Key Assumptions
I have only had ESPlannerPlus for a week, but I'm enjoying working with it. I can manage all the inputs (so far) except some of the assumptions. I realize no one can predict, but I don't have any basis to estimate how much or when Social Security benefits will be reduced, how much or when Federal or State taxes will be increased or how much or when Medicare will be increased. I have read Spend til The End and the Coming Generational Storm so I am convinced what's ahead, just not how much or when. Where do I start to project these assumptions?
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That is the problem, isn't it.
ESPlanner generally assumes that things like taxes are either fully indexed or not indexed (for a while), then indexed, to avoid bracket creep. The decisions are based on statue, some states mandate that their brackets track inflation, some reset periodically (we attempt to model their reset behavior in the code), some reset sporadically, when the bracket creep has become too severe. Same with bits of the federal stuff, e.g., the AMT.
However, you're asking what should happen in the future, which is a different kettle of fish and depends on your own opinions. The current system, without modification, will need tax increases. How much depends on the study and when. You can hit the literature to see what folks are saying or Larry might chime in when he's back from vacation.
I'm a bit of a pessimist and believe that the congress critters will continue to fiddle while the system crashes so I would project increasingly bad times over the next 20 to 30 years. If by some miracle they actually get around to beginning to fix things, the the outcome after the bad 20 or 30 years is good. If they don't, then you better have a good bolt hole and a lot of ammunition laid in as things will get pretty tough.
Best,
Dick Munroe
munroe wrote:However, you're asking what should happen in the future, which is a different kettle of fish and depends on your own opinions. The current system, without modification, will need tax increases. How much depends on the study and when. You can hit the literature to see what folks are saying or Larry might chime in when he's back from vacation.
I would be very interested in hearing what others are using as far as assumptions go for future tax rates, Medicare premiums, inflation, etc. It would be useful to have, say, 3 sets of assumptions: no change, moderate change, and doomsday scenario. Unfortunately, I have no idea what reasonable numbers might look like for the latter two scenarios.
What are others doing?