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Factoring Inflation

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My Time!
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Factoring Inflation  Reply with quote  

Hi I'm 58 and married, as I start to gather and spreadsheet out our retirement... inflation has me a little concerned. My goal was to get to 100k per year but based on my calculation in the 34th year of our retirement it would require approx. 425k...I'm hoping I'm wrong!

I took the average inflation for the last 20 years which is 2.2%
I also figured it on the last 10 years which was 1.9%
Based on articles I read... I came up with using 1.5% per year
So for each year of retirement increased the inflation rate by 1.5%
So in year 34 our 126k will only be worth 36k based on 71% inflation?

Am I missing something?

Gosh I hope so!
MT

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Post Tue Mar 08, 2016 7:52 pm
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oldguy
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In 34 years you'll need $209,570/yr to match your present $100,000/yr, @ 2.2%/yr inflation.

The $425,000 in 34 yrs would equal 4.35%/yr inflation. Yeah, I hope you are wrong.

Are you expecting to die at only age 92? lol, what if you screw up and live to be 102? You'll need an extra $2M to cover that extra decade.
Post Tue Mar 08, 2016 9:17 pm
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My Time!
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SO I must be messed up then obviously! I guess I thought the inflation was compounded yearly so inflation in the case of using 2.2 Year 1 would be 2,2 , year 2 would be 4.4%, Year 3 would be 6.6... I was hoping I was wrong because by year 34 inflation would be almost 75%.

I'm just getting started on this but I have no one in my family lived past 82 so 92 seemed like a good number...maybe it's not. I'm not trying to be funny We recently came into 1.2 million dollars after my wife's business sold. We are trying to do the right things. Working with a medium income is kind of hard...working with a large sum of money is a lot harder and a little scary. Either way I have seen several of your posts and I respect what you say...I hope I don't find out later you're a DJ or something like that....so thanks for the post.

We do have a financial planner with Fidelity and we are working on a plan...I just don't want to make any mistakes and I want to understand what we are doing.

Thanks Again!
MT
Post Tue Mar 08, 2016 11:30 pm
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oldguy
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quote:
no one in my family lived past 82 so 92 seemed like a good number...maybe it's not.


Yeah, I don't think it's a good idea to try to predict life-span. I calculated our retirement based on "in perpetuity". Instead of trying to estimate when we would run out of money, I calculated how much money I needed to avoid touching principal. So if I lived to be 100, the fund would still be growing even tho I take out our expenses every year.

Eg, if had $2.5m, and took out 4% every year, that would be $100,000. And if you kept it in a 4% fund it would stay at $4M forever. Better yet, if you kept it in a 6% fund, the 2% left over every year would offset inflation and the $2.5M would slowly grow forever.

I've had relatives (back in the 1910s. 1920s) die at 60 from heart attacks and strokes. And my dad & uncle lived to be 98 - cholesterol pills, pace makers, baby aspirin - have fixed some of those common diseases that killed so many folks 75 years ago. You may be the one who makes it to 100?
Post Wed Mar 09, 2016 12:52 am
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