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Old 01-01-2018, 09:26 AM   #41
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I think inflation is different for most Retirees as they become less of a consumer once they retire. Yes Food etc. But in general I have been retired for 5 years and DW 3 (FiRED), and really have not seen any significant inflation in that period (for US). OK tuna Cans are now 4oz instead of 6oz for the same cost but eggs are still ~$1.50 a doz. House Taxes have actually decreased a little. Utilities are up a little but not that we notice that much.
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Old 01-01-2018, 09:29 AM   #42
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that premise , that retirees spend in a smile shape and spending falls off a cliff as we age makes two wrong assumptions for starters .

the first is it depends on discretionary income levels . when everything is a need and you have few wants there is nothing to get cut back .

the other is that if we do have discretionary income and our own spending falls off we may just do more for our kids or grand kids like helping with school or day care .

so this premise stills is highly individual situation dependent
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Old 01-01-2018, 09:37 AM   #43
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Currently, I have 22.5% in cash or cash equivalent. At 2017 WR rate of 2.66%, that cash is good for more than 8 years, if that money can keep up with inflation. And just coincidentally, in 8 years we will be able to draw SS of $74K (in today's dollars).
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Old 01-01-2018, 09:44 AM   #44
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Who has see the inflation monster for the past 5 years
For the 5 years of 2012 -> 2016 inclusive it totals 6.54 % (not compounded).

That is barely a nudge.

https://inflationdata.com/Inflation/...tInflation.asp
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Old 01-01-2018, 09:48 AM   #45
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We are about 93% stocks.
It's been a great ride, but as I learn more, I'm becoming more worried about sequence of risk, and so have been slowly converting to cash-like to have about 4-5 years of expenses covered.
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Old 01-01-2018, 09:52 AM   #46
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having so many negative real returns historically , after inflation and taxes with cash instruments , has actually added to sequence risk . those in 1965/1966 were crushed by inflation , not their returns or rates over their 30 years.

there is a mistake made thinking cash instruments lessen sequence risk . they really don't because it is real returns governed by inflation and taxes that count .

fixed income has terrible results in firecalc .
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Old 01-01-2018, 09:53 AM   #47
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35 years in Cash, CDs. That should cover it. No SS...... Yet, maybe next year. No Stocks as none are needed. No Heirs to worry about.

As mentioned that does not include any SS or Interest income from the CDs.
Similar here. But I do have a small amount in stocks for an inflation hedge. But could go w/o stocks. Don't see any point in paying taxes on capital gains so will just let it ride and collect the dividends.
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Old 01-01-2018, 09:55 AM   #48
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Who has see the inflation monster for the past 5 years
For the 5 years of 2012 -> 2016 inclusive it totals 6.54 % (not compounded).

That is barely a nudge.

https://inflationdata.com/Inflation/...tInflation.asp
When compounded, the cumulative inflation from 11/2012 to 11/2017 (past 5 years) is 7.14%. It's still significant, even for a tame period, and works out to 1.39% average for each of the 5 years.

It could be up to 2.5% each year, and still be considered normal. The cumulative 5-year number would be 13%.
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Old 01-01-2018, 09:58 AM   #49
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it is the sequence risk in inflation that acts like sequence risk in our returns . cumulative means little .
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Old 01-01-2018, 09:59 AM   #50
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Similar here. But I do have a small amount in stocks for an inflation hedge. But could go w/o stocks. Don't see any point in paying taxes on capital gains so will just let it ride and collect the dividends.
I just checked our budget spreadsheets back to 2008 (We both were working till 2012) which is when we purchased our current home in Florida, and other than the Items I mentioned in my previous post our mandatory expenses have been quite static. Real Estate taxes have gone down. Our Groceries have been pretty consistent too. That is 10 years.
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Old 01-01-2018, 10:04 AM   #51
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you can see here the 30 year cumulative results for 1965/1966 were pretty average .

but it was inflation that did them in the first 15 years .


30 years

1966 stocks 10.23 - -bonds 7.85 -- rebalanced portfolio 9.56- - inflation 5.38

for comparison the 140 year average's were:

stocks 8.39--bonds 2.85%--rebalanced portfolio 6.17% inflation 2.23%



so lets look at the first 15 years

1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38%
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Old 01-01-2018, 10:04 AM   #52
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For reference, $1 in Nov 1967 became 13.7c in Nov 2017. That inflation over the past 50-year period works out to 4.06% per year.

PS. Yes, it is true that "sequence of inflation" hurts the same as "sequence of returns".
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Old 01-01-2018, 10:06 AM   #53
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average inflation still would not matter when spending down . only the sequence of how everything meshes counts in the order it plays out ..
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Old 01-01-2018, 10:07 AM   #54
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Inflation statistics are all well and good, but the REAL measurement is how it affects one (one's family) personally. For us the last 10 years has been petty static based on our budget spreadsheets, especially since we both retired.
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Old 01-01-2018, 10:09 AM   #55
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the cpi figures are not a personal cost of living measurement .



when it comes to your personal cost of living their is no link to the cpi's at all . we are 1500 mini economies and the cpi is only a price change index on goods and services most of which we have no use for personally .some we use most we don't ..

a personal cost of living is very different . it depends on what you buy AND HOW OFTEN YOU BUY IT . it depends on the quality of the items as higher quality sees higher price inflation but may last a lot longer and it depends on what you personally are willing to sub .

so what the gov't uses to take the countries temperature and the 1500 mini economies we are comprised of may be very very different than your expenses .

i am so much lower than even two years ago . we have not had rent increases allowed in 2 years in nyc and 1/2 of all rentals are stabilized apartments so that represents millions of people . i went from way over priced health insurance to far cheaper medicare and medigap .

my sister refinanced in arizona and she is spending less today than years ago . so we are all different and you have to adjust on your own to what you see , not what some index of price changes shows . .
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Old 01-01-2018, 10:13 AM   #56
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From Jan 1976 to Jan 1981, the cumulative inflation was a horrendous 56.5%.

I still remember getting a salary increase at a 6-month interval instead of yearly. The reason was that megacorp needed to raise starting salary to get new hires, and if they did not give raises to existing engineers the latter would work for less pay than new hires.

Scary stuff, but I was young then, so did not realize the severity of the problem.
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Old 01-01-2018, 10:18 AM   #57
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Yep. Health premiums have been a real kicker in the a$$ the last few years. Premium increases way ahead of average inflation rates. But in 19 months(not that I'm counting) my premium will be cut almost in half with medicare and supplements. Hopefully I live long enough to see the reduction.
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Old 01-01-2018, 10:19 AM   #58
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How many years expenses in cash/bonds if the rest is 100% stock?
If cash equals, actual cash, CD's, etc then I'd estimate 25 to 30. Maybe not a popular position around here, but that's my answer.
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Old 01-01-2018, 11:34 AM   #59
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If cash equals, actual cash, CD's, etc then I'd estimate 25 to 30. Maybe not a popular position around here, but that's my answer.
There was a recent poll. There are plenty of folks here with high numbers of years in cash or fixed income.
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Old 01-01-2018, 12:10 PM   #60
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the reason usually given is i don't want to sell stocks when they are down , but with a typical 40/60 to 60/40 mix you would not be selling selling if that is what plunged . you would be rebalancing bonds in to cash and perhaps even in to more stocks .

2008 saw most bond funds that were not proxies for stock like high yield actually go up . high quality long term treasuries were up about 40% .

total bond funds were up too .some like fidelity's had held to much in those cdo's but that was an isolated event . even my money market lost money because of it .

generally bonds pay more than cash does and they tend to rise when stocks take a bad hit unlike cash .
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