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Long Term Inflation Rate Assumption?
Old 11-04-2017, 05:16 PM   #1
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Long Term Inflation Rate Assumption?

I am curious what others are using as an estimate for long term inflation rates for your financial models. The last ten years are very low and I don't expect rates to remain this low for too much longer. However, I think they will remain lower than the thirty year average for several more years. If I run my model with 3.0%, I could have already retired. If I use 3.3%, I probably need another year or so. If I am pessimistic and use 3.75%, I probably need another 3-4 years to be safe.

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Old 11-04-2017, 05:18 PM   #2
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Personally, I don't use the expected inflation rate as much as I use the expected real return on my portfolio. I tend to use about 4% for that.

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 11-04-2017, 05:31 PM   #3
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I use 2% above inflation for my portfolio's expected return and do my calculations in today's dollars assuming all expenses increase at the rate of inflation, whatever that is.
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Old 11-04-2017, 05:39 PM   #4
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We used 2.5 in our planning. I think inflation will stay relatively low for a while, and interest rates are the barometer. As long as they are low, inflation should stay that way.
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