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  #71  
Old 05-22-2018, 01:35 PM
Gene Yuss Gene Yuss is offline
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Originally Posted by Klaymen View Post

Your apartment is now worth 14x what you paid for it? Dang.
Yes, for a few reasons:

1. Because this city has seen near constant year over year real estate price increases over that time period. Even the 2008-2010 bust was not much of a correction if at all.

2. Because my neighborhood is highly sought after due to its location and due to the draw of a relatively new waterfront park

3. Because the combination of our 2BR and 1BR apartments created a 3-4 BR, 2 bathroom apt which is worth more than the sum of its parts

4. Because we got very lucky with the timing back in 1996. It was a buyers market then and on top of that, the place needed a lot of work which might have scared away other potential buyers. In fact, we paid about 3.5 times more for our 1BR in 2005 than what we paid for the 2BR in 1996. And 1BR's are going for more than twice the price now than what we paid in 2005.
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  #72  
Old 05-25-2018, 01:00 AM
independent independent is offline
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Originally Posted by Lusus Naturae View Post
I prefer a keep-it-simple approach, and pull out expected inflation from income, expenses, investment returns, etc.
+1
The numbers make more sense if they are in today's dollars.
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  #73  
Old 05-25-2018, 09:02 AM
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Originally Posted by independent View Post
+1
The numbers make more sense if they are in today's dollars.
You lose some of the tax complexity in such a model (i.e. you're going to get taxed at nominal, not real rates on most non sheltered investment income).
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  #74  
Old 05-26-2018, 01:52 PM
Don Quijote Don Quijote is offline
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My model splits accumulation period from draw-down period.

Some of the assumptions:
Interest rates: current 10 yr T-bill, stochastic walk to the future. I have a 1% floor, which started to feel aggressive a few years ago.
Inflation: 50 bps below the Interest Rate
Medical Inflation 300 bps above the Interest Rate
Equity: stochastic
Mix of Equity / Bonds - current mix (I can put in a future shift, but usually leave it constant)
Mortality: RP-2014, with a slightly more conservative projection.
10,000 scenarios.

I don't care about salary - I input current annual savings in dollars (could have an increment here, but like the above, I leave it constant).

Expenses in retirement assumed to be equal to today's expenses, which is a little conservative, I think, growing with inflation, plus medical premiums and OOP expenses, which are assumed to grow with medical inflation. For fun, I have a transition table for diagnosis of significant medical issues, which spikes the medical cost and mortality table for a period of years following diagnosis. As someone else mentioned, I use ACA premiums for the pre-65 period, then the medicare premiums and medicare supp market premiums post 65.

Taxes at my current Fed+State tax rate, which I hope is conservative. Taxable savings are separated from already taxed savings.

Social security modeled, with the assumption that it is taxable.

Output: A distribution of accumulated savings by age, plus a curve of savings needed by age to be X% confident that I don't need to cut spending after retirement.

Pick a confidence level and you can determine a target retirement age. Looking at it today - 60% confidence that I could retire at 55, 90% confidence at 58.

I know that is an unnecessary level of analysis, and implies a precision which is meaningless for a single individual. Actuaries gonna actuary, I guess.

(other outputs - is the life insurance I have today enough for my spouse if I die still working? Am I likely to be better off with a J&S annuity in retirement, a single life annuity, or just draw-down? Oh, yeah, my current net worth falls out as well.)
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  #75  
Old 05-30-2018, 03:01 PM
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Lusus Naturae Lusus Naturae is offline
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Originally Posted by fdsafdsa View Post
You lose some of the tax complexity in such a model (i.e. you're going to get taxed at nominal, not real rates on most non sheltered investment income).
I have no non-tax-sheltered investment income and intend to have none, so that makes things easier. All of my forecasts are net income.
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  #76  
Old 05-30-2018, 04:59 PM
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Originally Posted by Lusus Naturae View Post
I have no non-tax-sheltered investment income and intend to have none, so that makes things easier. All of my forecasts are net income.
Wow, wish I could shelter that much. Deferring capital gains and getting reduced taxes for dividends and capital gains on own currency stock are both big for me.
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  #77  
Old 05-31-2018, 05:03 PM
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fdsafdsa fdsafdsa is offline
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Originally Posted by Colonel Smoothie View Post
I model those trends with general factor model or AR(2) autoregressive process. That way I can incorporate projection risk into my estimates.
I think this was meant as a joke, but I did just build a quasi-stochastic model based on historical returns to get a sense check on my result. An interesting experiment, particularly in building an efficient frontier by asset class based on probability of failure.

Still not willing to use any of it to pull the trigger on that decision though, at least, not, yet.
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