Retirement: fantasy vs reality

[Roderick_Femm]

@jaycat

The same thing has happened to me. I have lots of projects on the back burner, but mostly I sit around looking out the window, feeling lazy, at least so far after 1 year of retirement.

I dunno, maybe after 45 years of work, it’s ok to be lazy for a while…

Same for me, but I fear it too. It’s too easy to slip into the lazy habit when there’s always tomorrow. Then the days slip away and your time is gone. Active people seem both to live longer and to be happier, so I feel like I have to make an effort to be more active. The saving grace is there’s so little on TV that I want to watch. On the other hand, there are thousands of books published every year. Not to mention online time vacuums, like this place.

[Voyager]

@LSLGuy

ETA: @Voyager

I agree “constant expenses over time” is bogus. But it gets complex quickly.

First off are we talking constant-constant or inflation-constant? If we assume 3% inflation we need to receive 3% more next year to have the same effective purchasing power. All the historical records about market returns are using dollars that have been inflating. So if you use “7% historical market return” but don’t use “3% historical inflation”, you’re comparing apples to pizza and are gonna get burned.

The analysis my financial planner did for us had inflation figured in, or course. It was a Monte Carlo simulation, and so covered lots of inflation and investment return possibilities. That is the only kind of analysis I’d even come close to trusting. And it gives probabilities that you will have a certain amount of money at a certain year in the future.
I don’t know if the retirement needs calculators take inflation into account or not - I suspect they do, because their purpose is to scare you so you’ll invest more with them.

For folks near the bottom, after retirement they’ll have a modest budget for fun above their idea of necessities. As their interest in money-spending naturally and appropriately wanes with age, that modest amount is all they can reduce painlessly. Any relatively small increase in medical costs can eat all of that and more. Which puts them over a barrel. “Pills or food this week?” is a common problem in the US.

For folks way up the food chain, they’ve got a large budget for fun above their larger idea of necessities and as their interest in that fun naturally wanes with age the odds are much higher that the incremental medical costs won’t grow that much faster than the rate they free up cash flow from now abandoned fun. In fact it may be more slowly. So net net the rest of their lifestyle can remain unaffected or nearly so. If things do get too expensive they have a lot of room to downsize & regroup to restore balance.

By near the bottom you mean most people, right? At age 56 - 61 the median retirement savings was $17,000.
Worrying about expenses growing or shrinking over time is a luxury for those of us with a lot more than that.
The overall implication is that if I was to plot inflation-corrected costs over the span of a retirement I’d have the curve sloping upwards ever more steeply for working class retirees and sloping level to downwards for doctor/lawyer class retirees. With maybe a hockey stick upwards at the end for both. Followed shortly by a funeral.

Then there’s the real shocker:

I ran some long duration projections based on recent medical cost inflation. It’s simply impossible for anyone in their working years to earn, save, and invest well enough to keep up with 12%/15%/20% medical cost inflation for another 50 years. It simply can’t be done. Even if they sell the boat and the McMansion and move into a 1995 Camry tomorrow.

Therefore we know something will give before then. Whether cost inflation slows, everybody does without, or something else instead is a very open question. But it’s an example of a trend that economic physics demands will come to an end.

The way Medicare is structured now, the government might be forced to do something reasonable about health care when the disaster you describe happens. For those under 65 they can pretend that people can find reasonable insurance, but with Medicare they are stuck with a lot of the bill.
But I may be overoptimistic.