Hi Toofuzzy, Given that, in my neck of the woods, inflation over the last 50 years has averaged 3.77% and that as we age medical and other expenses tend to increase, my thinking is that the higher number is better. Also adjusting your budget to meet your real income is a good idea.
My mother's understanding was that the retail investor could only count on real returns of about 2% above inflation after taxes, etc. After all, even if one were in only the 15% bracket, which most of us are not, that plus state taxes would mean at least 20% would be lost to friction in the system. My combined rate is about 35%, not exactly chump change, so the earnings above my current level get whacked more than just a bit.
I don't think it is quite as bad as 2% but expecting a whole lot more and not getting it could put you into a real bind. 50% of all bankruptcies in this country are for medical debt so age and the normal expectation that has proven true, for the most part, that one spend about 80% of all your medical costs in the last 5 years of your life is worth taking into your accounting as to how much you might need.
Best,
Allen
