Comments on: Introducing Retire Worth /blog/introducing-retire-worth/ getting the most out of life one penny at a time ... Tue, 06 Jul 2010 04:01:34 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Steward /blog/introducing-retire-worth/comment-page-1/#comment-3704 Steward Fri, 02 Jan 2009 14:51:03 +0000 /blog/?p=241#comment-3704 Hi davmp, I thought for a while about how to fit inflation into my equation, but haven't really settled on any specific way to handle it just yet. This is partly because I wanted to get a better grip on understanding how simple changes would affect the Retire Worth number (I haven't done algebra or graphing in a long, long time and was quite rusty) and partly because I don't think my expenses will be close to stable over the next 15-20 years. Without stable expenses any talk of inflation seems a little over my head at this moment in time. But if I had to decided today, I would probably find a way to get the average expenses over the 70-80 year "retirement" and use that as the number. Currently, I have no way to do this quickly - but if my memory serves me correctly it would look something like: <blockquote>(MExpenses+MExpenses(1+Inflation)+MExpenses(1+Inflation)(1+Inflation)+...+MExpenses(1+Inflation)^N)/N</blockquote> I can't remember for the life of me how to simplify this or even if one is capable of simplifying it, but that is what I would try to do. Thanks for the comment. Hi davmp,

I thought for a while about how to fit inflation into my equation, but haven’t really settled on any specific way to handle it just yet. This is partly because I wanted to get a better grip on understanding how simple changes would affect the Retire Worth number (I haven’t done algebra or graphing in a long, long time and was quite rusty) and partly because I don’t think my expenses will be close to stable over the next 15-20 years. Without stable expenses any talk of inflation seems a little over my head at this moment in time.

But if I had to decided today, I would probably find a way to get the average expenses over the 70-80 year “retirement” and use that as the number. Currently, I have no way to do this quickly – but if my memory serves me correctly it would look something like:

(MExpenses+MExpenses(1+Inflation)+MExpenses(1+Inflation)(1+Inflation)+…+MExpenses(1+Inflation)^N)/N

I can’t remember for the life of me how to simplify this or even if one is capable of simplifying it, but that is what I would try to do.

Thanks for the comment.

]]> By: davmp /blog/introducing-retire-worth/comment-page-1/#comment-3702 davmp Fri, 02 Jan 2009 05:46:17 +0000 /blog/?p=241#comment-3702 This is an interesting idea. I see that RetireWorth is basically a measure of how many months your non-income-producing assets would last if you had to liquidate them to pay a portion of your monthly expenses, and that you're trying to ensure that they'll last until you reach the ripe old age of 110. But I'm wondering how inflation fits into this. Inflation will matter greatly over the time period between any normal retirement age and when you hit 110. And it will matter even more if you retire early (perhaps 70+ years i that case?) Or were you explicitly leaving it out because of (a) an assumption that your assets (income producing and not) will grow faster than inflation, or (b) the 110 number was chosen as a way to incorporate inflation and you're really only aiming your money to last a fewer number of years? This is an interesting idea. I see that RetireWorth is basically a measure of how many months your non-income-producing assets would last if you had to liquidate them to pay a portion of your monthly expenses, and that you’re trying to ensure that they’ll last until you reach the ripe old age of 110. But I’m wondering how inflation fits into this. Inflation will matter greatly over the time period between any normal retirement age and when you hit 110. And it will matter even more if you retire early (perhaps 70+ years i that case?)

Or were you explicitly leaving it out because of (a) an assumption that your assets (income producing and not) will grow faster than inflation, or (b) the 110 number was chosen as a way to incorporate inflation and you’re really only aiming your money to last a fewer number of years?

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