Has your annual spend increased by inflation?

[Bikerdude]

great thread, I was surprised how people retired so long had no increase in spending.

Inflation is real and the only way spending can remain consistent is that you are spending less on some items than you did previously and it doesn't bother you.

 

[scrabbler1]

Inflation is real and the only way spending can remain consistent is that you are spending less on some items than you did previously and it doesn't bother you.

In the aggregate it may be real but not for every single item in everyone's expense basket. For example, the monthly maintenance charges on my co-op apartment not only were unchanged from 2009 to 2010 to 2011, they went down nearly 3% in 2012 and down nearly 2% more in 2013. That can more than offset small increases in other items such as food, gasoline, and utilities.

 

[ER Eddie]

Appreciate the thread. It confirms what I've read elsewhere and believed, that the adjustment for inflation in SWR is not necessary (at least not for those who watch what they spend).

 

[Lsbcal]

Appreciate the thread. It confirms what I've read elsewhere and believed, that the adjustment for inflation in SWR is not necessary (at least not for those who watch what they spend).

I think some account of inflation has to be given. This is sort of like the opening of a chess game (or war) which is only a plan that is expected to need modifications.

Other things positive and negative will be hard to anticipate. Things like:
-- when you actually take SS as events like 2008 stock crash may alter the decision
-- if the markets take a deep dive or give us a welcome present well above normal
-- if there are sudden health related expenses
-- natural disasters (maybe a fire or hurricane if you're in that region of the US)
-- a son or daughter suddenly needs help or decides to go to college (unplanned)

That is what I found in my post above. Embarrassingly faulty planning despite a lot of attention to this stuff. When running FIRECalc, all those colored lines in the final chart represent quite a spread of outcomes.

 

[W2R]

Anybody who was around in the 1970's may clearly remember the inflation we experienced back then. Every time I went to the grocery store I was in shock. Just because one retires in a period of moderate inflation, doesn't mean that inflation won't be a huge problem at some point during retirement.

 

[NW-Bound]

Inflation is real and the only way spending can remain consistent is that you are spending less on some items than you did previously and it doesn't bother you.

+1

I suspect people's habit changed and they might not noticed. For example, retirees shop less for clothes, or they may eat out or go to the movies less, etc... As they no longer care for some activities that they used to enjoy, they do not feel deprived. Hence they might not noticed that they spend less on something to make up for other things that go up in price.

Just a theory, of course.

My part-time income only stopped 1 year ago, and I am still settling into this new phase of life. I only have detailed spending data for 2011/2012/2013. Prior to that I only have the total numbers, and it was outrageous compared to now, due to children's college expenses, home improvements, foreign travels, etc...

 

[obgyn65]

I am not retired yet but my spending has increased by about 20% in the last 2 years.

 

[truenorth418]

Mine's about the same, but adjusted for taxes.

 

[Katsmeow]

There is a difference between an increase in spending during a year and an increase due to inflation. For example, if you are spending on the same things in a given year and you spend more because prices have gone up, then that is an increase due to inflation. OTOH, if your spending goes up because your are spending on more or different things that cost more then there may not be any inflation at all. Likewise, your spending can remain constant but if you buy less of something because the price has gone up then you've seen inflation whether your annual spending has gone up at all.

 

[Mulligan]

There is a difference between an increase in spending during a year and an increase due to inflation. For example, if you are spending on the same things in a given year and you spend more because prices have gone up, then that is an increase due to inflation. OTOH, if your spending goes up because your are spending on more or different things that cost more then there may not be any inflation at all. Likewise, your spending can remain constant but if you buy less of something because the price has gone up then you've seen inflation whether your annual spending has gone up at all.

Kat, I have to agree with you. I know we have some real detailed people on here and can prove it personally themselves either way. But for me, although I say my costs haven't gone up, it really probably is more to lifestyle change. Just as a quick snap shot example for me. Last month gas shot up 50 cents a gallon, but my monthly gas costs went down. I just didn't drive much. Nothing I did on purpose, I just worked out that way.

 

[ER Eddie]

Inflation is real and the only way spending can remain consistent is that you are spending less on some items than you did previously and it doesn't bother you.

Oh, I'm sure it's a matter of reduced expenses in retirement. I don't think anyone believes that inflation is a non-reality for people who retire, just that other things counteract it, like reduced overall spending. Mulligan gave a good example above: gas prices rise, but you don't commute, so you spend less on gas. Same would go for food costs, which I imagine drop in retirement because you have more time to cook (vs. grab something quick), shop carefully, etc.

 

[Brett_Cameron]

First year of retirement my spending went up ~1.2% over preretirement spending.
Second year it went up about 12% by choice.