Inflation is a problem and guessing what it will be is impossible. For an overall rate I use 4%. I think the 3% we see a lot is a little low and I hope the 4% is a little high. But then I use 8% for medical costs. I think this is close to what history shows. Look at the increases for the medicare premium since it started. Then for utilities I use 6%. No basis for this other than feeling as we go green these costs will go up faster that historic inflation. The going green will also put pressure on the 4% number. I also used 2% for SS increases. Probably too low but the current inflation formula understates a seniors true costs. I also use a 5.6% return on investment. Might be low but just look at the last 10 years and current interest rates. The spread between the inflation rate and the return is the key number. Being conservative I am hoping the spread I have is too low so my actual results will be a lot better.
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