Annual maintenance and condo fees--no inflation adjustment?
The property tax and homeowner's insurance numbers that I enter on the "Primary Home" tab appear to be adjusted yearly for inflation on the "Housing" page of the final report.
By contrast, the "Annual Maintenance and Condo Fees" number is held steady on the report for the duration of home ownership (no matter how long that may be).
Maybe I've misunderstood the purpose of that parameter, but it seems to me that the unstated lack of inflation adjustment for one parameter out of three could be quite misleading for the unwary user. In other words, I fear that treating "Maint and Condo Fees" as nominal dollars in a context where other expenses are adjusted for inflation could leave users with a hard-to-detect underestimate of long-term aggregate expenses. For example, annual fees of $13,000 today would run about $23,000 after 20 years of 3% inflation but the existence of the resulting shortfall might not be obvious to a user viewing summary numbers on a report.
If I've understood the situation properly I hope you'll consider inflating that parameter automatically as you do others of a similar nature--I think it would be a safer default from the point of view of most users. If I'm just confused, though, you have my apologies ;-)
Mon, 12/07/2015 - 00:01
Hmmm. A couple of
Hmmm. A couple of experiments exploring this issue lead me to a new hypothesis.
Experiment 1: I set "Maint and condo fees" to $5000. For the purposes of discussion, let's say that the resulting report told me that my discretionary spending could be $10,000 per year.
Experiment 2: I zeroed out "Maint and condo fees" and created a new special expenditure called "Mike's Expense", setting it at $5000 and choosing "Today's dollars". The report showed a discretionary spending number within just a few dollars of the $10,000 I saw in the report from Experiment 1. I inspected the report to verify that the initial "Mike's Expense" was inflated properly as I expected.
This all suggests to me that ESPlanner's internal calculations involving "Maintenance and Condo Fees" must, in fact, be using properly inflated numbers as time passes, just as it is for homeowner's insurance and property taxes. The difference is that the latter two expenditures are shown in inflated form on the Housing page of the report while "Maintenance and Condo Fees" isn't.
Does this make sense or am I missing something crucial?
Mon, 12/07/2015 - 09:59
Yes, I believe what you are
Yes, I believe what you are seeing is this:
Property taxes and insurance are assumed to go up with the "real appreciation rate" of the home and maint/condo do not--those simply track with the presumed inflation.
Thus, if you set the "Annual real appreciation" rate of the home as 1% you will see taxes and insurance rise faster than inflation, 1% more than say your assumed 3% inflation rate. But maint/condo will simply track with inflation at 3% and not be subject to the extra 1%
Remember, since these are today's dollars, getting a mere inflation adjustment means the numbers stay the same all the way down the column. But if you adjust the home value to go up at anything greater than 0% real, you'll see the numbers get larger each year--except the maint/condo which is always simply going to track with inflation. You could move maint/condo over to special expenditures and run it up differently if you wanted.
Mon, 12/07/2015 - 19:45
Thanks a lot, Dan--you're
Thanks a lot, Dan--you're exactly right.
When I saw prop tax and insurance increasing I hastily assumed that the cause must be general inflation and then leapt to the conclusion that maintenance should be increasing in a similar way. I really should have known better, having seen that ESPlanner's reporting generally presents things in terms of today's dollars elsewhere. Too many hours in front of the keyboard yesterday probably scrambled my brain.
Thanks to all the ESPlanner folks for being surprisingly thorough and consistent.