What to do about the coming inflation (if it comes)?

[unclemick]

I seem to remember bits and pieces of some long winded debates with the Brit/Commonwealth engineers (late 70's/early 80's) - Swiss annuities!

They thought provincial Americans were too - wellll provincial and didn't think global enough.

1. Provincial to the bitter end - psssst Wellesley!

2. Or American passport, Vanguard Total World Stock Index (conservative allocation for your age) and short term fixed instuments in the currency of where you are at.

And like the Terhorst's over the decades - know when to leave Argentina - AND when to return.

heh heh heh - Agile, mobile and hosile. Saw a cogent agrument last night rating Alabama no. 1.

 

[Gone4Good]

I dunno. Being a "preventer" is not a road to fame and adulation (ask anyone who flew for SAC or spent years beneath the waves on an SSBN. These guys are still waiting for the parade they deserve).

Maybe, but this feels a lot more like Kennedy and the Cuban Missile Crisis than someone anonymously doing yeoman's work as part of the silent service.

 

[ejman]

The difference between a couple of decades with 2% inflation and a couple of decades with 3% - 5% inflation (as suggested in my post) will be huge. Not a good comparison. I'm suggesting that folks who mistakenly think that mid-level inflation over a prolonged period will look the same as the recent mild 2% are going to be in for trouble.

I'm three yrs into retirement. The FireCalc run built on my situation at retirement uses historical CPI as the inflation factor and has a survival rate of 99.1%. I'm hoping that future inflation is no worse than historical inflation. If I plug in some other inflation rates, I get different results, some kind of scary. Here are some examples of my retirement plan survivor rates assuming other rates of inflation going forward:

Historical CPI - 99.1%
2% - 100%
3% - 99.1%
4% - 91.7$
5% - 47.7%

It doesn't take too much inflation (certainly not "hyperinflation" levels) over a retirement to kick the ever loving pajeebees out of survival rates of your portfolio. I lived through the WIN buttons and high inflation rates of the 70's and made it OK. But I am worried that inflation rates during my retirement will creep up to regularly be in the 4% or 5% range and that's going to hurt if I don't find a way to cope via portfolio performance.

BTW - no cola'd pensions here......

Thank you for noting the inflation impact on Firecalc runs. Although I used Firecalc quite a bit for my own ER, I've never really played with the inflation input parameter. With my own asset allocation and spending versus assets, I get 100% success until I hit 6 % inflation when it drops to 99.1% then it starts dropping a little faster 83.5% at 8 % inflation and at 10% inflation I'm down to 28.4% success- back to the salt mines for me! (No REAl Pensions either well, a little $5k/year non cola'd pension starting 6 years from now)

I don't really understand how the inflation adjustment factor works in Firecalc so I'm all ears (or eyes anyway)

 

[Kabekew]

Macro Economic theory has come a long way in the 30 years since the U.S. last had an inflation problem, so I don't see how you guys think the Fed will forget how to control it all of the sudden?

 

[IBWino]

Macro Economic theory has come a long way in the 30 years since the U.S. last had an inflation problem, so I don't see how you guys think the Fed will forget how to control it all of the sudden?

Not an issue of forgetting...I think it's more an issue of not letting politics get in the way of inflation control.