Extrapolate annual expenses for FI

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alexfoo39
Posts: 191
Joined: Sun Jan 06, 2019 2:00 am

Extrapolate annual expenses for FI

Post by alexfoo39 » Sat Feb 09, 2019 10:17 pm

I'm trying to extrapolate annual expense for Financial independence (when the 4% portfolio return every year is greater than my annual expense).

I'm factoring in the inflation.
But, I'm concerned on probable health cost, insurance cost as one gets older.

How do you extrapolate that? I saw in my insurance policy that the charge is staggering when the age number gets bigger :shock:

bluquark
Posts: 827
Joined: Mon Oct 22, 2018 2:30 pm

Re: Extrapolate annual expenses for FI

Post by bluquark » Sat Feb 09, 2019 11:35 pm

You could enter a fake age on healthcare.gov and see what it does to the quotes you're offered. And then hope it rises at the normal rate of inflation (it's been faster in the past few decades, but who knows where it will trend from here).

Traveler
Posts: 806
Joined: Fri Aug 30, 2013 9:07 pm

Re: Extrapolate annual expenses for FI

Post by Traveler » Sun Feb 10, 2019 12:52 pm

Unfortunately healthcare related expenses are the hardest for me to estimate for early retirement and I haven't figured out a good methodology except what the other poster mentioned - seeing what it would be today through the ACA and factoring in a (in my estimate) greater than standard inflation factor. That alone is relatively easy. My uneasiness comes with not knowing if the current system will even be there in a few years or will we be back to a system similar to pre-ACA and then how does that affect my expenses. Sorry I don't have a good answer. I assume this is a challenge for others too.

Thesaints
Posts: 2876
Joined: Tue Jun 20, 2017 12:25 am

Re: Extrapolate annual expenses for FI

Post by Thesaints » Sun Feb 10, 2019 12:57 pm

alexfoo39 wrote:
Sat Feb 09, 2019 10:17 pm
I'm trying to extrapolate annual expense for Financial independence (when the 4% portfolio return every year is greater than my annual expense).

I'm factoring in the inflation.
But, I'm concerned on probable health cost, insurance cost as one gets older.

How do you extrapolate that? I saw in my insurance policy that the charge is staggering when the age number gets bigger :shock:
“Safety margin”. Plan for a higher income than the amount you think you need. It is a practice used in many fields of human endeavour.

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