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  1. #1

    Do you budget for inflation in your retirement planning?

    The HOA thread got me thinking, how do folks plan for inflation eating away at your budget. Now me, I always assume the price of certain things will continue to go up. I've never had my property taxes go down without me moving.
    So I always assume that my cost will rise. I do invest in the stock market so hopefully my assets will grow also. although I know the market goes down.

    Do you assume the common 3% inflation rise in cost and budget for that? or is it more of an increase in one area means you cut back in another area.

  2. #2
    Actually as I get older more money will come my way so that will take care of inflation.
    Early retired and living on pension. Haven't touched the 401K or Roth and too young for SS.

    For inflation I follow shadowstats and assume 10%.
    When I see costs go up for me it's usually in that range, not the official 3% in government reports.

  3. #3
    I have Quicken Factor in 3% inflation for normal Inflation costs,
    5% for college costs,

  4. #4
    There are plenty of online retirement calculators that let you plug in an inflation rate. The problem is guessing what that will be.

    Whatever the bare minimum you think you need to retire on, double that.

    The last thing you want is to have to go back to work with a decades-long employment gap.

  5. #5
    all the better retirement calculators ALWAYS plan on inflation adjusted returns. never plug in an inflation rate . inflation rates are part of sequence risk . it is inflation that did in the worst outcomes in retirement history . you would make the same mistake throwing in an average inflation rate as throwing in an average return .

    just look at one of the worst groups , 1965/1966 .

    inflation was 2.50% -3.50% . who would have guessed in 3 years time it would have doubled and by 1974 it would be 11%. it was crushing to a retiree. but with inflation so low who ever expected a 4x increase coming .

    stress testing always looks for worst case outcomes and that includes inflation as part of those worst cases .

    remember -for 4% inflation adjusted to hold for at least 30 years you need a real return of 2% or more over the first 15 years .

    it would do you know good assuming some average inflation number .


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