Agreed, some don't need forecasting, those that do should note that actuarial ruin in retirement generally causes one of the following:
4) live in a tent down by the river
(paraphrased from the book)
Hard to see why someone would reduce their spending based on a forecast though unless the actuals precipitated the change in outlook? Maybe we're discussing semantics?
Yes, that is the CPI-U for all urban consumers. Note that is different than the CPI-W which is used for Social Security.Thanks. Is that inflation as measured by the CPI?
In my spreadsheet I assign separate inflation rates for medical expenses (10%) and all other expenses (3%). For my investments, I assign different rates of return for each bond fund, and a separate number of cents per share via dividends and cap gains in my stock funds.
I was planning to live in a VAN down by the river. I guess I better start saving.
This seems like a reasonable assumption to me. But it makes me wonder who is getting advantage of a 10% inflation rate? Insurance companies, pharmaceutical, US government (medicare), doctors, etc? Is there an investment that will help hedge against the higher inflation rate for medical care?
Can't speak for 'all', but I don't use any numbers for these. I let a tool like FIRECalc use the actual historical data.
google ASOP 27 on selecting economic assumptions and you will see why no one uses 100% historical data for future projectionsOriginally Posted by ERD50 View Post
Can't speak for 'all', but I don't use any numbers for these. I let a tool like FIRECalc use the actual historical data.
Thanks, I may look at that a bit later, but it appears to be somewhat irrelevant. I'm not using historical data to to tell me the future, it's just a data point for reference. At any rate, any look at future spending against the portfolio has to involve "future projections".
Even a zero return calculation assumes your portfolio keeps up with inflation. That might be considered a safe assumption, but it is an assumption none-the-less. Dang future!
-ERD50
if you don't you may run the risk of actuarial ruin
I think this is a must read - https://www.amazon.com/Money-Life-Lifetime-Retirement-Paycheck/dp/0985384603
I've read about half of it and it's outstanding.
Some of the reviews say the book is simplistic and steers you towards annuities. Is that true?
Is anyone using the target date income funds as a replacement for annuities? They would seem to address the lack of liquidity of an annuity. Any success stories?