I'm trying to adjust the standard of living / consumtion at ages beyond 85 to a lower level then ages 65-85. I'm entering a standard of living index value going from 100 to 85 in later years to try and drive this, but my reports show increasing consumption in later years- am I doing something incorrectly?
Thanks
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normaneking at cox.net wrote:I'm trying to adjust the standard of living / consumtion at ages beyond 85 to a lower level then ages 65-85. I'm entering a standard of living index value going from 100 to 85 in later years to try and drive this, but my reports show increasing consumption in later years- am I doing something incorrectly?
Thanks
Probably not. In retirement Medicare B costs escalate dramatically, especially out 20 or 30 years. This increase may easily outweigh your decrease in your standard of living as this can't be reduced. Other factors, such as withdrawals from tax deferred accounts may also contribute by putting you into a higher than necessary tax bracket while reducing your tax exemption from social security. Without looking at your specific case I can't give you any more details than that to begin with but this should give you a place to start looking.
Best,
Dick Munroe
Thanks Dick- I've rechecked and re run. For some reason, one of the things the program is doing is increasing consumption after my mortgage is paid off and housing expenditure drop. I would of thought it would hold consumption constant - is there a rationale for this adjustment in consumption?
normaneking at cox.net wrote:Thanks Dick- I've rechecked and re run. For some reason, one of the things the program is doing is increasing consumption after my mortgage is paid off and housing expenditure drop. I would of thought it would hold consumption constant - is there a rationale for this adjustment in consumption?
Again, probably, but without looking in detail at your specific case we can't tell. If you want us to analyze your case, send us email to eval(unescape('%64%6f%63%75%6d%65%6e%74%2e%77%72%69%74%65%28%27%3c%61%20%68%72%65%66%3d%22%6d%61%69%6c%74%6f%3a%69%6e%66%6f%40%65%73%70%6c%61%6e%6e%65%72%2e%63%6f%6d%22%3e%69%6e%66%6f%40%65%73%70%6c%61%6e%6e%65%72%2e%63%6f%6d%3c%2f%61%3e%27%29%3b')), with your database attached, describing your problem in detail and well toss it into our queue for examination. It's possible its a bug, but usually these sorts of things are a non-intuitive consequence of the actual smoothing against your specific inputs.
Best,
Dick Munroe
Hi, Dick gave you the wrong answer on this if, by consumption, you just mean consumption and not total spending. Total spending includes Medicare premiums. Consumption does not. If you told the program to cut your living standard starting at late in life and set the standard of living index to decline from 100 to 85, the program should reduce your consumption.
Please call me at 617 834-2148 so I can sort out if we have a bug or if you really mean total spending or if this has to do with borrowing constraints.
The increase in consumption spending when you pay off your mortgage that you report is certainly due to your getting out form under being borrowing constrained.
best, Larry
I've seen this sometimes and the explanation is that it's simply impossible to drop your standard of living after some point. In other words, the program is going to spend all of your assets and use up your retirement accounts unless you specify an estate. Actually there are a number of ways to leave money. Anyway, the point is, it could be that you simply can't lower your standard of living after a certain point (at least not for the remainder of your life) given the sources of income etc. that you have. You can verify this by lowering your standard of living in just one or two years (try different numbers of years) and watch the program do that. It will push the extra consumption dollars to the remaining years. This will assure you that lowering living standard is working. But if you try to lower it the rest of your life, it's not going to push that money back to your earlier years (I don't think).
You could try just leaving a special expenditure in some amount your last year. You could also create a reserve fund amount for the next to last year of your life. You could also leave a bequest in estate. All those things will lower your standard of living.