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What is your "Personal Inflation Rate"?
Old 06-29-2007, 05:31 PM   #1
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What is your "Personal Inflation Rate"?

I had never thought of inflation as being personal before, and of course, it is. What I spend my stash on is probably a lot different than what you do with yours. Thus, our personal inflation rates are different. I find this an interesting and pragmatic concept.

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One of the main financial risks we face in retirement is the topic of this month’s lesson: your unknown and age-specific personal inflation rate.
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But actually, the inflation story gets even more interesting. It seems the U.S. Department of Labor, via its Bureau of Labor Statistics (BLS), has created an entirely new inflation index for the elderly. They called it the CPI-E and it is meant to capture the inflation rate that is unique for Americans age 62 and older.

Why would inflation be different for the elderly? In fact, how does inflation get measured, at all? The answer to these questions comes down to our spending habits. Boiled down to its essence, statisticians measure inflation partially based on how we spend our money.
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Old 06-29-2007, 06:12 PM   #2
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Ha ha ha...

Do a search. I've brought this up before. I've been thoroughly assured that inflation is the same for everyone, everywhere and that there is not only no need to determine ones personal rate of inflation, that its a useless statistic.

Of course, I completely disagree on all counts.
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Old 06-29-2007, 06:15 PM   #3
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Oh heres a nice example of my attempt to constructively approach the topic, which was subsequently blown to hell by a number of people.

Official ER Forum January Inflation Report
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Old 06-29-2007, 09:16 PM   #4
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I've worked hard to lower my personal inflation rate. We own our home. We have no kids. We have good medical coverage from our employer. We a 13 mile commute and we carpool. We shop at the asian market for food.
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Old 06-30-2007, 12:00 AM   #5
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Should we factor in smaller product sizes and lower quality and no customer service?
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Old 06-30-2007, 08:48 AM   #6
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Ah yes, my favorite...invisible inflation. Its gotten so bad on some products and services that I quit using them.
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Old 06-30-2007, 11:15 AM   #7
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I missed that January discussion but ironically I have been going through the same process. We have concluded that our Jones Index for projecting our expenses needs to be 5%. This is based on 4.8 years of retirement. We have done all the substitutions and our base includes them now.

We have also revised our Investment Return Index to 10%. We are still open to discussion on the subject. Each year we compare actuals to plan and then re-establish the new base for our 35 year projection. We have exceeded the plan on our income line every year and only once on the expense line (owing to the effect of those substitutions). Our withdrawal rate is now 3.5%.
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