Assumptions

[wabmester]

I prefer the South Beach diet myself, but you might want to consult with wab to get yourself back to normal.

Hey, don't drag me into this! *I already know what TH's problem is. * He pops fish-oil capsules like they're candy. *No wonder he's a slick-tongued devilfish!

Devilfish -- get it?! *Oh, sometimes I slay myself [1]. *

[1] Well, maybe not this time.

[sgeeeee]

. . . *I already know what TH's problem is. * He pops fish-oil capsules like they're candy. *No wonder he's a slick-tongued devilfish!

Devilfish -- get it?! *Oh, sometimes I slay myself [1]. *

[1] Well, maybe not this time.

Maybe we should start a new thread titled, "What's TH's problem?" We should give everyone a chance to contribute to his rehabilitation.

[hocus]

Maybe we should start a new thread titled, "What's TH's problem?"

I'm in! I'm in!

(just kidding)

I love it when TH goes ballistic, or becomes
bombastic, egomaniacal, contentious, overbearing,
insulting, condescending, or just makes dopey jokes.
Takes the pressure off me. (I amuse myself...........
think self-imposed nasal milk expulsion, mopped up with
used dryer sheets).

John Galt

[brewer12345]

One of the assumptions I didn't mention was about longevity.

I'd like to assume a longevity equal to whatever the 95% joint life expectancy is for my wife and I at the point I retire. *I still don't know what that number is but I figure it's plenty safe enough. *I think overall I'll plan on a 40 year retirement (my current retirement age with all of those assumptions I listed and a few more I didn't is 57).

malakito.

I am trying to be conservative with my longevity assumptions for a number of reasons. One, I thoroughly believe that SS won't be there for us, so there is no safety net in my planning.

Two, its fundamentally not cool to be running out of money when you are over, say, 80. I know how John Galt feels at his age. Try adding on 20 years and being forced to go back to work. No thanks.

Three, DW comes from a very long-lived family (grandmother passed on in her 90s, numerous other relatives way up there). My family is reasonably long-lived, but most of them take terrible care of themselves, so I don't really know what the potential longevity is. Mostly, I have to plan for the likelihood that DW will outlive me by a number of years.

Four, medical technology continually advances in its ability to patch us up and keep us going. I hae to assume that life expectancy will continue to rise.

[cute fuzzy bunny]

I'll be glad to send you guys some naked photos anytime so you can just go ahead and get it over with...

:P

[Marshac]

I'll be glad to send you guys some naked photos anytime so you can just go ahead and get it over with...

Please don't... I never thought of you "that way", and never will.... I think I speak for everyone here when I say that

[cute fuzzy bunny]

Glad to hear it marshac. I wouldnt be so hasty to speak for others though. There appears to be a certain fascination among a couple of people here that can only be resolved one way. You know the drill...everybody's seen those folks that just cant get along with another person, then at a party one night theres a little too much punch guzzled, they both disappear and after that its all good? In this case, I'd like to not be one of the actual participants though...

I mean look at the Goose...after Intercast sent him some naked photos, he calmed down for a while and quit honking. Maybe he needs a fresh set of shots though...

(By the way, in case anyone is confused, I am laughing so hard my sides hurt...apparently I'm out of nasal milk but I'm not touching my coffee anytime in the near future.)

When I was much younger, I experienced the
"too much punch" syndrome many times. Unfortunately,
I often experienced heightened desire but
deflated performance, even back then. Kind of like the scene with Dudley Moore and Terry Garr in '10'. I don't
care how good you feel at the time, you will not feel good in the morning

John Galt

[MooreBonds]

Some assumptions from a 27 year old...

Note: I'm currently in my maximum-savings mode. As such, I haven't really crunched too many numbers to see just what exactly my assumptions will provide. My goal is to save like crazy until I'm 30 then recalculate everything in more detail (and hopefully have more concrete guesses on health insurance costs, as that and the number of kiddies will be the greatest financial variables in the equation). Sorry for the great length of variables, but I am a fairly detailed person, and I like to be as accurate as possible.

But, without further ado...

OUTFLOWS:
4% Utilities Inflation
8% Medical Inflation
5% Nursing Home Inflation
3% Other Inflation
ANNUAL EXPENSES IN 2004 DOLLARS (indexed in future years according to above inflation rates)
$1200 Annual Health Insurance premium
$750 Homeowners insurance
$650 Car Insurance
$7000 Annual Utilities
$2500 Annual Real Estate Tax
$7000 Travel
$8500 Food
$5000 Misc expenses
$100,000 "Major Medical" expenses
$130,000 Nursing Home expenses

ASSET ACCUMULATION PHASE
7.5% Taxable account pre-tax return
7.5% Tax-deferred return
5.0% "Annuity" return
17% Average retirement income tax rate
34% Total marginal income current tax rate
3% Annual wage growth rate
ASSET DRAWDOWN PHASE
6% Pre-tax return
20% Average net tax rate
$0 SS monthly income
$0 inheiritance (although I'll likely get at least something, which will just be icing)

Commentary:

There are other variables that have been omitted...if you want, I could e-mail you a copy of my Excel spreadsheet, which has the extra stuff (starting age, retirement age, age to start/stop retirement contributions, starting values in various accounts, SS assumptions/SS COLAs, ages to spend various percentages of the Major Medical account, etc.).

As I mentioned, I'm not necessarily planning to RE on the above info - I know it's woefully low on the health insurance premium (I originally composed the spreadsheet over a year ago), and since I don't have to pay for my living expenses, I don't know exactly what it would be..but I feel that I am fairly reasonable over-all with my total anticipated annual budget.

The "Major Medical" assumes that you will spend $100,000 (in 2004 $) over the course of your ER lifetime. Perhaps an ER would incur additional costs - but at any rate, that's what I assumed. My spreadsheet will allow you to specify what percentage of that $100,000 is spent at what age.

The nursing home budget allows for $130,000 in lifetime nursing home expenses (or similar at-home care). I used the amount from some random CBS Marketwatch article...which cited some 'expert' who estimated the average nursing home expense for a couple in their lifetime.

So I hope that my major medical/nursing home will be just a tad generous, which will allow me a little leway in other areas.

So how am I doing so far? Well, my frugal ways have allowed me to meet the above budget from ages 65 to 74 even if I don't save another single penny from age 27-65 and just let my current assets grow according to the above rates. Now it's just a question of getting accurate budget data for my ER years.

[bongo2]

I agree that the exact assumptions for your accumulation stage are not going to be critical for those of us frequenting an "early retirement" forum. If we really blow it and have to retire at 55 instead of 45 then so be it. It's the people who are using unrealistic assumptions to try and squeak a retirement at 70, or if you use unrealistic assumptions for the after-retirement phase and have to go back to work, then you have a real problem.

Inflation: 3%
Spending: Inflation + 2% pre-retirement, Inflation after.
Raises: Inflation + 5% up to a ceiling, then Inflation.
Education: 4.6% / limited to 5% of assets for financial aid
Inv returns: 7% nominal.
Social Security: I include it, and assume COLA will keep up with inflation.
Inheritance / sale of house / other windfall: none.
Longevity: 100
Taxes: a return to 1998 tax rates on income. 0.5% of invested assets, and 10% on investment withdrawals.

I have a range of plans that involve me living on 40-60k a year and funding 0-500k (present value) of my kids college educations. I figure when I hit the lowest threshold in a few years (40k withdrawal amount, no money for kids college) I'll see how willing I am to keep going to my medium and high funding amounts.

I have showed this plan to my spouse, but she is not particularly interested.

All good plans can turn worthless pretty quick. Six years ago I didn't think I would have four kids, a non-working spouse, and a serious bear market. Under the old plan I might be retired today.

Re. "she is not particularly interested", I can relate
big time! But, my spouse is pulling her weight
in the financial area. Happily we have no kids at home, and my spouse is working. Otherwise, there would
be major rethinking of our "golden years" planning.

John Galt