Join Early Retirement Today
Reply
 
Thread Tools Display Modes
What Inflation Rate for 2009
Old 01-01-2010, 05:46 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 12,880
What Inflation Rate for 2009

Related to plans that increase spending by inflation each year, what inflation rate will you use for 2009?
__________________
Al
TromboneAl 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 01-01-2010, 05:50 PM   #2
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,000
2.5%
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Old 01-01-2010, 05:55 PM   #3
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,391
You could use CPI as an inflation barometer with all of it issues. As you know the official 2009 US CPI will be released on January 15th.

Based on 11 months of data 2009 CPI through November has gone up around 1.8 Percent.
MasterBlaster is offline   Reply With Quote
Old 01-01-2010, 05:56 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Most of the academic research that supports "safe" withdrawal rates assume spending is increased by CPI. So I'd use that number which was 1.8% for the last twelve months.
Gone4Good is offline   Reply With Quote
Old 01-01-2010, 08:27 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Collin County, TX
Posts: 9,293
3%
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Old 01-01-2010, 10:37 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 7,863
My FIRE spreadsheet uses 3%. In reality, I expect my taxes to increase (due to a higher paying job) and the rest of my expenses to be basically flat.

2Cor521
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is online now   Reply With Quote
Old 01-01-2010, 10:48 PM   #7
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 47,468
This year (2010) is my first year. I have decided to withdraw 3.5% and I don't have to increase anything for inflation.

But in the following years, I plan to increase my withdrawal by the CPI. I am not sure which CPI is used (CPI-W? CPI-U?), but I have a while to figure that out.

But will a CPI increase for inflation every year be realistic for me? I am not so sure, for the following two reasons.

1.) My withdrawals will be a spending ceiling for me rather than a spending guideline, and actually I may try not to spend more than my dividends. Even if I increase my withdrawals by the CPI, I may end up lowering my withdrawals each year by the total left unspent at the end of the previous year.

2.) This first year (2010) is going to be NUTTY anyway so I may have to abandon the CPI approach for 2011. In 2010 I am hoping to sell my house, pay for a move north, possibly obtain an apartment temporarily, buy and furnish a house, and get a new car. I have tried to estimate the effect of all of this on my portfolio, if any, but there are two many unknowns to be sure right now.

So, if I complete all of this in 2010 (unlikely, but possible), then maybe I can just start over in computing my SWR for 2011, using the portfolio size one year from now. I don't know if that's "fair" or not, but if not I might have to figure out some other way to adjust.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

Happily retired since 2009, at age 61. Best years of my life by far!
W2R is online now   Reply With Quote
Old 01-02-2010, 06:08 AM   #8
Full time employment: Posting here.
 
Join Date: Mar 2005
Location: Punta Gorda, FL
Posts: 828
I have increased my budget by 3%. If the market tanks I'll tighten up though. I'm flexible.
dm is offline   Reply With Quote
Old 01-02-2010, 08:14 AM   #9
Full time employment: Posting here.
 
Join Date: Mar 2008
Posts: 968
We'll do 2.5% this year. We are not yet retired, but lived comfortably on our expected retirement income for 2008 and 2009. Took no increase in 2009. But are glad we have done the "trial" to be sure we are comfortable. 16 months and counting when we are both out....
bizlady is offline   Reply With Quote
Old 01-02-2010, 08:35 AM   #10
Gone but not forgotten
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 11,447
I do the flat 4% of portfolio but last year I only spent 3% despite several trips , a large amount of gifting , a few big home purchases and buying out Toys r us for my grandson . I really need to get better at this spending thing .
Moemg is offline   Reply With Quote
Old 01-02-2010, 09:32 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 12,880
W2R, that's how I've been doing it for the last three years. Here is a generic version of the simple spreadsheet that I use each year. It calculates my spending allowance for each year, and shows me what my withdrawal rate was based on the plan (that is, increase by inflation every year), or on my net worth.
Attached Files
File Type: xls RetirementSpendingPlanAndRecordGenericVersion.xls (79.5 KB, 39 views)
__________________
Al
TromboneAl is offline   Reply With Quote
Old 01-02-2010, 10:07 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
samclem's Avatar
 
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
Quote:
Originally Posted by W2R View Post
. . . This first year (2010) is going to be NUTTY anyway so I may have to abandon the CPI approach for 2011. In 2010 I am hoping to sell my house, pay for a move north, possibly obtain an apartment temporarily, buy and furnish a house, and get a new car. I have tried to estimate the effect of all of this on my portfolio, if any, but there are two many unknowns to be sure right now.

So, if I complete all of this in 2010 (unlikely, but possible), then maybe I can just start over in computing my SWR for 2011, using the portfolio size one year from now. I don't know if that's "fair" or not, but if not I might have to figure out some other way to adjust.
We've got several big expenses coming up in the next few years (finish the basement, a big hobby expense, a contingency pile of cash in case DD gets her head screwed on straight and goes to school, etc). I just estimated how much they would cost and don't count this amount in my annual withdrawal calcs. That keeps everything simpler, and I've mentally "written off" the money so I don't have any hesitation to spend it for its intended purpose. Maybe you could do the same thing for your moving expenses.
samclem is offline   Reply With Quote
Old 01-02-2010, 10:17 AM   #13
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
I would not increase our spending by any arbitrary inflation rate. Is it true that current rate is actually flat (i.e., -0.4) or the forecast is 1.6%?
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 01-02-2010, 10:23 AM   #14
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
Quote:
Originally Posted by samclem View Post
We've got several big expenses coming up in the next few years (finish the basement, .... .
Come to think of it .. we may have to purchase either a new or hardly used car soon .. that would debunk my earlier post about not increasing spending.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 01-02-2010, 11:03 AM   #15
Thinks s/he gets paid by the post
 
Join Date: Oct 2009
Posts: 1,190
Quote:
Originally Posted by W2R View Post
I don't know if that's "fair" or not, but if not I might have to figure out some other way to adjust.
It may not be "fair", but it is certainly reasonable.

Another approach would be to amortize some of the expenses as incurred on your yearly budget and "pay them off" from an accounting standpoint over time.

In other words, furniture cash expense in 2010 of $10,000. Budget expense in 2010 of $1,000 (assuming a useful life of 10 years). The $1,000 will hit your SWR for ten years (and not the $10,000 in one year).
LARS is offline   Reply With Quote
Old 01-02-2010, 11:50 AM   #16
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 47,468
Quote:
Originally Posted by TromboneAl View Post
W2R, that's how I've been doing it for the last three years. Here is a generic version of the simple spreadsheet that I use each year. It calculates my spending allowance for each year, and shows me what my withdrawal rate was based on the plan (that is, increase by inflation every year), or on my net worth.
Al, thanks for the "peek" at your spreadsheet. I looked at it and that is very similar to what I meant.

Quote:
Originally Posted by samclem View Post
We've got several big expenses coming up in the next few years (finish the basement, a big hobby expense, a contingency pile of cash in case DD gets her head screwed on straight and goes to school, etc). I just estimated how much they would cost and don't count this amount in my annual withdrawal calcs. That keeps everything simpler, and I've mentally "written off" the money so I don't have any hesitation to spend it for its intended purpose. Maybe you could do the same thing for your moving expenses.
Normally I would do that. But with selling and buying a house in this recession, I am shooting at a moving target. Not only that, but I can afford to buy much more house than I need and I have no idea how much I will want to spend.

We have been to open houses up there and I can get a very nice house for quite a bit less than it would cost down here. Probably the difference in housing prices will pay for the closing costs, realtors, moving expenses, 6 months of apartment up there while I look for a house, completely furnishing and decorating the new house, and the new car. Problem solved.

BUT - - location near to Frank's house and businesses would be a big plus for me in choosing a house. If my dream house is right next door to his house, and the price is reasonable for that particular house in that market, then I might buy it even if it was much more expensive than the amount I have been thinking of paying. In that case my profit might not cover any of that.

Quote:
Originally Posted by LARS View Post
It may not be "fair", but it is certainly reasonable.

Another approach would be to amortize some of the expenses as incurred on your yearly budget and "pay them off" from an accounting standpoint over time.

In other words, furniture cash expense in 2010 of $10,000. Budget expense in 2010 of $1,000 (assuming a useful life of 10 years). The $1,000 will hit your SWR for ten years (and not the $10,000 in one year).
That might be a good approach. I had been thinking of doing that in one year, but I don't want to LBYM that much!
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.

Happily retired since 2009, at age 61. Best years of my life by far!
W2R is online now   Reply With Quote
Old 01-02-2010, 02:38 PM   #17
Confused about dryer sheets
DunWrkingSoon's Avatar
 
Join Date: Nov 2009
Location: Northern VA
Posts: 5
I am pretty sure that CSRS uses the CPI-U index, so perhaps FERS is the same? For the CSRS COLA, take the Q4 average (Jul, Aug, Sep) and compare to the previous year. For 2009, it was -1.6%, so no COLA in 2010.

Earlier this year I found the CPI-U index that is published by BLS, probably even from one of the threads here.

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
DunWrkingSoon is offline   Reply With Quote
Old 01-02-2010, 02:45 PM   #18
Confused about dryer sheets
DunWrkingSoon's Avatar
 
Join Date: Nov 2009
Location: Northern VA
Posts: 5
I stand corrected, it is CPI-W, for both CSRS and FERS. Sorry about that.

Guide to Federal Retiree COLAs: What Are They and How Are They Calculated?
DunWrkingSoon is offline   Reply With Quote
Old 01-02-2010, 04:07 PM   #19
Thinks s/he gets paid by the post
 
Join Date: Nov 2005
Location: North of Montana
Posts: 2,768
We're just going to continue what we started when we retired in 2007. We'll spend what we want to and if at year end it exceeds 4% of portfolio, then we'll worry about it. So far 2007 was 1.8% (retired June1), 2008 was ~3% and 2009 looks like ~3.5%. Both included some fairly large gifts to the kids.
__________________
There are two kinds of people in the world: those who can extrapolate conclusions from insufficient data and ..
kumquat is offline   Reply With Quote
Old 01-02-2010, 04:22 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 12,880
Quote:
I would not increase our spending by any arbitrary inflation rate.
The goal is to not spend too much and also to not spend too little. One way to estimate the probability of the success of your plan is to use Firecalc, and that will have meaning only if you increase spending (or your spending upper limit) by an arbitrary inflation rate.
__________________
Al
TromboneAl is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
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
What Inflation Rate Will You Use for 2008? TromboneAl FIRE and Money 39 01-29-2009 06:49 PM
Implied inflation rate in an inflation adjusted SPIA cashflo2u2 FIRE and Money 6 04-30-2008 07:24 PM
What Inflation Rate Will You Use? TromboneAl FIRE and Money 14 01-16-2008 06:41 PM
CPI Rate in Advvanced FireCalc - Inflation Rate al4trade FIRECalc support 7 10-04-2006 12:40 AM

» Quick Links

 
All times are GMT -6. The time now is 10:41 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.