Anyone here concerned about inflation?

[joeea]

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Originally Posted by ShokWaveRider Why is it, people like to focus on the extremes. Be a glass half full person please. I have 10 years of budgets that PROVE that my personal inflation rate is ~1%. That is Fact.

Good for you! I hope you somehow manage to keep your personal inflation at 1% by changing where you eat pizza forever.

But your facts clearly don't translate to everyone else. For many, healthcare costs alone mean that they could not keep their personal inflation rate at 1%, even aside from the fact that the past 10 years have seen below-average real, non-personal inflation rates (about 1.14% over that time period).

And the discussion wasn't really about the low rates everyone has been experiencing for the past 10 years anyway.

Yes, you can mitigate the cost increases of a few things for a while (like pizza), but you will be affected by real inflation - you cannot avoid all of it.

If you managed to keep your personal inflation rate at 1% through the high-inflation periods of the 70s and early 80s, you should write a book. You'd earn enough so that you could get your personal pizzas wherever you choose.

Long term, I continue to believe that we all need to keep an eye on inflation - particularly those retired or on a fixed income. In the long run, it will affect us all.

[ShokWaveRider]

Ha Ha, I have only been tracking it since I retired. honestly, I did not really care when we were both earning a good wage. We were getting 8% on CDs in those days (90's) and our home was paid for.

For the record I do not really even like Pizza LOL, unless my DW makes it and then I just tolerate it for obvious reasons. However, hers is way better than the mass produced rubbish you get at a Pizza store, I do not know what the fuss is about.

FTR, in the last 10 years, our house taxes have gone down, We do not but that many Clothes anymore, Utilities are about the same. Do not use Oil, would never buy a home that does. HC is an issue, but there are ways to keep costs manageable and everyone on Medicare has the same issue. Perhaps I am wrong but I do not count healthcare in my inflation number, perhaps I should.

[kcowan]

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Originally Posted by ShokWaveRider Perhaps I am wrong but I do not count healthcare in my inflation number, perhaps I should.

Wow I would not rely on your budget projections for us. What about dental and pharmacy costs?

[joeea]

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Originally Posted by ShokWaveRider FTR, in the last 10 years, our house taxes have gone down

I'm guessing that is not the norm for most folks.

[ShokWaveRider]

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Originally Posted by kcowan Wow I would not rely on your budget projections for us. What about dental and pharmacy costs?

Keith: Honestly coming right from my budget sheet. Dental costs for 2017 $497 for 2 of us. RX = $19.90 Copays = $930 (I had major Eye Surgery x2) HC Premiums = $751 All these are for 2 of us.

[OldShooter]

Quote:

Originally Posted by ShokWaveRider Why is it, people like to focus on the extremes. Be a glass half full person please. I have 10 years of budgets that PROVE that my personal inflation rate is ~1%. That is Fact.

Good for you! But your post made me think of Taleb's turkey:



If the big one comes, IMO there will not be very many places to hide.

[ShokWaveRider]

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Originally Posted by OldShooter If the big one comes, IMO there will not be very many places to hide.

Yes I agree, BUT, I am basing it in 10 years of PERSONAL HISTORICAL experience. Just because one perhaps has a surprise medical condition after ~40 years of being healthy, the costs are not a true measurement of overall inflation. Because if one did, there would be no accelerated costs. Should one not divide current healthcare cots by those 25 years to get an accurate expenditure. That is why I have difficulty in calculating healthcare inflation. OK for a given year it may be accurate.

Say this year one has $25k bill (I am inventing this) divide that by 30 and it is $833 per year. I think it is hard to measure. At least for me.

If a tree falls on your house and it cost $15k to fix. Should that also be included?

[sengsational]

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Originally Posted by REWahoo And by the time it happens (jumps that high) it will likely be too late to do anything about it.

Seems most comments are on the defensive side. My dad must have gone on the offensive because for decades after the wild inflation of the 70's, I recall him thanking "the 70's" for the 14% coupons he was cashing from the load of bonds he bought during the ferver.

[harley]

Quote:

Originally Posted by ShokWaveRider Why is it, people like to focus on the extremes. Be a glass half full person please. I have 10 years of budgets that PROVE that my personal inflation rate is ~1%. That is Fact.

Of course, that's during a time when the national inflation rate was around 2%. That makes it easy to manage your personal inflation rate. However, when rates are normal (3%) or high, you won't be able to do that, at least not without making major sacrifices (cold, dark, and hungry). Don't let recency bias make your decisions.

[ejman]

Quote:

Originally Posted by ShokWaveRider Why is it, people like to focus on the extremes. Be a glass half full person please. I have 10 years of budgets that PROVE that my personal inflation rate is ~1%. That is Fact.

+1. My experience parallels yours. I've been keeping track of every single expenditure via Quicken and our personal inflation rate is very minimal since ER back at the end of 2002. Our average annual expenditures have remained pretty much level and our standard of living feels about the same i.e. travel about as much, eat out as often, buy pretty much the same things. Note that both of us have been on medicare for a while so health ins costs increases are mitigated.

I don't really know if we subconsciously substitute one thing for another if the price increase of A vs B is substantial but as I mentioned before our standard of living feels about the same.

Looking at individual items, our grocery bill has remained pretty much constant. I just bought a very nice rear wheel drive Husqvarna lawn mower for $380. The recently deceased Yard man (cheaper front wheel drive) was $300 back in 2004. That same model is not available but I see many listed at Walmart of a comparable quality at the same $300 price. Electronics are considerably cheaper now.

Some line items have varied substantially spent $4,647 for gasoline in 2013, $2,335 last year. Electricity was $1,296 in 2003, $3,129 last year.

[OldShooter]

Quote:

Originally Posted by ShokWaveRider Yes I agree, BUT, I am basing it in 10 years of PERSONAL HISTORICAL experience. Just because one perhaps has a surprise medical condition after ~40 years of being healthy, the costs are not a true measurement of overall inflation. Because if one did, there would be no accelerated costs. Should one not divide current healthcare cots by those 25 years to get an accurate expenditure. That is why I have difficulty in calculating healthcare inflation. OK for a given year it may be accurate. Say this year one has $25k bill (I am inventing this) divide that by 30 and it is $833 per year. I think it is hard to measure. At least for me.

I have posted this scenario here before, but I'll do it again just to illustrate what I think is a possible "big one."

The world financial community finally succeeds in knocking the US dollar off its pedestal as the world's reserve currency. Most of the world wants to do this just because they hate us, but also because our status allows our banking system to be used as a tool to beat up people we don't like. Also, many other countries aspire to this status. Finally, our national debt is starting to look like Greece and other spendthrift, deficit-addicted countries. Short term probability of this is admittedly low but it is not zero. Intermediate/long-term probability is definitely not zero.

Dollar declines by 20% so anything bought overseas now costs 25% more. Think electronics, clothing, etc. Margins of companies in the consumer staples and consumber durables markets are crushed, so most have no choice but to respond by raising prices close to the 25% level. Internationally priced commodities also go up 25%. Think oil, soy beans, metals, etc. Consumers react by cutting back spending, further hurting US economy. Little things like trying to extrapolate personal costs based on personal history are completely swept away. Over the long term the change makes US products more competitive on the international market, so US manufacturing starts to rise and the economy starts to recover. But we are all dead by that time.

[ShokWaveRider]

I seem to remember reading in the OP, that the question was "Anyone here concerned about inflation? " My answer is still the same, based on our last 10 years of PERSONAL historical data. NO!!!! We have been within ~1%.

Why others seem to have to turn the post around into a discussion about how everybody else is incorrect, never seems to amaze me. Just answer the question. Maybe it is a result of being old and cantankerous. I think some folk just look for things to argue about.

[bobandsherry]

The past doesn't provide justification as to what to the future will be. Let's be honest and realize that the last year has been substantially different than the 8 years prior brought on by change in the Administration(s). The next couple years will not necessarily reflect what to the prior 10 have been. That said an increase in prices with offset in wages doesn't mean that inflation will be out of control. Interest rates are getting back to a norm, the past 10 years have not been the norm there either. Prices may increase but as long as wages and rates move along in similar tend then little too worry about, IMHO.

[daylatedollarshort]

We planned for the possibility of high inflation before we retired using matching strategies. I ran scenarios of high inflation in my spreadsheets and we would tend to come out ahead as we have non-COLA pensions offset with fixed rate mortgage from when rates bottomed out + Prop 13, stable value and floating rate funds, TIPS ladders, I-bonds, CD ladder (average rate on ladders will increase over time). Our housing expenses will not change much but if there is high inflation our home value or what we could charge for rent, if we decide to keep the house when we eventually downsize, will go up.

Plus we keep our essential expenses relatively low compared to our retirement income, so even if our essential expenses do go up we have lots of pad in the budget to allow for that, so it would just reduce our savings rate in retirement, not our lifestyle. I have not tracked our inflation rate in retirement, but usually our expenses drop year after year as I have the free time to get more efficient in my price shopping and buying habits, we implement strategies to save money like making the house more water and energy efficient and we do more urban homesteading kind of projects.

[joeea]

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Originally Posted by bobandsherry Prices may increase but as long as wages and rates move along in similar tend then little too worry about, IMHO.

Of course since retirees don't have wages, their problem is different.

[Corporateburnout]

Are we concerned about inflation? not a lot. The future may be different than the past but based on Firecalc's 147 years of data our portfolio would survive periods of super high inflation like the 70's and early 80"s.

As retirees with no mortgages or any other debt there is little we can do to mitigate high inflation other than to buy high rate CDs in our fixed income investment to offset some of the increase in prices of goods and services.

So we plan to keep our AA as is and continue to enjoy retirement...

[bobandsherry]

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Originally Posted by joeea Of course since retirees don't have wages, their problem is different.

You don't get dividends? Wouldn't you expect dividends to rise? How about interest on your money? You don't have any cash in CDs, bonds, etc? You don't expect that stock prices will rise due to higher P/E? Even those on pension and social security will see COLA adjustments. So why do you not think retirees wouldn't see higher income? So, not wages per say, but obviously MAGI income.

[Dtail]

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Originally Posted by Corporateburnout Are we concerned about inflation? not a lot. The future may be different than the past but based on Firecalc's 147 years of data our portfolio would survive periods of super high inflation like the 70's and early 80"s. As retirees with no mortgages or any other debt there is little we can do to mitigate high inflation other than to buy high rate CDs in our fixed income investment to offset some of the increase in prices of goods and services. So we plan to keep our AA as is and continue to enjoy retirement...

+1

[joeea]

Quote:

Originally Posted by bobandsherry You don't get dividends? Wouldn't you expect dividends to rise? How about interest on your money? You don't have any cash in CDs, bonds, etc? You don't expect that stock prices will rise due to higher P/E? Even those on pension and social security will see COLA adjustments. So why do you not think retirees wouldn't see higher income? So, not wages per say, but obviously MAGI income.

As I said, no wages = different problem with different solutions.

[MichaelB]

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Originally Posted by joeea Of course since retirees don't have wages, their problem is different.

This is a critical distinction that many do not grasp. Inflation is a general rise in prices, wages and real assets. So, when chronic inflation sets in most skilled wage earners are protected over time, as are owners of real assets. The real pain is felt by those with fixed income streams and low / risk free financial assets, such as bonds.

Inflation is a measurement that has no application on a personal level, because it represents a total economy view of prices. Adjusting one's consumption basket to deal with changing prices is fine, but just like investing, past performance is no guarantee of future performance. When the rate of inflation does rise, and then stays high (chronic), it becomes impossible to fully adjust and this leads to some decline in real consumption by some segments of the population. Historically in the US and around the world, seniors are the greatest losers.

There are only two kinds of inflation: not enough and too much. Both are impossible to deal with. Inflation is always a real threat to retirees.