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.