I laid out a 20 year maintenance/replacement schedule for the home and cars, adjusting their value for expected price increases and inflation. Then I took that back to a yearly contribution needed to pay for those, added it all up, and added that to my annual required withdrawal. Then I dont take that money from the portfolio, but its planned in for required returns. I went with 20 years because almost everything that needs expensive maintenance or repairs is on a less than 20 year cycle.
Theres volatility involved, but a lot of these items can be deferred temporarily to account for that.
For example, I will probably need a new car every 10 years. So I look at cars and figure that in 2010 (when my car hits 10 years old), a reasonably serviceable car will cost $15k. That means I needed to make an extra $1.5k a year for the ten year period preceding that. If my regular withdrawal is $25k, then that means I need to see an average return of $26.5k to accommodate that.
Of course when ten years arrive, the car may still be quite serviceable, cars may be cheaper or more expensive than I thought, or I may decide to limp along with what I have and deal with breakdowns. Or my portfolio may have been screaming, my car might be a huge piece of junk, and I go buy a big fat expensive car if it suits me.
I have a fairly new house that is extremely low maintenance as well. My numbers include cars, tires, car maintenance, replacing furnaces and air conditioning units, water heater, kitchen appliances, furniture, etc. Not all-inclusive but pretty comprehensive. My added cost per year is roughly $3342.60.
Some of my smaller incidental "capital" costs are also soaked up by my "miscellaneous" category, which includes almost everything I can think of excluding monthly bills, food, gas and so forth. I am very conservative with the misc numbers and then add a 30% fudge factor in. That comes to $4930.85 a year.
So if you add up your insurance, utilities, mortgage or rent, food, medical, and any other monthly or yearly expenses, and add ~$8273.45 to it, that should give you a reasonably good idea as to how much you need to generate a year over a ten year period to not bite into your portfolio.
Add to that any luxuries you enjoy that are above and beyond, for example expensive wines, eating out, travel, $50k cars, continuing education, expensive hobbies, etc.
Since these costs can jack up your income requirements by a third or more, if you arent including longer term capital costs in your ER budget, you have some very unpleasant surprises awaiting you...
