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Old 11-09-2009, 03:26 PM   #21
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As others have said, you have to consider what you are living on now and allow for inflation of all expenses. Remember that all expenses do not inflate at the same rate (at least not lately). Medical in particular has gone up a lot each year.

I'm in a similar situation - I save so much (out of necessity) that my salary has no relation to what I need to live on. Be sure to get at least enough health insurance that if something catastrophic happens, you have coverage for that. If you pay the first $5K or whatever, and they pay most or all of the rest, you won't become bankrupt if you have an illness or car accident or whatever. Think of it as bankruptcy protection.

If you know how to use spreadsheet software (hey, not everyone does) that's what I used, painfully, to consider options. What I did was look at my actual expenses, year by year, and inflate them by various amounts each year. I was trying to figure out if my money would last until I was nearly 100 (not likely but my dad is almost 89 so not unlikely). Anyhow it was a lot of work but IMHO well worth it.

Periodically I take my current assets and just lump them into a kind of starting point for the year, subtract expenses, and see how long it lasts. You don't have to track every penny but it helps to know roughly what you are spending on food, utilities, and so on.

I'm not usually this compulsive but I am heading toward early retirement (hopefully in June) and it is critical that I feel comfortable financially. has retirement worksheets that seem to do the same thing with less work, but I wanted more control over the inflation % and so on.

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Old 11-09-2009, 03:50 PM   #22
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Originally Posted by randall View Post
I have no health problems, knock on wood. Only a cancer or something like that could hit me hard financially. I actually thought of what you said though-- self insuring, because I heard about someone who does just that, just a couple of days ago on public radio.
Growing up I never wore a helmet riding a bike and would have laughed at anyone who did - Today, that's obvious child abuse -

Risk => Reward - Look at the bright side - With any luck the catastrophic cancer you mention(fear) could be terminal and you'll have nothing to worry about financially ie. You'll never feel the financial hit or even notice it.

So, I guess what you want is insurance to cover the surviving of a major calamity - no matter how unlikely it is you'll need it. Should be some relatively low cost options. Is it possible to 'buy' into your current insurance plan as a retiree?

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Old 11-09-2009, 05:45 PM   #23
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We have in the last two months signed up for Blue Cross HSA anticipating our retirement in December 2010. We have a $1500 deductible, 100% preventive care coverage and $5950.00 tax deductible which we can pay for medical expenses. We pay everything out of pocket and hope to let the account grow. We are also 52 and 49 and very healthy and do not want our savings destroyed because of a health issue or accident.
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Old 11-09-2009, 06:23 PM   #24
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Originally Posted by randall View Post
Yes, I do need to figure out my retirement budget. So foreign to me, I am so used to my employer paying 100% of my medical and dental, so I have NO idea whatsoever what that insurance costs, I do not even know what the heck medicare and medicare even are all about, I am insulated from all that thus far.
medical is going to be a shocker for you if you have to go on the outside. It is very confusing. Each company does its best to give you so many options that you can't figure out what a good deal for your family is.
After waltzing through a lot of websites and having to register before being allowed to view alternatives, I got calls from a bunch of agents. Be sure you know what type of coverage you want, how much deductible you are willing to 'self insure' on, etc.
If you and your family are healthy and don't use a lot of healthcare, then you may want to take a large deductible. It will save you a bunch between now and medicare (btw, I know nothing about that also, but will need to start to learn soon). If you go to the Dr. for a bunch of stuff, then you may want to look at HMO's. Lots of stuff in between.

Good luck
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Old 11-15-2009, 11:24 AM   #25
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ER, by the way, stands for "Early Retirement". "FIRE" is "Financially Independent Retire Early" or something like that. Both terms are roughly synonymous.

I just calculated that my retirement budget has me living on about 13.4% of my current salary. As people have already said, the 70% of salary is just a rule of thumb that doesn't really apply to ER folks.

You can take what you're spending now and use that as your ER budget, or if you want to get a little more detailed, you can take what you're spending now and go through it category by category and figure out how your budget would change when retired. Income taxes will probably go down, health insurance will go up, commuting costs down, travel up, etc.

"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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Old 11-15-2009, 05:00 PM   #26
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Don;t forget health Ins goes up much faster than normal inflation. We plan for 15% increses every year and that may not be enough. The have been about 12% so far per year.
Worked the plan and now living the Dream!
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Old 11-15-2009, 09:24 PM   #27
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Originally Posted by megacorp-firee View Post
... I was like you and lived on a substantially lower percentage of my salary and was comfortable with it. Our budget is essentially the same (minus w*rk expenses and extra taxes plus travel) as when I was working.

Another thought, ... you really won't know what your 'new' lifestyle and spending will be until you actually start doing it. Things change ... that's life.
We have been LBYM'ers until a few years ago. Then, watching older relatives died or suffered from deteriorating health, I realized I would not be able to take it with me. So, I have been spending more than when we were working full-time. I belong to the group of people whom they say will spend more in retirement because they now have the time to. Heh heh heh...

Originally Posted by JustNtime View Post
Look at the bright side - With any luck the catastrophic cancer you mention(fear) could be terminal and you'll have nothing to worry about financially ie. You'll never feel the financial hit or even notice it.

So, I guess what you want is insurance to cover the surviving of a major calamity - no matter how unlikely it is you'll need it.
We have an HSA with $10K annual deduction. That allows the premium to be affordable at less than $400/month for the two of us, plus a 20-yr old son still in college.

Same as the OP, we had a sheltered life with our megacorp's health insurance, and never really knew how much the health care cost. Now, paying everything out-of-pocket, we are acutely aware of the expenses.

Not to worry too much about health care cost though! It could keep one from enjoying his life. If I die from a cancer, well, that's the end of it. If I recover from a bout of cancer, shouldn't I be so happy to be alive that I would not mind reducing my standards of living a bit, like selling my two houses to live full-time in a class C RV? I have read blogs of people who are happy living in their little motor-home, so it could not be that big a deal.

Do I spend money on an enjoyable foreign vacation or an RV now, when I still have my health? Or do I save that money in order to extend my life another week in a medical facility hooked up to machines, two decades from now?

Decisions, decisions. Heh heh heh....
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
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Old 11-16-2009, 01:56 PM   #28
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My gov't paycheck now has a section titled "Benefits paid by government for you." It lists medicare, retirment, 401K, health and OASDI. Pretty neat, even if I don't pay much attention to it.

I'm trying to wrap my brain around my options and figure out just how much I live on. I take home 66% of my gross so will try to figure out the assets I need to match that.
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Old 11-17-2009, 09:29 PM   #29
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Originally Posted by MasterBlaster View Post
To the OP...

If you are a fat cat making $500k chances are you would be just fine with a 10 percent income replacement ratio.
that's assuming you LBYM. I know some "fat cats" who make that kind of money and are in debt up to their ears. Hard to believe, but true. There is no way they'll be able to live on 10% replacement ratio...although it's their own fault.

I agree with the poster who said basically this is a rule of thumb that applies to the "average" person, of which many of us are not party.


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