I have not run any of the more advanced retirement calculators, but based my FIRE decision on some crude spreadsheets that I made with very conservative assumptions.
The most recent one I did took 15% off the top before starting as a fudge factor.
I assumed that the rate of expense inflation would be 5%. I would like to make a better model with different inflation rates for food, medical cost, insurance cost, taxes etc., but have not gotten around to it.
I assumed that the portfolio rate of return would be 4%, i.e. a real rate of return of negative 1%.
Having no dependents, I allow the portfolio to draw down to zero in my model. I am 59 now and with the simple calculations and these assumptions I make it into the mid 90's assuming that I keep with my LBYM lifestyle and ignoring any huge unexpected expenses.
I am curious what your opinions are on the expected rate of inflation going forward and on what you consider the expected average rate of return on your portfolio will be.
I feel that the government understates inflation, especially if you consider food and medical costs. I think the way that they factor in technological improvement leading to cost drops on electronics etc. makes their numbers lower than they should be.
I feel that the suppression of the interest rate environment will make fixed income yields in the future lower than in the past.
I feel that the current equity market valuations and support from quantitative easing will mean that the historical average return on equity will not be possible in the next ten or fifteen years.
What do you think?
Thanks.
Joe
The most recent one I did took 15% off the top before starting as a fudge factor.
I assumed that the rate of expense inflation would be 5%. I would like to make a better model with different inflation rates for food, medical cost, insurance cost, taxes etc., but have not gotten around to it.
I assumed that the portfolio rate of return would be 4%, i.e. a real rate of return of negative 1%.
Having no dependents, I allow the portfolio to draw down to zero in my model. I am 59 now and with the simple calculations and these assumptions I make it into the mid 90's assuming that I keep with my LBYM lifestyle and ignoring any huge unexpected expenses.
I am curious what your opinions are on the expected rate of inflation going forward and on what you consider the expected average rate of return on your portfolio will be.
I feel that the government understates inflation, especially if you consider food and medical costs. I think the way that they factor in technological improvement leading to cost drops on electronics etc. makes their numbers lower than they should be.
I feel that the suppression of the interest rate environment will make fixed income yields in the future lower than in the past.
I feel that the current equity market valuations and support from quantitative easing will mean that the historical average return on equity will not be possible in the next ten or fifteen years.
What do you think?
Thanks.
Joe