Even if the gummit CPI is totally accurate, it is a large-scale average which may not apply to you.
Agreed. It is not, nor is it intended to be a "personal inflation" index. But remember, if you're relying on FIRECalc results, FIRECalc assumes your inflation equals CPI. If you plan on spending more, or believe CPI is systematically manipulated, then you better plan on adjusting your withdrawal rate down.
A casual google hunt turns up a whole lot of people that disagree with you on this.
And every single last one of them is either a charlatan or is misinformed.
Now that is a pretty strong claim, but I'll stand by it. Why? Because it is demonstrably false that CPI systematically understates inflation in any meaningful way. We'll prove it in a minute.
But even as a matter of theory, it doesn't stand to reason. Suppose the government did manipulate CPI lower for all of the good reasons typically given. Over time that manipulation would compound and CPI's tracking error with actual prices would get increasingly, exponentially, large. So while the government might be able to get away with it in any given year, over many years CPI would eventually lag actual price moves so badly that the manipulation would be obvious.
But no obvious tracking error exists. This is easy to test (which is why I made the claim that the many internet sites pushing CPI conspiracy theories are charlatans). Find any independent source for historic prices, like
this one. Adjust those prices for changes in the CPI index and see if the result corresponds with the prices you see today.
For our purposes, I chose prices from
50 years ago. Partly because 50 is a nice round number but also because 50 years is long enough that any systematic manipulation would compound to a meaningfully large tracking error. And then I inflated those 1959 prices to a 2009 equivalent using the
CPI index. If CPI systematically understates inflation, then the resulting "2009" prices should be low compared to what you can actually find today.
Judge for your self . . .
Oldsmobile 88 . . . . . . . . . . . . $21,222.10
Men's Shirt . .. . . . . . . . . . . . . . . . $36.39
Men's Slacks . . . . . . . . . . . . . . . . .$38.67
Men's Suit . . . . . . . . . . . . . . . . . $234.86
Cotton Dress . . . . . . . . . . . . . . . . . $80.71
Women's Shoes . . . . . . . . . . . . . . .$109.90
Junior Accountant (Annual Salary) . . . $34,402.30
Chemical Engineer (Annual Salary) . . . $51,456.43
Snack bar attendant (Wage $/hr) . . . . $8.58
Bacon ($/lb) . . . . . . . . . .. . . . . . . . . $3.60
Chuck Steak ($/lb) . . . . . . . . . . . . . . $2.87
Bread (loaf) . . . . . . . . . . . . . . . . . . . $2.13
Onions ($/lb) . . . . . . . . . . .. . . . . . . . $0.32
Skippy Peanut butter (12 oz) . . . . . . . .$2.43
Campbells Soup (10.5 oz Can) . . . . . . . $0.75
Clothes dryer . . . . . . . . . . . . . . . $1,021.78
Coffee Maker . . . . . . . . . . . . . . . . . .$58.66
Dishwasher . . . . . . . . . . . . .. . . . .$1,543.33
Lawn mower . . . . . . . . . . . . . . . . . $587.19
Paint ($/Gallon) . . . . . . . . . . . . . . . .$35.80
News paper . . . . . . . . . . .. . . . . . .. .. $0.51
3 bedroom split level house . . . . . $132,316.53
Board game, Monopoly . . . . . . . . . . .. $22.75
Football . . . . . . . . . . . . . .. . . . . . . . $14.41
Television, 21" . . . . .. . . . . . . . . .. .$2,351.93