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FireCalc, inflation rate, expat retirement
Old 06-18-2005, 01:33 PM   #1
Confused about dryer sheets
Join Date: Jun 2005
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FireCalc, inflation rate, expat retirement

How does a person who plans to retire to another country know what to assume as the inflation percent when using FireCalc to figure a safe withdrawal rate.

I'm retiring in Mexico and I guess my basic question is this: has the cost of living ratio between Mexico and the US remained constant over the last 40-50 years? For instance, if we say that today it costs 70% as much to live in Mexico as in the US for an equivalant lifestyle. Was that true 20 or 30 years ago? Will it be true 20 or 30 years from now? If its changing then at what rate and in what direction.

I guess you could substitute any other country for this, but the historical comparison and the rate/direction of change between Cost of Living where one's investments are and where one will be living seems to me to be an important adjustment to make to assumptions about the affect future inflation rates.

But how to figure it? Does anyone know what I'm talking about?

It's the problem where in 1995 someone claims you can retire on $500/mo to such and such a place, then in 2005 the books are saying it's $1500/mo. Those guys who thought $500/mo at 4% annual inflation would pay for a tropical retirement would now be screwed! I wonder what happened to the people that took that advice....

BTW, I want to thank tmeri from the RetireEarlyHomepage bulletin board for bringing this problem to my attention!!! Thanks tmeri!

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Re: FireCalc, inflation rate, expat retirement
Old 06-18-2005, 11:14 PM   #2
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Re: FireCalc, inflation rate, expat retirement

There is no way to know what the cost of living in Mexico will be in 20 years. A lot depends upon politics. For example, if they decide to institute a prescription drug program like we have in the US, their meds will triple in price, or more. Many meds can now be bought inexpensively non prescription, which is one reason for their low cost of living.
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