Calculation of living standard per adult
This continues the Very Basic Question discussion...
What is the relationship between smoothed discretionary spending and living standard per adult?
Example:
Couple age 35 with two children ages 10 and 5
Two adults can live as cheaply as 1.6, and child costs 70% of adult.
ESPlanner results:
Age Spending LS/Adult
35-43 $24,238 $10,571
44-48 $20,730 $10,571
49+ $16,913 $10,571
$16,913 = (1.6)(10,571), so that makes sense.
How does $24,238 for two adults and two children relate to $10,571?
How does $20,730 for two adults and one child relate to $10,571?
RSS
ESPlanner uses the power function, x^nth, to model the economies of joint living, where x is the number of equivalent adults.
The default value is that 2 people require 1.6 times the consumption to live at the same standard of living as 1 person.
Therefore, n is such that 2^n = 1.6, i.e. n is about 0.678.
x^0.678 times the standard of living = consumption
With 2 adults:
(2^0.678) * $10,571 = 1.6 * $10,571 = $16,913
With 2 adults and 1 child, given that a child is equivalent to 0.7 adults:
(2.7^0.678) * $10,571 = 1.96 * $10,571 = $20,731
With 2 adults and 2 children:
(3.4^0.678) * $10,571 = 2.29 * $10,571 = $24,238
If you change either the 1.6 or the 0.7, the formula will be adjusted accordingly.
Mike O'Connor
Thanks. That's exactly what I wanted to know.