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Old 06-22-2015, 12:48 PM   #41
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Interesting subject.
We retired in 1989 at age 53. A 35 year timeline, to age 88. We're about 80% there.

Rather than looking at the past 25 years on the basis of how prices have risen, our view has been to maintaining our net worth with a lifestyle that is comfortable. Until age 70, we did everything we wanted to do, spent what we wanted to spend. Travel, entertainment and indulging in hobbies were all suited to our lifestyle. Without analyzing the costs in dollars or percents, our net worth has remained the same since 1989.

Since age 75, our expenses have slowly gone down. Again, not looking at the dollars, we simply don't spend as much. Travel almost nil, which means we can keep our older cars, but with virtually no operating and maintenance cost. We go out to eat much less often, and even our food bill has slowed, as we eat less and healthier. Clothing costs are essentially zero.

When the question comes up: "What have you bought recently?" ... we're hard pressed to think of any major purchases. No new decor, new appliances, or any kind of housing upgrade. Buying a newer CCRC designed home put us in a position where upgrades, repairs, or any major expenses have not been necessary.

Medical costs after age 65, when we went on to Medicare... are a known factor.. a roughly $10K figure that has not materially changed.

So... as to inflation... Basically, the effect of inflation will only be on our costs of food, utilities, base housing taxes.

Our investment dollars are in semi safe long term inflation adjusted I bonds.
.................................................. .................

Enough... Re: the OP:
This leads me to wonder if we overestimate inflation in retirement, or if perhaps the CPI itself overstated as it affects us, and if we underestimate our own ability to deal with increasing prices. This is not an argument to increase the withdrawal rate, but it does raise the question of just how much portfolio risk do we need to take.
I would say that this has been our situation. Real life often supercedes mathematics. In our case, money has not been a major concern. The real life changes in what we do, have just normally seen a reduction in expense.

Perhaps we just slipped in to old age "stuff" early. Most of our members seem to believe they will not slow down, and have plans for travel and social activities well into their 80's and 90's. Planning for this will require more attention to the details. If the costs of leisure and travel rise substantially, then inflation will certainly be a major concern.

Looking at persons who are around our age, it appears that most are in situations similar to ours. A few, perhaps 10%, continue to travel, upgrade their cars, and spend lavishly on their homes and lifestyles. For us, the slowing of our lifestyle has more than compensated for any actual inflation.

Overall, I think we can handle a 30% to 40% inflation without making major changes to our plans or lifestyle. At age 65 I would have had a different outlook.
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Old 06-22-2015, 01:58 PM   #42
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I'm still w*rking, but my parents have been retired for 20 years. They are 77. Their experience mirrors what imoldernu describes. They traveled a lot in the early years, and for 17 years rented a place in FL for 3 months in the winter (they live up north). Now, my mother's health is not the best, and they no longer go to FL, they don't travel, she gave up golf etc. Their expenses are way down. My dad said last year they lived on his small pension and their SS, which they didn't used to do. He also said their portfolio is higher than it was 20 years ago.

I am 46. I want to make sure I travel extensively in my 50s and 60s (while we are working and after - hope to retire at 57). My MIL recently passed at 74 from cancer; you never know what life is going to throw at you...
Two roads diverged in a wood, and I - I took the one less travelled by...
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Old 06-22-2015, 06:23 PM   #43
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Originally Posted by marko View Post
DW and I have come to the conclusion that we've been getting ripped off for the past 30 years!
With time to 'hunt' there's a whole world out there of equal/"just as good" things available. $25 'hanging around' khakis at Costco vs $140 at Brooks for example.
Yep, same here. We were getting ripped off on everything, both products and services. Especially car repairs. I mapped the cost of 60K service on my car by dealer location. The quoted price dropped about $100 every 5 - 10 miles further out from the metro area center.

I ended up saving something like $400 on service for one car alone by having the time to have the minor work done by a local mechanic and then driving 40 minutes from my house to a dealer further out of town to do the rest. The local dealer not only would not budge on the price, he in fact loaded up extra work beyond what was in the factory recommended servicing and refused to do only the factory recommended servicing.

So that kind of savings on groceries, car repairs, insurance, cable bill, and everything else all add up to quite a bit of lower run rate than we used to have for the same basic lifestyle.
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
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Old 06-22-2015, 06:48 PM   #44
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I haven't kept track of what goods and services have gone up with inflation and how we may have substituted, but our biggest line item non-discretionary increases by far since we retired in 2010 has been healthcare. Although able to keep the same insurance as we did while working the premiums immediately went up by 25% which is our marginal tax rate. I also lost the FSA and the HI policy doesn't qualify for an HSA so all our OOP expenses went up by 25% including prescriptions, eye tests and glasses, dental etc.

In the following years the HI premiums have also increased way above inflation, although the HI is still very good so no way would I consider substituting it for something else.
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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Old 06-23-2015, 08:50 AM   #45
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I've noticed significant inflation on car, health and LTC insurance, HOA dues, and especially food. Part of this increase is due to the cost of Paradise. Prices go up quickly when fuel costs increase (hey, Matson has to pay for all that fuel to bring us "stuff".) Funny how the costs do not go back down when fuel prices crater. Even our electricity is still in the $.30++/kwh range, even though fuel has gone down. So it's difficult to say whether "overall" inflation has been on a tear, though sometimes it feels that way locally.

The good news is that I retired considerably later than I had planned (how is that good news, you ask.) Doing so set us up for having a larger nest egg, allowing us to to take less risk and (so far) leading to a favorable spend rate vs plan.

We have more or less automatically adjusted to inflation where possible (CFLs and LEDs and air-drying, etc.) Still our electric bill is what it was 7 years ago. We've dropped collision on both cars with the result that our insurance is now similar to when we started 7 years ago. We've made substitutions on food, but mostly because we can't stand to spend so much on "frivolous" such things as fresh beef, etc. It's not that we couldn't afford it.

In reality, we are in good shape at this time. SS at 70 is "looming" (as are RMDs, unfortunately) so we have "plenty" to meet the current plan. I suppose the worst thing about seeing significant price increases is not that we can't afford them, nor even that we "have" to adjust our living experience. I think it's more thinking back to the "hyperinflation" of the late 70's/80s that is disquieting. Those were frightening times - and I was w*rking then. Now, I'm more dependent on the whims of markets as well as gummint. I can't imagine that we have another 30 years to plan for, but there is a decent chance of another 20 or even 25 years. 15 to 20% inflation could wreck our current plan in that time period. I would find a way to adjust, but it wouldn't be pretty. So, If I have a point, it is "yes", there is significant (reported by gummint or not) inflation. "No", it won't affect us much going forward at current rates. "Yes" I do worry about the future inflation (and other effects of - just for instance and without references to bacon - doubling the national debt in less than 8 years.) YMMV

If I've wandered too far from MichaelB's original point - it wouldn't be the first time.
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Anything which can be used can be misused. Anything which can be misused will be.
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