Consumption smoothing after retirement
I am recently retired at age 60. My wife, age 52, is on social security disability. We own our home free and clear. Wouldn't the simplest strategy for using ESPlanner be to enter only our regular and retirement assets, home value and associated taxes and expenses, and disability income (as a special receipt), and then let ESPlanner tell us the maximum consumption that our situation could support each year. We would then use that figure to budget all our expenses including health insurance, medical care, prescriptions, food, clothing, transportation, etc.
The tutorial seems to suggest that things like health insurance premiums, medical care, and prescription medications should/could go in special expenditures as "off the top" expenses, but since these fluctuate from year to year, it would be very difficult to do with any real accuracy.
Is ESPlanner likely to overstate or understate our recommended consumption if I leave special expenditures blank and just focus on the assets and special receipts side?
Thanks,
John
RSS
Hi John,
You are certaintly free to enter nothing under special expenditures. You are right that many items that users might enter under special expenditures are not immutable and "off the top," but rather can be modified.
Health insurance premiums isn't optional, so I'd probably enter that under special expenditures. But future car purchases, for example, are optional. You can buy an expensive or cheap car.
So enter whatever you think you absolutely must spend come what may under special expenditures and nothing else and that will be fine.
best, Larry