Disclaimer: Still in the learning stage.
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Let's start off with the CPI... The Consumer Price Index.
Now we all know what that means, don't we? ... Or maybe not!
My IBonds use the CPI to adjust my interest rates.
My Social Security increases are based on the CPI.
So if the CPI goes up X%... I get the same increase both ways, right?
Sorry... this is where the discussion begins.
Here's a first example:
IBond interest adjustments are based on CPU-U For March 2014
minus.2 Percent (minus food and energy costs)
Social Security adjustments are based on Core Inflation... For March 2014
plus 1.7 percent.
Now that's just the beginning... The Bureau of Labor Statistics develops many charts, based on different means of calculation... All apparently developed for specific reasons, for industry, government, and for other specific needs are used by different government departments.
In addition, there are many other ways of interpreting inflation... One of the most well known is Shadow Government Statistics... a "pay" site that purports to present the "real story"... Who knows?
Now... here's where the fun part begins...
Inflation Calculator: Bureau of Labor Statistics
In my case, with nearly 25 years of retirement under my belt, I look back to see what my pay was in 1989, when I retired... $50K... would be the equivalent of about $95K/yr. today.
Hey... suggest you bookmark that site... comes in handy for all sorts of reasons.
Now... here's another website that offers a "FREE" calculator that measures ACTUAL inflation... a whole 'nother story...Measuring Worth - purchasing power of dollar.
This site gives numbers are based on different factors, from standard of living to "economic power"... In my case, that $50K would have an inflated rate of from $83K to $148K.
To understand these numbers, do your own calculation, and read down the page of results, for a better explanation.
So this may not affect anything in that you do in the future... but, going back to the difference between Social Security Inflation and I Bond Inflation...March 2014:
Do a net present value calculation over a 20 year period, and see what happens to $100K.... when you use minus .2 percent and plus 1.7 percent.
See what happens.
Que Sera, Sera...
.........................................................
Let's start off with the CPI... The Consumer Price Index.
Now we all know what that means, don't we? ... Or maybe not!
My IBonds use the CPI to adjust my interest rates.
My Social Security increases are based on the CPI.
So if the CPI goes up X%... I get the same increase both ways, right?
Sorry... this is where the discussion begins.
Here's a first example:
IBond interest adjustments are based on CPU-U For March 2014
minus.2 Percent (minus food and energy costs)
Social Security adjustments are based on Core Inflation... For March 2014
plus 1.7 percent.
Now that's just the beginning... The Bureau of Labor Statistics develops many charts, based on different means of calculation... All apparently developed for specific reasons, for industry, government, and for other specific needs are used by different government departments.
In addition, there are many other ways of interpreting inflation... One of the most well known is Shadow Government Statistics... a "pay" site that purports to present the "real story"... Who knows?
Now... here's where the fun part begins...
Inflation Calculator: Bureau of Labor Statistics
In my case, with nearly 25 years of retirement under my belt, I look back to see what my pay was in 1989, when I retired... $50K... would be the equivalent of about $95K/yr. today.
Hey... suggest you bookmark that site... comes in handy for all sorts of reasons.
Now... here's another website that offers a "FREE" calculator that measures ACTUAL inflation... a whole 'nother story...Measuring Worth - purchasing power of dollar.
This site gives numbers are based on different factors, from standard of living to "economic power"... In my case, that $50K would have an inflated rate of from $83K to $148K.
To understand these numbers, do your own calculation, and read down the page of results, for a better explanation.
So this may not affect anything in that you do in the future... but, going back to the difference between Social Security Inflation and I Bond Inflation...March 2014:
Do a net present value calculation over a 20 year period, and see what happens to $100K.... when you use minus .2 percent and plus 1.7 percent.
See what happens.
Que Sera, Sera...
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