Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 09-30-2010, 10:52 PM   #21
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Quote:
Originally Posted by ferco View Post
Confusion in FIRE planning: How does anyone planning FIRE deal with the annual increases in Health, Auto and Home Insurance. What number do you use to project? Premiums for Health Insurance rose 18% Home Insurance 15% Auto Insurance 10%.....the numbers are all over the place. They certainly aren't tied to the CPI. How does Firecalc account for these wild increases if they assume increases based on some markedly smaller number like 3% inflation rate. Most of us don't have COLA driven pensions / health plans, so what do most folks do to project ahead or do some folks just drop the insurances all together and just pray for no bad outcomes.
FIRECalc just uses a generic rate of inflation, the CPI, without trying to put a number on each & every expense category. While individual categories may be all over the place, the overall rate of inflation may be 3-4%. Of course FIRECalc also assumes that past is prologue, not 1981 all over again.

Once you're retired (and perhaps as you get close to ER) you'll have the time to shop around and tailor your coverage to your exact needs. Some insurance companies will offer price breaks on home/auto premiums because you're retired. (You're home more often, you're driving less.) Some medical insurance coverage may change once you're no longer "employed", although I'm not an expert in that area. You may also choose to go the self-insurance route with higher deductibles.

If your ER plan works when you assume 3% inflation but falls apart when you assume 3.1% inflation, it's a warning sign that your ER plans are very thinly capitalized and may even lack sufficient reserve for surprises.
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-30-2010, 11:02 PM   #22
Thinks s/he gets paid by the post
Bikerdude's Avatar
 
Join Date: Jul 2006
Posts: 1,901
Quote:
Originally Posted by dgoldenz View Post
The individual market has been much more than 10% increase the past few years. Most of my client's policies have been 20-35% increases over the past two years.
I think you are focusing on health care insurance rates. The OP's question concerned the increase of ALL insurance.
__________________

__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
Bikerdude is offline   Reply With Quote
Old 10-01-2010, 07:51 AM   #23
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Quote:
Originally Posted by dex View Post
If you are paying 833.33/mo now or 10K/yr it isn't unrealistic - it is just math.
What are the details for the policy that you are paying 833/mo.?
Dex, I was illustrating the math.
But, in NJ, $10K/yr to cover 2 people is in the ball park. Check on eHealthInsurance.
__________________
walkinwood is offline   Reply With Quote
Old 10-01-2010, 08:08 AM   #24
Recycles dryer sheets
fisherman's Avatar
 
Join Date: Jul 2007
Posts: 478
Over the last three years of ESR we have had the following changes in Ins. The numbers are monthly and are from 2007 and 2010

Home owners Ins. $76.92 to $92.17

Car Ins. Has not changed

Real Estate Tax $259.67 to $282.38 Just for our primary home. I left of the Lake House for this comparison

Health Ins. for a family of four. Deductible was $5K to start and is now $7K.
$371.91 to $456.77 The biggest increase was this year but we went to a $7k deductible to help offset it. I project 15% increases for this area and yes the number gets really high toward the end. I doubt this will continue.

Liability Ins has not changed

Long Term care $17.50 to $22.65

We projected our over all inflation rate for the other budget items to be around 3.5%. In the previous three years we have been comfortably below budget on spending as several categories had plenty of padding and we had years of data to start with.
__________________
Worked the plan and now living the Dream!
fisherman is offline   Reply With Quote
Old 10-01-2010, 09:56 AM   #25
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,859
In my budget spreadsheet, I input one inflation rate for medical costs and another for everything else (including other types of insurance such as auto). When I was first developing my 20-year ER budget to get me to age 65, I had 7% for Med (including dental which is all out-of-pocket but not very high) costs and 3% for everything else. In the "everything else" category, some items rise by a little more than 3%, others by a little less, and others are unchanged.

However, I have since changed that to 10% for Med and 2% for everything else. But that 10% figure may be too low because my HI premiums rose by 20% for 2010 and will rise another 25% for 2011. At a 20% inflation rate, my Med costs (single, no kids) will triple in 6 years to nearly $20k and will cost me $167k when I turn 64! Very scary stuff.

Someone in E-R.org posts a link to an online calculator which will show how much less we pay for HI due to the recent reform. There is a cap on the amount paid via tax credit relative to a percentage of our income. I did not build this into the spreadsheet because, frankly, I don't know the method by which this is calculated.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is online now   Reply With Quote
Old 10-01-2010, 12:41 PM   #26
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by Bikerdude View Post
I think you are focusing on health care insurance rates. The OP's question concerned the increase of ALL insurance.
Indeed. I think awful yields on savings and fixed income is a significant reason for it. Insurance companies make much of their money on the "float" they hold (premiums collected but not yet paid out in claims). When interest rates are near zero, they can make very little profit on "float" and thus have to get it somewhere else -- premium increases.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 10-01-2010, 02:57 PM   #27
Thinks s/he gets paid by the post
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 3,242
Quote:
Originally Posted by ferco View Post
Confusion in FIRE planning: How does anyone planning FIRE deal with the annual increases in Health, Auto and Home Insurance. What number do you use to project? Premiums for Health Insurance rose 18% Home Insurance 15% Auto Insurance 10%.....the numbers are all over the place. They certainly aren't tied to the CPI. How does Firecalc account for these wild increases if they assume increases based on some markedly smaller number like 3% inflation rate. Most of us don't have COLA driven pensions / health plans, so what do most folks do to project ahead or do some folks just drop the insurances all together and just pray for no bad outcomes.
I more or less used FIRECALC and other calculators to plan my retirement needs (stash-wise) but included back-ups in the plan. Some back-ups included not retiring before I could retire on a lower draw than calculated. IOW, we all know the 4% rule. Good for planning - maybe not always good for execution. If FIRECALC says 4% (using CPI or whatever estimate of inflation) then maybe wait until you can live on 3 or 3.5%.

Another back up is to play the "game" for the outliers. Insurance is one of the big outliers, recently. (So is fuel.) Play the game by switching insurance companies (if that's practical) or changing coverage and deductible, etc. It's not a total fix, but it can delay until we do fix things.

Other back-ups include flexibility in spending in other (more stable?) areas. One of ours is eating out. We do it often, but could easily cut back. That was built into our plan. Cars are another place we could cut (e.g., sell one car - talk about cutting insurance costs!! ).

If none of these are possibilities, it may be necessary to conclude that you are not really FI enough to RE. Not what one wants to hear, obviously, but it may be true. I think Nords called it "thinly capitalized" retirement.

Finally, I think it's clear that SOMETHING will be done to begin to stabilize HC costs (probably the most important insurance issue you face). We won't all like what the "fix" is, but something has to be done. 20% increases into the foreseeable future can't continue or we will eventually have only one budget item. Since that can't happen, it won't.

So I guess I would suggest you use your best judgement in FIRE planning but also plan to be flexible when you actually retire. (Best of luck!)
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 10-01-2010, 05:29 PM   #28
Recycles dryer sheets
 
Join Date: Apr 2005
Posts: 463
Quote:
Originally Posted by dex View Post
I think the problem with living outside the USA is when you are at an advanced age and frail - take a walk through a retirement home with people 80+ years old.

Are you plans to remain in Mexico at that stage?
Actually that's the very best part about the care that's available here at Lake Chapala. There are numerous assisted living and similar facilities where one can get whatever level of care is needed, excellent food and be in one of the world's greatest climates for $1200-1600 a month at the top end.

Alternatively, it's very easy to age in place in one's home and hire a part or full-time helper for $3-4 an hour. Mexico is extremely family-oriented and the elderly are respected. Year-round fresh fruit and produce, highs in the 70's and 80's and lows around 50 year-round and $15 doctor visits and dental cleanings are truly a different world than being stuck in some awful nursing home up north staffed by people getting paid nothing with high turnover.
__________________
kevink is offline   Reply With Quote
Old 10-01-2010, 05:40 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by kevink View Post
Actually that's the very best part about the care that's available here at Lake Chapala. There are numerous assisted living and similar facilities where one can get whatever level of care is needed, excellent food and be in one of the world's greatest climates for $1200-1600 a month at the top end.

Alternatively, it's very easy to age in place in one's home and hire a part or full-time helper for $3-4 an hour. Mexico is extremely family-oriented and the elderly are respected. Year-round fresh fruit and produce, highs in the 70's and 80's and lows around 50 year-round and $15 doctor visits and dental cleanings are truly a different world than being stuck in some awful nursing home up north staffed by people getting paid nothing with high turnover.
Good to hear; I always like to have options.

I think my check out time is 85 so I have some time. I'm going have to check out Lake Chapala.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 10-02-2010, 02:34 PM   #30
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,308
Quote:
Originally Posted by dex View Post
I haven't researched this. But does it really go down when you consider the supplemental ins you need to buy for part B(? or whichever letter it is) and for drugs. My mother 92 pays 170/mo for the supplemental plus the medicare premium (I don't know the number - maybe she is on medicaid, I don't remember).
170 - 2 supplimental policies
254 from the web site
96 part B
520 total
That 520/mo. is a good policy for a private ins. policy today.

Check the numbers - I'm not sure if I got it right.


https://questions.medicare.gov/app/answers/detail/a_id/2260/~/medicare-premiums-and-coinsurance-rates-for-2010

I have ten years to go until 65. Again, without doing/knowing the numbers my guess is that my age 65 costs will be close to my age 64 costs. After that I'm guessing by the time I'm 70 we will have a single payer system. My costs will then go down or be pretty flat as I dump the costs on the younger generation that is still working.

Maybe others can contribute with their experience.
From your link:

Most people do not pay a monthly Part A premium because they or a spouse has 40 or more quarters of Medicare-covered employment.

Subtract the $254 from your mother's premium and it would be $266 per month, and this likely gives her close to 100% coverage (depending on which supplemental she has chosen), other than a copay for drugs.
__________________

__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Federal Long Term Care Insurance Premium Increases Purron Health and Early Retirement 77 11-24-2009 08:17 PM
Federal LTC Insurance Premium Increases Purron Health and Early Retirement 2 11-11-2009 08:03 AM
ER increases 25%~ Welcome to the party! mickeyd Other topics 8 05-25-2009 08:13 AM
Tax Increases Bikerdude FIRE and Money 25 01-08-2009 02:25 PM
Wage Increases vs. CPI Increases TromboneAl FIRE and Money 19 05-06-2005 02:05 PM

 

 
All times are GMT -6. The time now is 12:57 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.