Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Less than 2 %
2.01 - 3%
3.01 - 3.75%
3.76 - 4.75%
Greater than 4.75%

Click here to see results so far.

Print the post Back To Top
No. of Recommendations: 0
I voted 2.01 - 3% because regardless of the inflation rate published by the feds, my personal inflation rate will probably be lower.

decath
Print the post Back To Top
No. of Recommendations: 2
regardless of the inflation rate published by the feds, my personal inflation rate will probably be lower.

I used to think this also, but many 'experts' are now saying that the increases in health care costs will be higher than the inflation rate, and will make up the difference. As I understand it, medicare doesn't cover dental and optical. And basically Bush's pharmacy plan doesn't really work, so drug costs will probably keep skyrocketing, particularly if they block the Canadian drug lines. And the co-insurance premiums will increase higher than inflation also.

BWTFDIK?

2old

Print the post Back To Top
No. of Recommendations: 0
I try to make my estimates err on the side of being conservative and pessimistic, so I use 4%. Actually, factoring in health care as a retiree or second-career self-employed type, that may be low.

#29
Print the post Back To Top
No. of Recommendations: 0
As we're all aware, one of the major components in all the 'retirement funds needed' calculators is the average inflation rate. I'm interested in what range most folks use. I'm cross-posting this same poll to other boards and I'd like to see if the ranges vary by board, so if you post to other boards, please answer it on only one. :-)

What range does the inflation rate you use for your estimates fall in?


These calculators also require an estimate of the rate of return for various invesments or have built into them some rate of return. I think you need to couple the rate of return on investments with the inflation rate. I focus on a real rate of return (i.e., after inflation) rather than both inflation and the inflated rate of return in my spreadsheet calculations. This simplifies everything since I can reason about things in current real dollar terms. A dollar today is a dollar thirty years from now. If you think inflation is 3% and returns will be 8% for your investment then just use real returns of 5%. If your rent is $1000 today there is no need to inflate it 3% per year and complicate your thinking. (The spreadsheet will handle it better than your brain.)

Another technique that I use is to set up multiple scenarios for various inputs. For example, use three rates of inflation ranging from mild to average to high. Do the same with other inputs. Mix and match to see how the results change. This gives you some intuition for the relative importance of things. You will find, for instance, that investment costs add up over 30 or 40 years.

Keep in mind that these simple straight line retirement calculators are not very useful for getting at the risks or even the details of planning for retirement. They provide a ball park estimate at best. Life is much too volatile for most of these calculators.

Regards,
Prometheuss
Print the post Back To Top
No. of Recommendations: 0
These calculators also require an estimate of the rate of return for various invesments or have built into them some rate of return. I think you need to couple the rate of return on investments with the inflation rate.

Actually, that's my next poll, what estimated rate of return do folks use!

If you think inflation is 3% and returns will be 8% for your investment then just use real returns of 5%. If your rent is $1000 today there is no need to inflate it 3% per year and complicate your thinking. (The spreadsheet will handle it better than your brain.)

I have my own spreadsheet, tailored to my individual needs. It handles the calculations fine.

Another technique that I use is to set up multiple scenarios for various inputs. For example, use three rates of inflation ranging from mild to average to high. Do the same with other inputs.

On my spreadsheet I have 6 inputs that I can vary: Monthly expenses prior to age 86, monthly expenses post age 86, SS benefits, inflation rate, rate of return and retirement age.

Keep in mind that these simple straight line retirement calculators are not very useful for getting at the risks or even the details of planning for retirement. They provide a ball park estimate at best. Life is much too volatile for most of these calculators.

Agreed, that's why I had to build my own!

Thanks for responding,

2old



Print the post Back To Top
No. of Recommendations: 0
I have my own spreadsheet, tailored to my individual needs. It handles the calculations fine.

I still find it easier to wrap my brain around inflation adjusted returns and expenses. The calculations are okay, but I find it difficult to look at a $100K income 18 or 19 years into the future in the same way that I look at the equivalent $60K income today. Whatever works for you, though.

Agreed, that's why I had to build my own!

Good decision. I have yet to find a retirement calculator that was flexible enough.

Regards,
Prometheuss

Print the post Back To Top