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Could you explain to me how at any point in my life inflation wouldn’t apply? I really don’t get that logic. If you eat food, and you watch cable or movies, or buy clothes, or do anything inflation applies. Some things rise faster than others sure, but everything costs more eventually.
I can’t think of anything I do that would be cheaper in the future. I already have a tiny mortgage, so not that. I already work from home so not gas either. I don’t buy fancy clothes either. I just don’t follow this logic whatsoever. My expenses would only continue to rise.
I am about 3 or 4 years from retirement and I've given this some thought. I currently have a mortgage that is $800 a month (not including taxes/ins). Inflation won't effect that and about 6 years into retirement it will go away entirely. Also in our budget is $300/month charitable giving. Again inflation won't effect that and if need be we can decrease or completely eliminate that. We also have about $7500/yr budgeted for vacation/travel. That is also discretionary and will probably decrease as we age.
interesting study by famed researcher michael kitces .
EXECUTIVE SUMMARY
The very essence of saving for retirement is to accumulate a nest egg sufficiently large enough to replace the retiree’s employment income and sustain a stable standard of living throughout retirement. If the prospective retiree doesn’t have enough saved up to maintain his/her lifestyle for the next several decades, it’s not yet time to retire.
Yet a growing volume of research studying the actual spending habits of retirees is revealing that this traditional approach may not be entirely appropriate after all. Because as it turns out, retirees don’t actually maintain a stable lifestyle in retirement; instead, spending levels tend to decline (in real terms), as the retiree goes from the “Go-Go” early years of retirement, to the “Slow-Go” years, and eventually the “No-Go” years.
In addition, not only does retirement spending slow in the later years, but the underlying composition of the retirement spending begins to shift as well as clients cross through these “age bands”, as spending on housing and entertainment activities fall significantly in the later years, while health care expenses are rising. Still, though, discretionary spending tends to fall by more than health care expenses rise – leading to an overall decrease in retiree spending as retirees proceed through the age bands.
Ultimately, this suggests that rather than merely assuming a stable standard of living throughout retirement, a better approach may be to look more directly at not just the composition of the retiree’s spending goals, but also how those particular types of expenses tend to change as the retiree moves through the different age bands. In other words, projecting retirement expenses using an age-banding approach may allow for a more nuanced and accurate representation of how spending will change over time. Which is important, because the data indicating that retiree expenses tend to fall throughout retirement – especially in some categories – implies that retirees may not actually need to be saving as much, or accumulating as large of a nest egg, to retire in the first place!
Could you explain to me how at any point in my life inflation wouldn’t apply? I really don’t get that logic. If you eat food, and you watch cable or movies, or buy clothes, or do anything inflation applies. Some things rise faster than others sure, but everything costs more eventually.
I can’t think of anything I do that would be cheaper in the future. I already have a tiny mortgage, so not that. I already work from home so not gas either. I don’t buy fancy clothes either. I just don’t follow this logic whatsoever. My expenses would only continue to rise.
You kind of have to assume Social Security will be there and will continue to be COLA-protected. Assuming I defer collecting to age 70, that's $43.5K per year in 2018 dollars as my baseline.
Even if you're really conservative, your portfolio will at least track inflation over the long term. The real estate portion certainly will in most zip codes.
I usually just assume 75% of what social security tells me when making financial planning calculations. That's about what their doomsday "if nothing changes!" projections say they'll keep paying out in whatever year the well runs dry.
You kind of have to assume Social Security will be there and will continue to be COLA-protected. Assuming I defer collecting to age 70, that's $43.5K per year in 2018 dollars as my baseline.
Even if you're really conservative, your portfolio will at least track inflation over the long term. The real estate portion certainly will in most zip codes.
a cola that follows the cpi can have very little in common with anyone's personal rate of inflation . the cpi is a price change index not a true cost of living index for the most part.
just because ss is cola adjusted does not mean you will track inflation . many of us need well over that rate to stay current .
My apologies if this has been mentioned, but I don't feel like going through 27 pages. I estimate by the time my wife and I are ready for retirement, our health care costs until death will be between $350k-$400k. If you think an extra $650-$600k is enough for everything else over a 25+ year period, have at it.
not sure how you came up with that short of a nursing home but fidelity does their yearly estimate and it can run about 220k for a couple.
i know with us dental has been insane the last couple of years hitting 5 digits but hopefully that is done for a while and glasses just cost us 1400.00 for the two of us last week . my lenses alone are 600 bucks each time . .
not sure how you came up with that short of a nursing home but fidelity does their yearly estimate and it can run about 220k for a couple.
i know with us dental has been insane the last couple of years hitting 5 digits but hopefully that is done for a while and glasses just cost us 1400.00 for the two of us last week . my lenses alone are 600 bucks each time . .
I've looked at a variety of sources that say the current estimate is $280k (including Fidelity). We are not at retirement age now.
i know between our f-plan and our long term care partnership our exposure can be quite low . others with high out of pocket advantage plans and no ltc plan can have far more exposure . this is one area that is unique to each of us as well as based on any mitigating you do .
the area and local costs have a lot to do with your healthcare expenses as well .
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MJ, I give you an A+ for your research.
