Looking for suggestions

[wabmester]

How do you cover healthcare? 

I did a COBRA immediately after retirement (about $600/mo for a family for two), then switched to an individual policy (went down to about $400/mo for a family of two), had a kid, had our insurance go up to about $600/mo, and then switched to an HSA plan at about $300/mo with a $2600 deductible.

I'm certainly not immune to future rate hikes, but with a kid, I have a renewed interest in staying healthy.

 

[sailor]

Would somebody here *puhlease* post their personal rates of inflation so we can put this one to rest.

Mine was averaging 6.1% for last 7 years ( look also this thread from a month ago http://early-retirement.org/forums/index.php?topic=3406.msg57426#msg57426 )

 

[unclemick]

Vanguard Target Retirement - Income ( for those in retirement):

50% Total Bond Market
25% Inflation Protected Securities
20% Stocks
5%   Prime Money Market

A little of this and a little of that. Soooo - that's their best take on the matter.

Am I smarter than they are Wellllll - I have a little putz money to be a legend in my own mind. Bet the farm - nope. I have a up/down track record from 1966 to date - and that's why 75% balanced index. SS plus a non cola pension would cover a bare bones budget in a pinch.

The Norwegian widow is ready for some similarities of 1966-1982. History never repeats exactly - but sometimes it rhymes. Someone tell me who I'm mis quoting.

Heh, heh, heh

11 years in - going on 12

Bon Temps Rolliere - let the good times roll.

 

[wabmester]

Mine was averaging 6.1% for last 7 years

Thanks, sailor. I really should try to nail ours down, but the quirks of quicken have always managed to turn me off.

Was there anything special to give you such a high rate of inflation? I'd guess that if your house is paid off, for example, then other factors that would have been in the noise suddenly become a big part of the signal.

 

[REWahoo]

The Norwegian widow is ready for some similarities of 1966-1982. History never repeats exactly - but sometimes it rhymes. Someone tell me who I'm mis quoting.

Think it was Mark Twain...the same guy who said, "Familiarity breeds contempt - and children."

REW

 

[Mr._johngalt]

Thanks, sailor.   I really should try to nail ours down, but the quirks of quicken have always managed to turn me off.

Was there anything special to give you such a high rate of inflation?   I'd guess that if your house is paid off, for example, then other factors that would have been in the noise suddenly become a big part of the signal.

I check my personal inflation by the retail price of a Starbucks
Frappacino. Best I can do now is around 1.19 ea. A year ago I was
paying .99. Thus, 20% in one year. Ouch!

JG

 

[maddythebeagle]

How can you afford Starbucks? Dividends from a day of dumpster diving?

 

[riskadverse]

I moved all my 401K funds out of the stock market just before the big bust (had an uneasy feeling when Clinton announced the gov was going after Bill Gates) and haven’t had the courage to reenter the stock market.

It's interesting that those of us who dodged the big down turn in the market are more afraid to reenter than those who rode it down.
You would think we would be less "burned" than the buy and hold types.  Then again, maybe our timing is still good and reentry is still be too early. 

 

[sailor]

Was there anything special to give you such a high rate of inflation? I'd guess that if your house is paid off, for example, then other factors that would have been in the noise suddenly become a big part of the signal.

Few categories from Quicken with big inflation numbers:
Recreation:Flying 9.3% (hangar rent went from $160 to $290, gas also went up)
Boat - 8.7% most marinas are increasing their fees faster than inflation, especially in Florida and near metro areas (Lake Lanier for us), insurance went up after the hurricanes in 2004.
Medical - 12.1%
Dental - 7.8% (mine root canal was $752 in 2000, wife's $1093 in 2005)
Water/Sewer - 5.2%
Hair Cuts - 7.6% ( mine went from $9 to $14, wife from $45 to $70 )
Massage - 8.3% ( went up from $37 to $65 )
Home Insurance - 9.6% ( up from $290 in 1999 to $460 in 2004 )
Utilities:Telephone - 9.7% ( up from $27 to $43 )
Groceries - 6.2% ( Whole Foods bought out most of nicer places to buy food ) for example steel cut oats went up from $1.99 to $2.69 )

 

[bosco]

Hair Cuts - 7.6% ( mine went from $9 to $14, wife from $45 to $70 )
Massage - 8.3% ( went up from $37 to $65 )

don't understand these numbers. Are you practicing hedonics? Getting your hair cut less often?

the price increases you cite are way bigger, and inconsistent with the percentages you give. There must be more to the story.

 

[wabmester]

don't understand these numbers.  Are you practicing hedonics?  Getting your hair cut less often? 

the price increases you cite are way bigger, and inconsistent with the percentages you give.  There must be more to the story.   

I think those were his annualized rates of inflation over a 7-year period (or between dates indicated).

The OP indicated that he has no mortgage, so I would expect his personal rate of inflation to be higher than the CPI-U, which is heavily influenced by the cost of housing (the biggest expense for most people).    But, at the same time, that would mean that a large chunk of his annual $50K expenses are discretionary, so that should give him plenty of wiggle room even in the face of inflation.

And, remember, TIPS currently give you CPI-U + 2%, so for somebody just looking to preserve purchasing power, your personal rate of inflation can be 2 points higher than CPI-U and you'll still maintain purchasing power.

 

[sgeeeee]

Mine was averaging 6.1% for last 7 years ( look also this thread from a month ago http://early-retirement.org/forums/index.php?topic=3406.msg57426#msg57426 )

I still don't understand how anyone is really able to calculate their personal inflation rate.  It seems to me that you would have to be anal retentive about shopping --  purchasing exactly the same things in the same quantities every year.  The closest I've been able to come to a personal inflation rate calculation is to split my spending into the same categories that they use for US Bureau of Labor Statistics then use their inflation rate in the appropriate percentage to my own spending.  But that doesn't satisfy the complaints of those who think the government is secretly hiding the real inflation rate.

I haven't had two similar purchase years in my life.  And since retiring (2003), I've reduced annual spending while increasing my time doing what I want each year.

 

[wabmester]

And since retiring (2003), I've reduced annual spending while increasing my time doing what I want each year.

To me, that is the bottom line.   At what rate do your expenses grow?   To do it right, you should probably separate fixed expenses from discretionary spending and amortize large purchases over their lifetime, but that seems like something quicken should be able to do for you.

 

[sailor]

don't understand these numbers. Are you practicing hedonics? Getting your hair cut less often?

the price increases you cite are way bigger, and inconsistent with the percentages you give. There must be more to the story.

Sorry,
I should have posted the years for all the prices.
And wabmester is right - these are annualized numbers.
The formula I use is:

( (new price / old price ) ^ ( 1 / number of years elapsed ) -1 ) * 100 %

For example massage changed from $37 to $65 during last 7 years, so:
( ( 65 / 37 ) ^ ( 1/7 ) -1 ) * 100 = 8.38%

sailor

 

[bosco]

I think those were his annualized rates of inflation over a 7-year period (or between dates indicated).

thank you...now it makes sense. Guess I didn't read closely enough

after I ran the calc for 7-year, I saw the same formuala posted below. Sorry, just didn't register the 7 year part.

 

[justin]

In the "Change in CPI Calculation" thread that was linked above, I also posted this about inflation for the well-to-do:

http://early-retirement.org/forums/index.php?topic=3406.msg58123#msg58123

In summary, millionaires have seen twice as much (or more) inflation as that shown by the CPI. The CPI is an average for everyone in the US.

Sailor, you just might be experiencing a higher inflation rate because your spending is different than what the index represents. Specifically, most people don't have airplane, boat and massage expenses.

 

[sgeeeee]

Sorry,
I should have posted the years for all the prices.
And wabmester is right - these are annualized numbers.
The formula I use is:

( (new price / old price ) ^ ( 1 / number of years elapsed ) -1 ) * 100 %

For example massage changed from $37 to $65 during last 7 years, so:
( ( 65 / 37 ) ^ ( 1/7 ) -1 ) * 100 = 8.38%

sailor

This doesn't help me much. Take a simple budget case for me: one year I get involved in a lot of local activities. I travel infrequenty. I eat at home (buy groceries), drive relatively short distances, do a lot of home and yard work . . . The next year I'm traveling on camping trips 30% of the time which involves gasoline, camping fees and gear, wear and tear on my auto, eating on the road, etc. The next year I get opportunities to visit Europe, meet relatives on a trip in Alaska, and spend some time with friends in Washington, DC. My costs include airfare, hotels, upscale restaurants, tourist admissions, . . .

Now apply a formula to come up with personal inflation rate. I can easily calculate how much toothpaste has inflated in cost, but it doesn't have any meaning as a personal inflation rate.

 

[sailor]

I can easily calculate how much toothpaste has inflated in cost, but it doesn't have any meaning as a personal inflation rate.

I think we are talking about two different animals.
Infaltion for me is how much more per yer in nominal dollars something changes price.
(A toothpaste is a good example, while we still have teeth )
You are talking about elastic budget (with a lot of dicretionary spending - which is good IMHO ) - not a personal rate of inflation.
Inflation in your example would play a role as in "How much more would cost me this trip to Europe if I postponed it for two years from now?"

sailor

 

[sgeeeee]

I think we are talking about two different animals.
Infaltion for me is how much more per yer in nominal dollars something changes price.
(A toothpaste is a good example, while we still have teeth )
You are talking about elastic budget (with a lot of dicretionary spending - which is good IMHO   ) - not a personal rate of inflation.
Inflation in your example would play a role as in "How much more would cost me this trip to Europe if I postponed it for two years from now?"

sailor

I think we are still talking about different things.  While I can quantify the inflation rate for toothpaste and a few other essential items, such a calculation falls short of defining a personal inflation rate.  Unless everything I buy during the year is the same as in the previous year, my personal inflation rate is difficult to quantify in a meaningful way.  And because of that, I don't understand how people can compare their year to year spending to a CPI calculation and draw meaningful conclusions.  Look at this another way:

Personal Spending as a percent of total:

ITEM. . . . . .. . . . . . . . . . . . . .YEAR 1. . . . . . . . .YEAR 2
FOOD AND BEVERAGES . . . . . . . . . . . . 10%. . . . . . . . . 12%
HOUSING . . . . . . . . . . . . . . . . . . . . . . .15%. . . . . . . . . 13%
APPAREL . . . . . . . . . . . . . . . . .. . . . . .  .5% . . . . . . . . .  2%
TRANSPORTATION . . . . . . . . . . . . . . . .10%. . . . . . . . . 13%
MEDICAL CARE . . . .. . . . . . . . . . . . . . .15% . . . . . . . . .19%
RECREATION  . . . . . . . . . . . . . . . . . . . 20% . . . . . . . . .16%
EDUCATION AND COMMUNICATION  . .15% . . . . . . . . . 16%
OTHER GOODS AND SERVICES . . . . . . 10% . . . . . . . . .  9%
TOTAL SPENDING . . . . . . . . . . . . . . . . $64K . . . . . . . . .$62K

Are the changes from year 1 to year 2 due to inflation of some items more than others?  due to changes in spending requirements? due to changes in your buying habits (better shopper, new interests, etc.)?, due to infrequent purchases that should be averaged over the life of that product (car, appliance, for example)? . . .

What is your personal inflation rate based on the table above? 

 

[sailor]

What is your personal inflation rate based on the table above?

You haven't posted enough information for me to calculate it
When I posted mine it was a weighted average of most spending categories.
Where I had the data in Quicken (single transaction spending like hangar rent or a hair cut) I calculated it, where I didn't I extrapolated from few points I had (groceries inflation for example was extrapolated from the few receipts I dug out from '98 shoe box and few recent grocery receipts).
I haven't decided how should I treat big ticket items (like buying a house or a boat).
I could either depreciate it through the useful life of the item (let's say 30 years for a house and a boat), measure inflation on a replacement value and in calculating personal rate use the depreciation value from this year as a weight, but this would not be correlated with your money flow, since you probably have fixed mortgage on your house and bought your boat for cash)

I don't understand how people can compare their year to year spending to a CPI calculation and draw meaningful conclusions

I understand your difficulties with non-repetative purchases (like vacations in Europe).
I guess one way to calculate "annual inflation rate" for such a purchase, would be to check the price of such thing in the previous year (I'm not saying this would be easy or even worthwhile task).
On the other tentacle - if your spending patters are truly random and tootpaste is the most repeatable purchase, than "personal inflation rate" is probably not of much use to you - I hope to be there too someday, probably retired on a boat

 

[sgeeeee]

I understand your difficulties with non-repetative purchases (like vacations in Europe).
I guess one way to calculate "annual inflation rate" for such a purchase, would be to check the price of such thing in the previous year . . .

Well, I still don't understand your calculation. I don't think any of my purchases are repetative. Do you buy the same amount of toothpaste every year? of toilet paper? pork chops? gasoline? milk? . . .

When I go to the grocery store, I buy what I need. Today I might buy mushrooms and coffee. Next week I buy peppers and onions. The following week I buy mushrooms again, but the price has gone down. The following week mushrooms have gone up in price. It goes up and down depending on season, availability, etc. So how can you estimate your grocery inflation from a few sample receipts? Even if I have all my receipts, I didn't eat the same thing number of mushrooms this year as last. Because I traveled more this year, I ate out more and bought fewer groceries. How do I calculate inflation rate on groceries?

And what happens if you change habits? What if I learn that I've been using too much toothpaste when I brush my teeth. Recent dental studies indicate that I should cut my toothpaste usage in half. So what is my personal toothpaste inflation rate? The percentage increase in average cost of a tube? How should that be weighted? Or is my personal toothpaste inflation a negative number because I've cut usage in half?

I guess till I see the details of a personal inflation calculation, I'm skeptical that anyone can calculate a meaningful number to compare to CPI.