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Author: fredinseoul Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5084  
Subject: Savings Rate (long) Date: 6/9/2005 8:00 AM
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Hi all. I wanted to see if anyone saw Kiplinger's Retirement planning guided for Fall 2005. One of the articles is called "Solving the 'How Much' puzzle."

It has a rather basic worksheet that factors in present income, 401K, Pensions and such, along with the value of your house and then with some tables, helps project growth and future needs.

I find the worksheet has some basic issues, but as a guestimation tool, it has some serious value to me. One of the biggest issues I see is that they suggest using 80% of your current salary as the amount you will need in retirement. I find that number to be very high. From the FIRE board, I remember a discussion that put the real number closer to about 50%. What are you using as your benchmark? The article does discuss cheaper clothing, commuting, etc costs, but they also point out that you will probably pay more for health care and possibly you will travel more. Still, many people who are aggressively chasing FIRE live on less than 50% now.

Another questionable entry I found is using your house as a source of your income in retirement. They discuss selling the house and having the first $250,000 as tax free. I know that, but is the house a part of your plan? I don't consider my house as part of my nest egg, simply because I live here. If I sold it, I'd have to find somewhere else to live. There would be costs associated with that. While I do expect my house to appreciate over time, I also expect it to shelter me. I'm certain I won't remain here until I die, I do expect to have my retirement house paid for when I retire. Am I missing out on a big part of my nest egg planning?

I've never really done the math to figure out how much I need to save, so this was an eye opener for me. According to the worksheet, I only need to save $200 more a month to retire in 20 years. I'm not sure that I trust that. It seems quite low. FIRE should be a touch harder, shouldn't it? :)

I am going to play with this worksheet to see if I find numbers that seem more reasonable. Anyone else seen the article?

fredinseoul
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Author: HaltCatchFire Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3302 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 8:38 AM
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I find the worksheet has some basic issues, but as a guestimation tool, it has some serious value to me. One of the biggest issues I see is that they suggest using 80% of your current salary as the amount you will need in retirement. I find that number to be very high. From the FIRE board, I remember a discussion that put the real number closer to about 50%. What are you using as your benchmark? The article does discuss cheaper clothing, commuting, etc costs, but they also point out that you will probably pay more for health care and possibly you will travel more. Still, many people who are aggressively chasing FIRE live on less than 50% now.

I've not seen the article. As usual, this will not stop me from commenting.

I don't really care how much of my salary I need to replace. I'm more concerned about meeting 100% of my expenses.

Most IRL people I talk to are just stunned that Mrs.Fire and I track our expenses down to the penny, month after month. We can tell you what percentage of our income goes to taxes, insurance, mortgage, cars, charity, you name it. We use this data to drive down our expenses. Detailed expense data gives me a good estimate on how much we'd need to FIRE. But, as I said, most people do not have this tight a grip on their expenses. But income is much easier to estimate. So the "experts" use that instead.

I've never really done the math to figure out how much I need to save, so this was an eye opener for me. According to the worksheet, I only need to save $200 more a month to retire in 20 years. I'm not sure that I trust that. It seems quite low. FIRE should be a touch harder, shouldn't it? :)

You'd think. But you're simultaneously raising your saving rate and reducing your target amount through reduced expenses (assuming you LBYM and don't go into debt to save). You're driving faster to reach a closer milestone.

It's really sad to me that most people could FIRE if they only tried. But they don't.

Regards,

- HCF


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Author: yttire Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3303 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 8:38 AM
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No, I haven't seen the article.

You could take out a reverse mortgage on your house (if you are 65) and tap the equity that way without moving out. Or you could move into an apartment and pay the amount of the apartment off of interest from your old house (or rent your old place), assuming that you need less space, because your kids are gone, or because you are now watching TV all day.

I think that you can figure out how much you need by looking at a budget (that is what you actually spend). It is irrelevant how much you earn right now- if you are saving 50% of your gross then certainly you won't retire on 100% of your gross. It is very relevant how much you spend, and your projected growth in health care costs.

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3304 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 9:42 AM
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>> I find the worksheet has some basic issues, but as a guestimation tool, it has some serious value to me. One of the biggest issues I see is that they suggest using 80% of your current salary as the amount you will need in retirement. I find that number to be very high. From the FIRE board, I remember a discussion that put the real number closer to about 50%. What are you using as your benchmark? The article does discuss cheaper clothing, commuting, etc costs, but they also point out that you will probably pay more for health care and possibly you will travel more. Still, many people who are aggressively chasing FIRE live on less than 50% now. <<

I think 80% is way too high -- particularly if you own your home free and clear and you live simply.

We actually "live" on about 70% of our income; the rest is saved and invested (2/3 of that by maxing out my 401K and two Roths). We could easily make this 60% *today* if we wanted to badly enough.

So right off the bat, since we won't be actively funding retirement *during* retirement, we could live on 70% of our income today. Plus, the mortgage would be paid off -- that's another 10% of our income. Okay, we're down to 60%.

But with only 60% of our current level of income, and much of this potentially coming from long-term capital gains and Roth IRAs, our federal income tax burden is probably cut in half. Since federal income tax was about 14% of income last year, that's another 7% we don't need. We're down to 53% of current income. And we're not living as simply, or as far beyond our means, as we easily could, and we could probably get that down to 45% fairly painlessly.

This, of course, ignores health care. I might have to add 10% back in for that, so call it 55%. I'd say there would likely be a little more travel, but is probably offsets reduced commuting costs, less eating out, et cetera, to the point where it's close to a wash.

I'm planning for 65% of current income, knowing that we can fall short of that and probably still be okay -- and that factors in health care.

I believe the 80% figure is for people who aren't good at LBYMing.

>> Another questionable entry I found is using your house as a source of your income in retirement. They discuss selling the house and having the first $250,000 as tax free. I know that, but is the house a part of your plan? I don't consider my house as part of my nest egg, simply because I live here. If I sold it, I'd have to find somewhere else to live. There would be costs associated with that. While I do expect my house to appreciate over time, I also expect it to shelter me. I'm certain I won't remain here until I die, I do expect to have my retirement house paid for when I retire. Am I missing out on a big part of my nest egg planning? <<

If you know you're going to "downsize" your home in retirement, it does make sense to include *some* of its value in your calculations. We're planning to move to a smaller home, cheaper home with less space to cool and lower property taxes. If you're not planning on moving, then no, it makes little sense to include home equity in your calculations.

There are other things, too, which are likely to happen but which we don't include. My inheritance, for example. First of all, we don't *want* it for a long time, for obvious reasons; second of all, there's no guarantee that it will still be there when my parents pass (or that I won't predecease them, for that matter), though it's very likely that it will be. Still, I think I know about what that portion of the estate would be, at least ballpark, and in the back of my mind I know it's potentially there even though I do not and will not use it for retirement planning.

#29

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3305 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 10:18 AM
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>> Another questionable entry I found is using your house as a source of your income in retirement. They discuss selling the house and having the first $250,000 as tax free. I know that, but is the house a part of your plan? I don't consider my house as part of my nest egg, simply because I live here. If I sold it, I'd have to find somewhere else to live. There would be costs associated with that. While I do expect my house to appreciate over time, I also expect it to shelter me. I'm certain I won't remain here until I die, I do expect to have my retirement house paid for when I retire. Am I missing out on a big part of my nest egg planning? <<

If you know you're going to "downsize" your home in retirement, it does make sense to include *some* of its value in your calculations. We're planning to move to a smaller home, cheaper home with less space to cool and lower property taxes. If you're not planning on moving, then no, it makes little sense to include home equity in your calculations.


Another factor is that most working people live in relatively expensive areas of the country. There are over 2,000 counties, and half the population lives in only about 200 of them. (I actually had exact figures once.) And even within those 200, there are huge variations in population density and the cost of real estate with, naturally, most people in the more expensive places - because that's what makes them more expensive.

And a retiree doesn't have to live close to his (former) job.

So a great many people, as they retire, can sell their house and moving to an equally nice or nicer house (and perhaps a smaller easier-to-maintain one since they don't need room to raise kids) in an equally nice or nicer neighborhood with an equally pleasant or better climate and a convenient level of access to amenities both urban and rural - and, in the process, put a large wad of cash in their pocket.

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Author: decath Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3306 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 11:42 AM
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warrl:
Another factor is that most working people live in relatively expensive areas of the country. There are over 2,000 counties, and half the population lives in only about 200 of them. (I actually had exact figures once.) And even within those 200, there are huge variations in population density and the cost of real estate with, naturally, most people in the more expensive places - because that's what makes them more expensive.

And a retiree doesn't have to live close to his (former) job.

So a great many people, as they retire, can sell their house and moving to an equally nice or nicer house (and perhaps a smaller easier-to-maintain one since they don't need room to raise kids) in an equally nice or nicer neighborhood with an equally pleasant or better climate and a convenient level of access to amenities both urban and rural - and, in the process, put a large wad of cash in their pocket.


Using this strategy is what will allow me to FIRE at 50-52 as apposed to 55-56. Moving to a rural area outside the city limits will keep property taxes low. Having an energy efficient smaller home would considerably reduce my expenses.

Another added benefit will be having all 3 kids out and on their own. Even with LBYM techniques, it's amazing how much I still spend on them.

decath

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Author: whyohwhyoh Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3307 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 12:00 PM
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I know that, but is the house a part of your plan? I don't consider my house as part of my nest egg,

I do include my house as part of my networth/nest egg.
(House Worth)*0.94-(What I Owe)

As this is what I would have left over after a sale. It is also a large number and percentage of my networth, so not including it would make a big difference on when I could FIRE.

80% of your current salary as the amount you will need in retirement. I find that number to be very high

This will vary from family to family. My goal is to retire when my oldest child will be 11-13 years old. Therefore, I need to plan for some expenses to continue and potentially rise for a bit after I retire.

Medical is also a cost to be considered. Hopefully the Repubs could create real medical savings accounts, so we can start saving now tax deferred, without having to flush the account once a year.

My number right now is 65% of what I make today, but there are many factors that affect this, including a high investment rate.

--
whyohwhyoh


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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3308 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 12:17 PM
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Hopefully the Repubs could create real medical savings accounts, so we can start saving now tax deferred, without having to flush the account once a year.

They did. It's buried in the Medicare drug-coverage bill, and has some limitations (basically you have to have real medical insurance rather than the blanket pay-everything coverage that passes for "medical insurance" in most of the world, more comparable to the form of car insurance that covers oil changes and windshield-wiper blades - so if you have employer-provided medical insurance, you probably aren't eligible) but it's there.

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Author: nmckay Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3309 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 12:18 PM
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80% seems way high. Also, what is their expected return on investments. I use 4% for my planning. Maybe they use 5 or 8%. The numbers could then be way off but would probably work out to 65% or so all netted out.

My amount is probably more like 45%. DW and I will move from NYC and all the insane expenses of this place. Additionally we are saving agressivly and that percentage won't be there in retirement. We could FIRE now, but are having too much fun doing what we're doing. We'll get sick of NYC eventually.

It's funny how this place will suck up every last nickle if you let it. We know people making over $200,000 who can't save a thing. I equate it to being on a game show in one of those glass bubbles with the dollar bills blowing all around. You just have to stuff a few of those in your pocket while trying not to be blinded by all of the cash blowing around. Easier said than done.

nmckay

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Author: whyohwhyoh Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3310 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 12:33 PM
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basically you have to have real medical insurance rather than the blanket pay-everything coverage that passes for "medical insurance" in most of the world

We have a "cafeteria style" medical plan where I work. You can select from ~15 different plans, from the "blanket pay everything including oil change" to a plan with a $1000 deductable per person, 85% coverage after $1000.

The 15 plans price range for a family of 4 is between ($6200 to $16000 per year).

So does $1000 deductable equal "real" medical insurance?

I wish they offered even higher deductables, but they don't yet, although they have provided more and more each year.

so if you have employer-provided medical insurance, you probably aren't eligible) but it's there.

So I want the Repubs to pass a medical savings account bill... without limitations.... unless I find I can use it.

--
whyohwhyoh




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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3311 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 1:10 PM
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basically you have to have real medical insurance rather than the blanket pay-everything coverage that passes for "medical insurance" in most of the world

We have a "cafeteria style" medical plan where I work. You can select from ~15 different plans, from the "blanket pay everything including oil change" to a plan with a $1000 deductable per person, 85% coverage after $1000.

The 15 plans price range for a family of 4 is between ($6200 to $16000 per year).

So does $1000 deductable equal "real" medical insurance?


Well, the basic problem with laws is that they have to draw a line someplace. And no matter where they draw the line, one can sensibly ask "why there, and not just a notch or two over?" and there usually is not a good answer.

Here's a document about where they drew the lines: http://www.irs.gov/publications/p969/ar02.html#d0e115

As for your specific question, a policy that covers only you with a $1000 deductible qualifies. (If your insurance also covers your spouse, the policy must have a minimum $2000 per-family deductible and can't have a per-person deductible lower than $2000.) However there are some exceptions to the deductible, and some other rules and restrictions, and some really odd twists (the upper limit on contributions - for 2004 - for a person with single-person-only coverage is $2600 or less; but if you're married and have a single health-insurance policy that covers both of you, the upper limit apparently can be as high as $5150 EACH, or a total of $10,300). I won't try to cover it all; go read the link.

Contributions are from your pre-tax income. Your employer can make part or all of your contribution for you - I think this MIGHT exempt the contribution from Social Security tax as well!

The nice thing is that while you don't HAVE to draw money out of the account, you CAN draw money out for pretty much anything that you can make a case is medical. Such as a bottle of aspirin you pick up at the grocery store. Or the medicinal Chinese herbs your acupuncturist sells you. (If your doctor recommends you take a vacation and you respond by going on a round-the-world luxury cruise... that's probably pushing it too far.)

When you become eligible for Medicare, the account turns into a conventional IRA.

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Author: TheBreeze Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3312 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 6:38 PM
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Right now I pay 7.65% of my income to FICA, and 10% goes to the 401k. Each child of four costs me about $5250 after taxes ($1000 credit and one deduction).

If I retire when child #2 graduates from college, which should be one year after I'm eligible for paid health care and a reduced pension, I'll have two years of house payments left. I end up needing only 55% of my current income as an "ongoing" cost. Some things will go up, like prescriptions.

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Author: alstroemeria Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3313 of 5084
Subject: Re: Savings Rate (long) Date: 6/9/2005 11:26 PM
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It depends on your needs, your wants, and your income before retiremnrt: it's easier to live on, say, 50% of a $250,000 income than 50% of a $30,000 income.

We moved out of the fast lane a few years ago and live nicely on 30% of our former income. We moved to a cheaper area, have no mortgage or other debt, the kids are independent, and our expenses are much lower.

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Author: qaddy Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3314 of 5084
Subject: Re: Savings Rate (long) Date: 6/10/2005 2:07 PM
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It's funny how this place will suck up every last nickle if you let it. We know people making over $200,000 who can't save a thing. I equate it to being on a game show in one of those glass bubbles with the dollar bills blowing all around. You just have to stuff a few of those in your pocket while trying not to be blinded by all of the cash blowing around. Easier said than done.

nmckay,

That is a fantastic analogy.

qaddy

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Author: nmckay Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3315 of 5084
Subject: Re: Savings Rate (long) Date: 6/10/2005 3:06 PM
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I've got a friend who had $19M on paper during the telco craze. He lost it all holding out for $20M. I told him I'd have been on a beach after the first $2M. He didn't understand.

There is always someone richer than you and richer than that guy and richer than the guy who's richer than all of them put together. In NYC, that guy's still broke. Someone who can't let the Jones' win will go insane in this town.

nmckay

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Author: chooey98 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3316 of 5084
Subject: Re: Savings Rate (long) Date: 6/11/2005 11:07 AM
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Hi all. I wanted to see if anyone saw Kiplinger's Retirement planning guided for Fall 2005. One of the articles is called "Solving the 'How Much' puzzle."


Hi, fred:

I haven't read the article, but I do have a "bare bones" retirement budget which would be about 40% of my present gross income, and one with a little more cushion, which would be about 60-70%. Rather than going by percentages, though, I'm must figuring up living expenses, saving as much as I can, and re-evaluating from time to time.

As for the house, I'm considering possibly taking out a reverse mortgage or HELOC as a last resort for a medical emergency or long term care need, if it comes to that.

I'm the type that likes to have a financial cushion, so I'll probably work a bit longer to achieve that.

--Chooey



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Author: kdjsmom One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3317 of 5084
Subject: Re: Savings Rate (long) Date: 6/11/2005 9:21 PM
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Our 2 youngest of 4 children start college in the fall (oldest 2 are independent and educated). We are very close to FIRE, but don't want to go there until the last 2 are through college and off the parental dole. As a compromise, my husband will go part-time in September so that he will have more time for hobbies, travel and enjoying life in general. We have bought an RV and are hitting the road every other month.

I have budgets worked up for all kind of retirement income levels and scenarios. We have no debts---even have the house paid for---so it makes it a little easier figuring "how low can we go" if we decide to retire earlier. Like others have stated in this thread, I think retirement income needed as a percentage of current earnings is worthless. It's how much do you need to covered your expenses and being sure those expenses are as low as you can comfortably get them.

In my opinion, the rapidly rising cost of health insurance is the scariest thing facing us. My husband is self-employed and we have to provide our own insurance. Each year the insurance company jerks the premiums up nearly 20%. We do have an HSA and currently have over $11,000 in it. We contribute the max, and don't withdraw from it. But it does seem that we are paying more and more for insurance, and getting less and less covered. GRRRR.............

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3318 of 5084
Subject: Re: Savings Rate (long) Date: 6/12/2005 12:17 PM
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In my opinion, the rapidly rising cost of health insurance is the scariest thing facing us. My husband is self-employed and we have to provide our own insurance. Each year the insurance company jerks the premiums up nearly 20%. We do have an HSA and currently have over $11,000 in it. We contribute the max, and don't withdraw from it. But it does seem that we are paying more and more for insurance, and getting less and less covered. GRRRR.............

This is very true, and there's a good reason for it.

Compare your "health insurance" to you car insurance. Not just in cost, but in how often you have a claim that will be covered and in the dollar amount of the typical claim.

Then compare the process by which most people select a "health insurance" company, to the process by which they select an auto insurance company.

Insurance should be there to protect you against events that are financially devastating. And one of the factors in selecting an insurer should be the price of the insurance.

"Medical insurance" in the US mostly doesn't meet either of those criteria.

And we'll have problems with it until it does.

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Author: whyohwhyoh Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3319 of 5084
Subject: Re: Savings Rate (long) Date: 6/12/2005 1:07 PM
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"Medical insurance" in the US mostly doesn't meet either of those criteria.

And we'll have problems with it until it does.


I believe many people do have options already. When I go to bluecrossca website and ask for medical insurace for 2 people at age 50, you get 16 insurance quotes ranging from $269/month to $1103/month.

At $269/month, there is a $2500/member deductable, $5000/member max out of pocket/year. Rx not covered.

Would this medical insurance meet your stated criteria?

--
whyohwhyoh

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3320 of 5084
Subject: Re: Savings Rate (long) Date: 6/12/2005 2:22 PM
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"Medical insurance" in the US mostly doesn't meet either of those criteria.

And we'll have problems with it until it does.

I believe many people do have options already. When I go to bluecrossca website and ask for medical insurace for 2 people at age 50, you get 16 insurance quotes ranging from $269/month to $1103/month.

At $269/month, there is a $2500/member deductable, $5000/member max out of pocket/year. Rx not covered.

Would this medical insurance meet your stated criteria?


It would meet those two criteria, and is clearly a step in the right direction. However...

You wouldn't expect your auto insurance to pay more after you run into a tree if, a week earlier, you'd replaced a broken rear-view mirror, than it would pay if the mirror hadn't been broken. Potentially-covered but minor incidents don't count against the deductible for major incidents. And the insurance company will probably never even see any paperwork on the minor incidents.

Yet even with a high-deductible health-insurance policy, the insurer normally will see (and, more importantly, have to process and tally) paperwork on minor claims that are well below the deductible - because it's a per-year deductible, not a per-incident deductible.

Obviously, this drives up the cost of the insurance.

Another effect of this is that the people who EXPECT to exceed their deductible for the year (and they are the ones who normally consume the largest share of medical care), don't care about the cost of ANY potentially-covered care.

And covering some care (surgery) but not other care (prescriptions), based on form rather than price or need, will sometimes mean favoring expensive care over inexpensive care as a way to reduce out-of-pocket costs. Not obviously wise.

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Author: nmckay Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3321 of 5084
Subject: Re: Savings Rate (long) Date: 6/13/2005 9:00 AM
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I haven't shopped around yet, but I would hope that there would be a product that would allow you to have a high deductable and just covered the big stuff. DW and I have an e-fund for the small stuff.

nmckay

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Author: whyohwhyoh Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3322 of 5084
Subject: Re: Savings Rate (long) Date: 6/13/2005 4:21 PM
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Yet even with a high-deductible health-insurance policy, the insurer normally will see (and, more importantly, have to process and tally) paperwork on minor claims that are well below the deductible - because it's a per-year deductible, not a per-incident deductible.

Obviously, this drives up the cost of the insurance.


Interesting point.

However, one may choose to use an insurance company even on smaller out of pocket items because due to the insurance companies large number of customers they can negotiate much lower costs than an individual consumer.

This would be similar to AAA. You pay insurance in case you need to get towed. On your own you would pay $70-100 for a simple tow, but through AAA the towing company only gets a contract rate for $30-$50.

Not the greatest analogy. Maybe Costco is a better analogy. You pay a membership price to have access to better product pricing due to Costco being able to negotiate better pricing due to their large customer base.

It's amazing the difference in out of pocket expenses between retail, or someone without insurance, versus insurance companies contract rates.

For example, a blood test that retails for $20, can be reduced to $5.

Opening up competition like auto insurance may not work, due to the much more complex and broad range of even smaller medical expenses. I can fix a broken rear view mirror myself… I cannot go out and give myself a biopsy. I would be willing to pay BlueCross, just to negotiate all the fees and know I am getting a decent price out of pocket.

Also, if the annual deductible gets too high (like $10k), then Blue Cross would be less motivated to negotiate the pricing of smaller expenses in the $100-$500 range.

True, I would prefer Rx to be included to possibly avoid an expensive surgery. Ideally the insurance I would want would be $3K/year deductible, $6K annual max including Rx. But not an Rx copay, like almost all of them.

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whyohwhyoh


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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3323 of 5084
Subject: Re: Savings Rate (long) Date: 6/14/2005 11:08 AM
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My amount is probably more like 45%. DW and I will move from NYC and all the insane expenses of this place. Additionally we are saving agressivly and that percentage won't be there in retirement. We could FIRE now, but are having too much fun doing what we're doing. We'll get sick of NYC eventually.

It's funny how this place will suck up every last nickle if you let it. We know people making over $200,000 who can't save a thing. I equate it to being on a game show in one of those glass bubbles with the dollar bills blowing all around. You just have to stuff a few of those in your pocket while trying not to be blinded by all of the cash blowing around. Easier said than done.
{emphasis added}

Well said! I really enjoyed that! I'm also in NYC and currently living on 67% of my gross income, 47% of my net. With lower tax rates in retirement, and not paying a mortgage, I'll probably be able to make it on 40% of my gross.

2old


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