in retirement, but some things are the same regardless where you live. interviewed two retirees to learn how their spending has changed since they stopped working. The first, whom we'll call Sy City, lives in Manhattan in a rented apartment. The other, Barry Burbs, lives in a condo in the metropolitan area. Both requested anonymity in exchange for providing details of their personal finances. Mr. City, 63, is single and was forced into retirement at about age 60. Mr. Burbs is 67 and his wife is 64. He has been retired, by choice, for about four years.

Money Sources.

Mr. City is eligible to collect Social Security at a reduced rate but has opted to wait until he is 69, when the monthly payments will be higher and sufficient to cover rent and utilities. Although his income has fallen 60 percent since retirement, he is living on investments from "completely unexpected inheritances," which enable him to avoid making too many hard choices.

Both Mr. Burbs and his wife collect Social Security, but they also draw on investments. Their income plunged 80 percent immediately after retirement but has recovered about 20 percent from that low point. Mr. Burbs notes that his income fluctuates with the stock market, but because 2014 was a good year, he is living better than he originally thought he would.

Both men are more thoughtful about how and where they spend money than they were while working. This is especially true for Mr. Burbs, who says he is very cautious about large outlays.

Food Costs.

Post-retirement grocery costs are about the same for the two men, even though Mr. Burbs buys for two people. Both spend more at the market now because they eat at home more frequently. Mr. City spends roughly $480 a month on groceries, more than double what he spent before retiring; Mr. Burbs' bill jumped to $500 from $300 previously.

Food constitutes a big part of the men's social lives. Mr. City gets together with friends for lunch, dinner, or coffee to the tune of $60 to $80 a week. The expense is about 30 percent what he used to spend on restaurant meals. Mr. Burbs and his wife rarely ate out while he was working (he often skipped lunch) but now order takeout a couple of times a week, sometimes eat at the mall, and occasionally eat at a restaurant. Mr. Burbs also goes into the city once or twice each week to catch up with friends over lunch or drinks. His non-grocery food costs total about $450 a month.

Healthcare Expenses.

Mr. City is not yet eligible for Medicare, so insurance co-pays, premiums, and prescriptions amount to about $650 a month, costs that were far lighter while he worked. He is looking forward to the time when this cash is freed up for other things.

Mr. Burbs is on the Medicare rolls, but his wife, who is in poor health, is not. His monthly outlay for insurance comes to $330 compared with $200 pre-retirement, and medications cost another $75. He has not paid any doctor bills for himself so far this year. Mr. Burbs expects the financial pressure will ease up once his wife enrolls in Medicare later this summer.

Transportation Costs.

Both men spend less getting around now that they're retired. Mr. City formerly drove to work, which required $30 a week for gasoline and $525 a month for parking. Now he fills the tank less often -- about $25 a month does it -- but continues to pay for the garage.

Mr. Burbs took public transportation to work, and while he still travels to the city, he no longer needs a $115 monthly commuter ticket. He now qualifies for the half-price senior discount on subway fares, a big saving over the $20 he used to spend each week. He drives a lot more, though, so his monthly fuel bill has climbed to $100 from $70; tolls add about $40 a month.

Leisure Spending.

This is a category for which living in the city makes a big difference in terms of savings and opportunities. Mr. City holds memberships at several museums and often attends lectures or classes. Sometimes these events are free, but recently he paid $15 to hear a lecture. He takes classes at a ceramics studio (about $200 a month), where he spends a lot of time. Firing his work comes at a price, as well -- about $150 a month. He enjoys gardening and volunteers at a community garden; in May, he shelled out $60 for garden supplies.

Mr. Burbs, a music aficionado, has become adept at finding sites or forums where he can hear and download music for free. Although he attends an occasional concert, for the most part this hobby costs him nothing. Were it not for his wife's ill health, he says, he might seek out more music events.

Miscellaneous Expenses.

The cost of miscellaneous needs hasn't changed much for both men since retirement, with one exception: dry cleaning. Suits are no longer a mandatory apparel choice. Mr. City now spends $50 every two months for this service, a huge drop from the weekly $30 to $50 pre-retirement tab. Mr. Burbs spends about $50 every three or four months compared with $50 every month in his former life. They both get haircuts every few weeks ($60 a month in the city; $50 a month in the suburbs); clothes when needed (on sale); toiletries ($50 a month for Mr. City; $100 a month for Mr. Burbs and his wife); and digital subscriptions to The New York Times ($15 a month). Neither has a washing machine in his home, so laundry runs about $20 a week. Mr. Burbs pays $100 for a cleaning lady once a week; Mr. City does not.

The Future.

Both men expect their income to be affected by stock market fluctuations. Mr. City rents storage space, a luxury he isn't sure he will hold on to much longer. He would love to travel more and buy a house in the country but doesn't think he will be able to manage both. He expresses hope of selling his finished ceramics, which might, at least, pay for clay. Meanwhile, he is looking for ways to unbundle his $180 monthly cable bill to avoid paying for shows he doesn't watch.

When Mr. Burbs retired, he expected to build a consulting practice, but that didn't pan out. He saves money when he can, and banks tax refunds and other windfalls that come his way. He, too, would like to travel more, but given his wife's health, that isn't possible. He is sure he will age in place for as long as he can, and dreads the day when he might have to give up going into the city to meet friends.

There is a lot of nervousness around the future for these men, not least because it's possible to outlive your money. Both Sy City and Barry Burbs have been and continue to be careful with their investments and live frugally. Still, they are all too aware of the likelihood that extreme thriftiness will be their mantra sometime in the future.

Sy City
Barry Burbs
HealthcareMinimal$650/month$200/month for premiums$330/month for premiums; $75/month for prescriptions
Transportation$120/month for gas; $525/month for parking$25/month for gas; $525/month for parking$115/month for commuter ticket; $80/month for subway; $70/month for gas$40/month for bus fare; $20/month for subway; $100/month for gas
$180/month for cable$350/month for classes and related expenses; $180/month for cable$50 for occasional concerts$50 for occasional concerts
Dry Cleaning$120-$200 /month$50 every two months$50/month$50 every three to four months
Pocket Change$600/month$300/month$600/month$600/month

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