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Old 10-08-2007, 10:09 PM   #21
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twaddle, I agree that it can, and does work in some cases (and I'm glad they have worked for you). I'm just not so sure anyone can reasonably count on it, I don't think GM is the only exception to the rule of company stock not keeping up with the price of it's products.

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Old 10-08-2007, 10:19 PM   #22
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twaddle, I agree that it can, and does work in some cases (and I'm glad they have worked for you). I'm just not so sure anyone can reasonably count on it, I don't think GM is the only exception to the rule of company stock not keeping up with the price of it's products.
Hmm, I guess I'll have to publish this in an article to make it an accepted idea.

Any single company is subject to various shocks, loss of market share, etc. But if you capture the entire sector, or at least a representative sample, you're likely to capture earnings growth reflective of underlying price movements.

It's the same idea behind capturing the total stock market. Over time, you capture capital growth that is directly proportional to GDP growth (less a dilution factor).

In any case, I think it's a better approach than trying to guess what medical inflation is going to be, and then socking away $X millions to cover your guessed future expenses.
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Old 10-09-2007, 09:32 PM   #23
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A FIRECalc "95% success rate" appears overly optimistic, what with the futility of attempting to model future health care costs.

Adding to that the tsunami of boomers about to begin collecting social security at the rate of 365 PER HOUR.

And soon after, adding them to the medicare rolls, likely makes the past a poor basis for future modelling....
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Old 10-10-2007, 08:53 AM   #24
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A FIRECalc "95% success rate" appears overly optimistic..
Not really. FIRECALC is what it is. You tell FIRECALC what your expenses will be, how big your RE nestegg is and how it will be invested. FIRECALC tells you the probability that nestegg would have survived during historic periods.

Whether you can tell FIRECALC what your future expenses will be with much accuracy and whether you will fail to achieve market returns due to some investment error on your part are open to question.

Life is full of tradeoffs and uncertainty.
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Old 10-10-2007, 09:05 AM   #25
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A FIRECalc "95% success rate" appears overly optimistic, what with the futility of attempting to model future health care costs...
FC doesn't love you back.

I like to do a poor man's "sensitivity analysis." Run it under the worst possible conditions you think are realistic. Only you can define what those are in your world, and I usually make it pretty somber but not doomsday level. When you get > 90% success rate even under the worst conditions, you just might be there.

My big hesitation is that I don't know what I might be leaving out in my assumptions. When I was a novice to FC I forgot to gross up my income assumptions for taxes on IRA withdrawals. I was real happy for about half an hour when I realized what I was doing - a real "DOH!" moment. Never felt quite sure of myself since then. Then again, sometimes you just have to dive in.
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As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 10-10-2007, 09:16 AM   #26
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There is some upward limit on health insurance costs.

Take and average family now paying $1000 per month for HI. Inflate that 20 years at 15% per year, and they are paying $16,367 per month for HI.

Let's say the average household income for insured families is $65,000 per year, or $5417/month today. Inflate this average income for 20 years at 4% (assumed 3% inflation plus 1% for real wage growth). In 20 years the avg household income will be $11,869 per month. Obviously folks earning less than $12000 per month won't be paying more than $16000 per month for HI. Something has to give.

Personally, I'm thinking I can always head back to work 20 hrs/wk after FIRE at walmart or starbucks if HI gets really outrageous (enough to seriously damage FIRE plans). Maybe let the wife switch off w/ me working every so often. But in reality, these employers will probably drop HI as a fringe benefit if the costs get too outrageous. Then I'll be up the creek.

But if HI costs get so high that they start pinching me (a soon to be millionaire, independently wealthy upper middle class blah blah blah kinda guy), then I think there will be "the common folk" rioting in the streets demanding a national fix of some sort. Just my $0.02.
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Old 10-10-2007, 09:22 AM   #27
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Personally, I'm thinking I can always head back to work 20 hrs/wk after FIRE at walmart or starbucks if HI gets really outrageous (enough to seriously damage FIRE plans). Maybe let the wife switch off w/ me working every so often. But in reality, these employers will probably drop HI as a fringe benefit if the costs get too outrageous. Then I'll be up the creek.
Not necc.

Ignore the HI provided by "Walmart" entirely for a second.

Just assume you you work part time at company X. Even at a $8 rate only 20 hours a week, you can still bring home ~8k before taxes.

So the $6k after taxes could cut your health care costs in half (assuming $1k a month).

So a small paying part time job that does NOT include health insurance can still take a large chunk out of paying for health insurance.
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Old 10-10-2007, 09:54 AM   #28
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If all else fails, the idea is that you NEED to find a part time job w/ benefits. In that case, you will be working for benefits only - job satisfaction/$10 check will probably not be enough of a motivation to keep going back to work.

I think something will have to give... it will get too crazy in not to distant future otherwise.

For what is worth, I am still quite a way away from FIRE and I opted to use my state's high risk pool health insurance cost for 64-year olds as a base for planning (these change every year). I figured, I really can't get much worse than that...
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Old 10-10-2007, 10:13 AM   #29
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If all else fails, the idea is that you NEED to find a part time job w/ benefits. In that case, you will be working for benefits only - job satisfaction/$10 check will probably not be enough of a motivation to keep going back to work.
You missed my point. I was trying to say that a part time job WITH out benefits can still help you pay for health care. It will be very difficult to find a part time job that even pays $0 a hour that will include benefits, but you will be able to find a TON of jobs that pay $8-10 an hour with out benefits.

All the money you make from the part time job can then go to helping one pay for health care. It likely won't cover it but it certainly can reduce the nut to a manageable number.



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I think something will have to give... it will get too crazy in not to distant future otherwise.
People have been saying the same thing about college costs for 20 years now.
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Old 10-10-2007, 10:24 AM   #30
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Maldini,

If my insurance costs increase 15% per year for 20 years, I'll be paying $9000/month in real terms. Getting a part time job and earning $1100/month with no HI benefits would only pay about 12% of my HI premiums. I'd probably just go back to work full time and hope I could find a company w/ HI benefits.
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Old 10-10-2007, 10:31 AM   #31
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People have been saying the same thing about college costs for 20 years now.
College isn't a "necessity" to the degree that health care is a necessity. College, from a strictly financial perspective, should be foregone if the net present value of the benefits of obtaining a college degree are less than the net present value of not obtaining a college degree.

College is still very affordable (given the huge expected benefit) if one selects a state school and/or pursues coursework at a community college.
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Old 10-10-2007, 10:32 AM   #32
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Actually, I was not really addressing anything in particular.

My point was, if the cost keep up increasing at a tune of 10-15% per year - we may all need jobs with benefits (or retiree benefits). In part due to ordinary premium increases, but also due to lack of coverage. I suspect, as overall cost are increasing, more and more "conditions" will cause one to be rejected for insurance.
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Old 10-10-2007, 10:39 AM   #33
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Maldini,

If my insurance costs increase 15% per year for 20 years, I'll be paying $9000/month in real terms. Getting a part time job and earning $1100/month with no HI benefits would only pay about 12% of my HI premiums. I'd probably just go back to work full time and hope I could find a company w/ HI benefits.
Hi Justin,

If health insurance increases at a 15% rate for the next 20 years, then a large majority of people who don't have a pension that covers health insurance will have to reenter the work force, including myself.

It should also be noted that if that happens, many people targeting the normal 65 year old retirement will have to stay working much longer as well.
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Old 10-10-2007, 10:58 AM   #34
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So at what point will there finally be enough political pressure on Washington to do something about the high health care costs? Up until 6-8 years ago I always voted Republican, but honestly, it seems all they care about now is how well corporations are doing (which includes health insurance and drug companies, etc.). And the democrats want to give it away for free which isn't realistic. At what point will Washington have the guts and political willpower to make health care in this country more like a utility company where profits are not the driving force but are regulated so that we can keep the costs in line? Also, what's wrong with our government bargaining with the drug companies for lower prices like other countries do? Free market isn't always the answer to pricing...here in Texas they deregulated electricity and we now have the highest electricity rates in the country. Anyway, there should be a limit to how much health insurance and drug companies can make, don't you think? Also, it's great that we're always getting new cutting edge health care breakthroughs, but at what cost? Isn't that another reason costs are rising fast? I wish there was an easy answer. Like many of you have said, there's probably a point where public outcry will finally cause Washington to do something.
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Old 10-10-2007, 11:45 AM   #35
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A FIRECalc "95% success rate" appears overly optimistic, what with the futility of attempting to model future health care costs.

Adding to that the tsunami of boomers about to begin collecting social security at the rate of 365 PER HOUR.

And soon after, adding them to the medicare rolls, likely makes the past a poor basis for future modelling....
There are a few ways to make FC simulate a more bleak future. For example, if you think the retiring boomers will add a drag to the economy (something the govt's own OMB believes), then increase the fund expense ratio FC uses by 1% or 2%.

You can also change the inflation assumptions FC uses.

Either way, the result is predictable: you'll need a bigger nest egg or a smaller SWR if you want to retire safely in a bleak future.
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Old 10-10-2007, 12:17 PM   #36
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Past performance just seems like a poor predictor of future results, given the unique circumstances of our times.

"Even the past ain't what it used to be." ~YB
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Old 10-10-2007, 01:30 PM   #37
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So at what point will there finally be enough political pressure on Washington to do something about the high health care costs?

...

Anyway, there should be a limit to how much health insurance and drug companies can make, don't you think? Also, it's great that we're always getting new cutting edge health care breakthroughs, but at what cost? Isn't that another reason costs are rising fast? I wish there was an easy answer. Like many of you have said, there's probably a point where public outcry will finally cause Washington to do something.
It seems to me, from my understanding of economics, that if people in the United States have uniformly decided that they must have health insurance coverage at any cost -- even to the point of paying thousands of dollars per month for coverage -- then the costs will rise without limit, regardless of government intervention.

With any other product, it seems most people do an intuitive cost/benefit tradeoff: "Wow, oranges are $10 each, I think I'll skip those." "New cars are really expensive, I think I'll only buy one every 10 years instead of every 5 years." But with health care, it seems people have been nearly brainwashed to say you cannot live without it. I say hogwash. Yes, I know that being sick can cost a lot of money; I used to work in a job where I got to see a lot of actual hospital bills. Yes, I know that this purchase decision may affect how long I live. But at some point it seems like someone other than me in this country should decide that if health insurance gets too expensive, maybe the answer is not to go back to work to afford to pay for it but to instead just stop buying it.

I am seriously considering FIREing with very minimal catastrophic coverage (like a $10,000 deductible) and if that gets too expensive, just taking my chances and going completely without. Maybe I get lucky and live a long life without any expensive diseases. Maybe I get a little less lucky and get some diseases, but the billions (exaggerating) I save in premiums are enough to cover my healthcare expenses. Maybe I get really unlucky and die from cancer or a heart attack, completely broke, in a filthy government hospital or an emergency room.

But between my FIRE date and that ignominious end, if I choose that path, I save billions (exaggerating) in premiums, I am more likely to take care of myself I think, and I have a lot less hassle in my life -- I go to the doctor, he sends me a bill, I pay it. No confusing EOB's, no deductibles, no comparing health plans, no balance billing.

To get back to what I quoted from DallasGuy above:

1. I think the only way to reduce costs is to reduce demand (or increase supply). This means either some people decide that they aren't willing (or able) to pay an infinite amount of money for health insurance, or we add more competition on the supply side. I really don't understand how getting the government involved is going to reduce demand (in fact I think it will increase demand for health care, because it will be "free") or increase supply (I don't think prospective medical doctors and nurses are going to be encouraged to go into medicine based on the prospect of a $30,000 a year government job.

2. I think any private enterprise in this country should be able to make an unlimited amount of profit. I believe in capitalism, and I believe that if such companies are allowed to earn as much as they possibly can, other folks will notice that there's gold in them thar hills, and enter the business, which increases competition and drives down prices.

3. If medical breakthroughs are expensive, then some folks will pay for them (because they can and/or it's worth it to them) and some folks won't (because they can't and/or it's not worth it to them). Those breakthroughs that can make enough sales to pay for their discovery, development, and operation will survive and thrive -- Lasik eye surgery, maybe -- and those that cost a $billion and have one customer who wants to pay $1.50 won't. In a free market there would not be this notion that medicine goes on inventing new expensive treatments and we, as the poor hapless consumers have to buy them regardless of whether we think it's worth the cost.

4. Public outcry and government intervention will not reduce health care costs, see point #1 above, any more than Hawaii putting a lid on the price of gasoline will magically cause gasoline to be cheaper. If you have the same supply and the same demand, and add price caps that are below the fair market price, you will get shortages, whether it's gasoline or health care or any other product or service. It's basic economics.

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Old 10-10-2007, 02:53 PM   #38
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I am seriously considering FIREing with very minimal catastrophic coverage (like a $10,000 deductible) and if that gets too expensive, just taking my chances and going completely without.


2. I think any private enterprise in this country should be able to make an unlimited amount of profit. I believe in capitalism, and I believe that if such companies are allowed to earn as much as they possibly can, other folks will notice that there's gold in them thar hills, and enter the business, which increases competition and drives down prices.

2Cor521
I wouldn't recommend going without any insurance, unless you're filthy rich....one long term bout with a cancer or something similar (even when survivable) could wipe you out financially. At the very least get a very high deductible plan if you can afford it, especially if you have savings and investments that you want to rely on in retirement.

I used to agree that private enterprise in this country should be able to make an unlimited amount of profit. But there are certain things that are more important than profits and sometimes a society has to change things for the greater good of that society. I believe health care is one of those things. Competition does not always drive down prices. Also, health care is one of those industries where it's very very difficult to find out the cost of something. I went in to get a colonscopy last year and they could not tell me the price of it in advance. I believe that most of the health care industry wants to keep us in the dark on pricing so it's difficult to shop around for services. If buying health care services were more like buying a car, there might be more pressure on lowering prices due to competition. Anyway, just my opinion...I know many of you disagree with me...I respect your opinions.
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