How much money are you going to pay out in order to provide for yourself, your family, and your friends? You don’t want to be a deadbeat. (all below numbers relative to the 48 states in 2020)
- Your housing bills, basic food, etc.
- The medical expenses that you must pay, for yourself, your family, and dear friends
- The long-term care expenses that come out of that
- Education expenses in certain instances, since you try to avoid getting deeper in the hole
The basic living expenses can be budgeted and to a certain extent controlled. You can talk about $20K of medical insurance for you and your family, per year, with the living expenses above that. This varies by region, but say $20K all-in. Every 5 years, you are on the hook for another $200K. 15 years out from retirement, $600K.
However, the medical costs above the base are unpredictable. $50K? $150K? $500K? Then the follow-on of long-term care and support, which requires you to predict your own and your family’s lifespan, which could be anywhere from $24K to $116K a year per person depending on how bad you get it, and whether you choose to account for family and friends taking care of you. Good luck.
There is a macro concept: if we truly are accounting for family and friends, then we should be able to employ statistics to derive an average value; that is, we should expect to incur these medical and care expenses. From a planning perspective that is helpful: we know we are going to have hundreds of thousands of dollars above the base, leave our pockets.
All that assumes you actually can continue to work, and/or your family will generate enough income. If you incur these medical expenses, that is not likely. Hence, you have no clear idea of whether you even have future earnings potential once you and your possible dependents near 50 years of age.
So with regards to the family unit, we know we are in for $1M in expenses over 20-30 years that have to come from somewhere, on an income that as we age becomes less certain. Stack on top of that job loss and transition from macroeconomic and industry factors, as well as issues of “with whom do I live and where is their job” that depreciates social networking value.
Other unplanned expense and disrupter: divorce, and other family breakup issues.
Another wildcard: college and retraining costs. You know you are in for the long-haul, so now you have to pay if it seems like it can make sense.
You see where this accounting leads: with no certainty, no secure pensions or mostly covered medical care, and a pile of known expenses starting at $1M, you have to save a huge amount of money: an amount of money that isn’t so much different from independent wealth (used to be $5M in the era of low interest rates and inflation, but especially with the huge run up in housing prices, now it’s more like $10M to have a choice about where you want to live).
If by contrast you have a universal basic income, old-age pensions, and some level of certainty around medical and care costs, then you can talk about knowing what you are going to owe.
You could choose to play charity arbitrage, and give money to worthier causes, then have your fellow taxpayer bail you out to some degree, hence effectively redirecting general taxation to your charity cause. That only works if you know the mostly unknowable – that your specific condition will get treated at the hospital, and that it won’t render you crippled. The former is knowable to some extent, but the latter is not. Since martyrdom is undesirable during the feasibly-achievable good years of one’s life, I don’t think this would not be a correct decision.