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Money Smarts
Chapter 15 Money Smarts: Retirement Living Expenses
As you plan your retirement, consider how
much money you will need to live comfortably. You will not
be able to predict the exact amount. However, you can estimate
what your basic needs will be. Don’t forget to take
inflation into account when estimating your expenses.
Go to the BusinessWeek Online
Personal
Finance Planning calculators. Under Retirement Calculators,
click on “How will retirement affect my expenses?”
Input the following values:
| Monthly costs
that may be reduced at retirement |
|
| |
Current |
Estimated |
| Housing |
$2,000 |
$1,500 |
| Life insurance |
$ 60 |
$ 40 |
| Transportation |
$ 300 |
$ 150 |
| Clothing |
$ 200 |
$ 100 |
| Debt payments |
$ 350 |
$ 100 |
| Education |
$ 400 |
$ 0 |
| Other |
$ 500 |
$ 300 |
| Monthly costs
that may increase at retirement |
|
| |
Current
|
Estimated |
| Medical |
$ 60 |
$ 250 |
| Food |
$ 200 |
$ 250 |
| Recreation |
$ 60 |
$ 150 |
| Property insurance |
$ 30 |
$ 30 |
| |
|
|
| Years until you retire |
|
30 |
| Inflation rate |
|
3.5% |
Click on the “get your results”
button and answer the following questions.
- In today’s dollars, what is the amount of your estimated
monthly expenses in retirement?
- What is the amount of your estimated monthly retirement
expenses adjusted for inflation?
- Click on the INPUTS tab and change the inflation rate
to 4.5 percent. What is the amount of your monthly retirement
expenses adjusted for inflation?
- What is the monthly amount of expenses adjusted for an
inflation rate of 5 percent?
- What can you do to counteract the effects of inflation?
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