Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Spending as retirement progresses.
Old 01-21-2012, 08:35 AM   #1
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 3,167
Spending as retirement progresses.

Has there been any research to determine how the personal level of inflation in retirement is related to inflation in the general economy and how it evolves with age? I use a flat 3% inflation level for my model, but I imagine that the actual inflation in my spending will be less than that of the general economy as I get older.
__________________

__________________
OCCUPY ER

<=>

"The needs of the many outweigh the needs of the few, or the one." - Spock
nun is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-21-2012, 09:00 AM   #2
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,855
Quote:
Originally Posted by nun View Post
...I imagine that the actual inflation in my spending will be less than that of the general economy as I get older.
It could, or could not be. It all depends on the categories of what you spend your retirement dollars.

I've been retired just under five years (and yes, I love it!). However, my PROI (Personal Rate of Inflation) has been under what has been declared by the government in such items as SS (which I don't get at the current time), VA disability income (which I do get).

It's not only what is the "published rate of infation", reference:
http://www.inflationdata.com/inflati...Inflation.aspx
but also how you spend your money IRL (in real life).

I'm just giving you a response, based upon my actual retirement situation. If you wish (for planning purposes) consider that you will spend less, so be it. OTOH, I've always "planned for the worst, and hoped for the best"; therefore I used pre-retirement current inflation rates in my planning.

Just my $.02.
__________________

__________________
rescueme is offline   Reply With Quote
Old 01-21-2012, 09:03 AM   #3
Thinks s/he gets paid by the post
Mulligan's Avatar
 
Join Date: May 2009
Posts: 3,589
Quote:
Originally Posted by nun
Has there been any research to determine how the personal level of inflation in retirement is related to inflation in the general economy and how it evolves with age? I use a flat 3% inflation level for my model, but I imagine that the actual inflation in my spending will be less than that of the general economy as I get older.
That is a very interesting question with both short term and long term variables, and I believe depending on each persons unique reference point would ultimately determine the reponse. For example, I believe that energy and health costs have been the driving costs of recent inflation. If that continued and you had major expenses in those two areas inflation rate could actually be higher. If you dont then it could be lower. For me, in the short term, my inflation rate has been lower than 3%, but like you when I do long term planning that is the number I have used. It seems based on my frequent readings of posts here that members in the past threads have mentioned that their costs have been lower than inflation rate ( not counting HI). Whether that is because they become better at controlling costs because they have time to research things, I do not know. I do know that I have controlled costs by being more efficient, without "suffering". I know I have kind of blended "expenses" with "inflation", but I imagine many others do also to avoid the true inflation rate.
__________________
Mulligan is online now   Reply With Quote
Old 01-21-2012, 09:29 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 10,396
Let's all use the same terms. How I see it:

Inflation refers to the cost of stuff, and is independent of how much one spends. Personal inflation refers to the cost of stuff that YOU buy. You may talk about inflation in your spending, but that is neither inflation nor personal inflation.
__________________
Al
TromboneAl is online now   Reply With Quote
Old 01-21-2012, 09:44 AM   #5
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 2,254
In my retirement budget spreadsheet, I separated medical expenses from everything else so I could assign a single (higher) inflation rate for the former than for the latter.

That being said, my non-medical expenses saw a spike in 2010 because I had a large, unexpected cap gains distribution from a bond fund and that spiked my income taxes owed. Kinda mucked up things in my spreadsheet temporarily.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is online now   Reply With Quote
Old 01-21-2012, 09:53 AM   #6
Recycles dryer sheets
 
Join Date: Aug 2011
Location: aberdeen
Posts: 190
Inflation affects you only when you absolutely have to buy or spend on something. Certainly the cost of food, medicine, and health care will inflate in time.
I think you can beat inflation by buying stuff you only absolutely need that are on discount and out of season like clothes.
Obviously if you have kids in college, that's a big inflation there. Or if you're fond of trading cars often.

The challenge for retirees is to find out how to spend their time and have
fun with minimum of consumption. Obviously, there will still be some coincidental expenses, but if they focus on doing things rather than buying stuff, inflation should not be that much of a problem.
__________________
Birchwood is offline   Reply With Quote
Old 01-21-2012, 09:56 AM   #7
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 28,004
For me, unusual and irregular expenses of the type that we all have and budget for have created a much greater disparity in my total annual expenses from year to year than has inflation. So, this has masked inflation. This is my third year of retirement, and I would expect that the effects of inflation will seem much more apparent after 10 or 20 years.
__________________
“Knowing others is intelligence; knowing yourself is true wisdom. Mastering others is strength; mastering yourself is true power. If you realize that you have enough, you are truly rich.”
- - Lao-tzu
W2R is online now   Reply With Quote
Old 01-21-2012, 10:05 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 2,254
Quote:
Originally Posted by W2R View Post
For me, unusual and irregular expenses of the type that we all have and budget for have created a much greater disparity in my total annual expenses from year to year than has inflation. So, this has masked inflation. This is my third year of retirement, and I would expect that the effects of inflation will seem much more apparent after 10 or 20 years.
Besides what I posted about income tax spikes resulting from income spikes (not that that type of expense increase is bad, of course!), I agree with you. For example, in just the first week of 2012, I have charged more on my credit card than I did in all of 2011! I bought a new PC to replace my ailing, 10-year-old one and the $400 I spent on it was more than I spent on my CC in all of 2011, a year in which I had nearly zero unusual or irregular expenses (and the not totally unwelcome cap gains spike I had in 2010 was far smaller in 2011).
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is online now   Reply With Quote
Old 01-21-2012, 10:10 AM   #9
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,855
Quote:
Originally Posted by scrabbler1 View Post
In my retirement budget spreadsheet, I separated medical expenses from everything else so I could assign a single (higher) inflation rate for the former than for the latter.
That's logical, and follows the forcast informaton provided by Fidelity's RIP (Retirement Income Planning) software, which increases the category of medical expenses (assuming you use the full retirement expense module) by 7% vs. whatever the current "inferred" rate (about 2.3%, if I remember correctly) for across-the-board expenses.

As for my personal opinion (even though it counts for nothing ), you are proper in planning in this manner....
__________________
rescueme is offline   Reply With Quote
Old 01-21-2012, 10:25 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 10,671
For the first few years of ER, I would expect people to go crazy with buying toys like RV, spending on travel, or even if one is the homebody type, spending on home improvements, etc... Usually, the typical ER'ee is the 'deferred gratification' type, and if retirement is not the time to self-gratify, then when?

I suspect it may take 5 years or longer until one settles down to a routine.

Quote:
Originally Posted by W2R View Post
For me, unusual and irregular expenses of the type that we all have and budget for have created a much greater disparity in my total annual expenses from year to year than has inflation. So, this has masked inflation. This is my third year of retirement, and I would expect that the effects of inflation will seem much more apparent after 10 or 20 years.
The wild variation in annual spending as reported by various posters in this thread was exactly what I expected.

As for myself, by using training wheels (ESR) before I stop working completely, I have time and money to get myself the toys (2nd home and RV), get the kids out of college, and watch my expenses for a few years to see how it is going to work. Oh, and work can be fun too (and profitable at the same time).
__________________
Capital gain + Dividend - Inflation > WR, result happiness.
Capital gain + Dividend - Inflation < WR, result shrinking principal.
NW-Bound is offline   Reply With Quote
Old 01-21-2012, 10:26 AM   #11
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Just chillin' down by the river
Posts: 14,372
Quote:
Originally Posted by nun View Post
Has there been any research to determine how the personal level of inflation in retirement is related to inflation in the general economy and how it evolves with age? I use a flat 3% inflation level for my model, but I imagine that the actual inflation in my spending will be less than that of the general economy as I get older.
I haven't seen anything specific to inflation and age group, but the BLS has lots of data and papers and makes for interesting browsing. The consumer expenditures survey looks at income and spending by age group, and if you track historical data you may find something. BLS here Overview of BLS Statistics on Inflation and Prices
__________________
So far so good
MichaelB is offline   Reply With Quote
Old 01-21-2012, 10:33 AM   #12
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 2,254
Quote:
Originally Posted by rescueme View Post
That's logical, and follows the forcast informaton provided by Fidelity's RIP (Retirement Income Planning) software, which increases the category of medical expenses (assuming you use the full retirement expense module) by 7% vs. whatever the current "inferred" rate (about 2.3%, if I remember correctly) for across-the-board expenses.

As for my personal opinion (even though it counts for nothing ), you are proper in planning in this manner....
Being a Fido client, that is probably where I got the idea to create two expense columns in my spreadsheet. I recall being exposed to Fido's RIP in late 2007 or early 2008 which was when I was developing my ER budget and the main spreadsheet. I also recall not having the twin expense columns originally but do not remember then I made that helpful switch. I included other elements of the Fido RIP program into my main spreadsheet at that time which greatly helped me plan my ER in late 2008 and gave me the confidence I was working out the numbers well.

I do appreciate your affirmation.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is online now   Reply With Quote
Old 01-21-2012, 10:37 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 8,727
Evidently the BLS actually (back) calculated a CPI-E (Elderly) from 1982-2007, here's a link with more info http://www.bls.gov/opub/mlr/2008/04/art2full.pdf for those who haven't already made up their minds. FWIW
__________________
“We all know what to do, we just don’t know how to get re-elected after we’ve done it.” [When talking about economic reforms] Jean-Claude Juncker
Retired Jun 2011 at age 57
Target AA: 55% equity funds / 40% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 01-21-2012, 10:58 AM   #14
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Just chillin' down by the river
Posts: 14,372
Quote:
Originally Posted by Midpack View Post
Evidently the BLS actually (back) calculated a CPI-E (Elderly) from 1982-2007, here's a link with more info http://www.bls.gov/opub/mlr/2008/04/art2full.pdf for those who haven't already made up their minds. FWIW
That is an interesting link and seems to address the original post, at least in part. Thanks! The summary
Quote:
Over the 25 years from December 1982 to December 2007, the experimental consumer price index for Americans 62 years of age and older (CPI-E) rose somewhat faster than the CPI-U and the CPI-W, mainly because prices for medical care and shelter, which are weighted more heavily in the CPI-E, increased more rapidly than overall inflation during the period
CPI-W is 3%, CPI-U is 3.1% and their estimated CPI-E (elderly) is 3.3% over the period 1982 through 2007. A hefty difference and something to keep in mind.
__________________
So far so good
MichaelB is offline   Reply With Quote
Old 01-21-2012, 11:06 AM   #15
Moderator
M Paquette's Avatar
 
Join Date: Oct 2007
Posts: 2,842
Quote:
Originally Posted by Midpack
Evidently the BLS actually (back) calculated a CPI-E (Elderly) from 1982-2007, here's a link with more info http://www.bls.gov/opub/mlr/2008/04/art2full.pdf for those who haven't already made up their minds. FWIW
Interesting article. They attribute much of the difference to the elderly spending a higher portion of available income on health care (no surprise), and heating oil (huh! Less tolerant of cold, perhaps?).
__________________
"Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor." - Dr. Zoidberg
M Paquette is online now   Reply With Quote
Old 01-21-2012, 11:20 AM   #16
Thinks s/he gets paid by the post
Mulligan's Avatar
 
Join Date: May 2009
Posts: 3,589
Quote:
Originally Posted by M Paquette

Interesting article. They attribute much of the difference to the elderly spending a higher portion of available income on health care (no surprise), and heating oil (huh! Less tolerant of cold, perhaps?).
I believe that. 10 years ago when I would visit my dad in the winter, I would always wear a sweatshirt. Now that he is 75, I feel like I need to change into my swim wear when I get there. He definitely is less tolerant of the cold, now.
__________________
Mulligan is online now   Reply With Quote
Old 01-21-2012, 11:24 AM   #17
Thinks s/he gets paid by the post
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 3,139
I expect travel will be a big part of my personal inflation after I retire. I figure I am at my healthiest for the next 10 years, then we will see. I may be decrepit or I may be like my 80 year old neighbor who, seeing the downed tree branches, is out chain sawing firewood in the snow.
__________________
The worst decisions are usually made in times of anger and impatience.

A retired guy of small but independent means.
Chuckanut is online now   Reply With Quote
Old 01-21-2012, 11:27 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 20,203
Quote:
Originally Posted by M Paquette View Post
Interesting article. They attribute much of the difference to the elderly spending a higher portion of available income on health care (no surprise), and heating oil (huh! Less tolerant of cold, perhaps?).
Home all day.

Ha
__________________
Insanity in individuals is something rare-but in groups, parties, nations and epochs, it is the rule-Friederich Nietzsche
haha is online now   Reply With Quote
Old 01-21-2012, 11:30 AM   #19
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,855
Quote:
Originally Posted by Chuckanut View Post
I expect travel will be a big part of my personal inflation after I retire.
Why isn't it now?

Just asing, since our biggest expense - both before and after retirement, is travel and it hasen't increased our PROI ioata.

Don't regret not being able to go places (due to health or other extremes) by waiting for retirement.

In our case, travel expenses have not increased at all, since they have been always part of our expenses.

Just our POV.
__________________
rescueme is offline   Reply With Quote
Old 01-21-2012, 11:32 AM   #20
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 13,437
You could also dig around on the AARP site for research they might have done or that they highlight from other sources (not saying it will be objectively presented).
__________________

__________________
In saying what is obvious, never choose cunning. Yelling works better. --Cynthia Ozick
Bestwifeever is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Are You Saving Too Much for Retirement? cscott711 FIRE and Money 22 01-09-2012 07:49 AM
Middle-Income Boomers Expect Tough Retirement mickeyd FIRE and Money 27 07-27-2011 07:44 AM
GAO Report on Retirement Income Purron FIRE and Money 5 07-17-2011 02:27 PM
Mid 40's looking for soft retirement in 8yrs, 9 months and 23 days sspribyl Hi, I am... 0 07-17-2011 12:34 PM

 

 
All times are GMT -6. The time now is 08:34 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2014, vBulletin Solutions, Inc.

Early Retirement News right to your Email!

Stay up-to-date with all the latest news to your inbox!

unsusbcribe at anytime with one click

Close [X]