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« What If I Lost My Career? Envision, then Act, Part 1 | Main | The Cost of Bad Credit »

December 28, 2011


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Don't forget the Obamaites want to kill off old folks--a drain on the economy--by cutting their incomes on accumulated savings to nothing (nominally) and less than nothing after inflation and their higher taxes. Also in non-election years they denied any increases in Social Security while the elderly had to pay more to live. There exists a cost of living index for the elderly but they refuse to apply it to Social Security, taxes, etc.

This and tax increases scare me. Tax law can change (and does frequently) - there is whole lot of potential revenue in tax sheltered Roths, nevermind tax rate increases or tax bracket lowering. Any intelligent person has to realize government is the biggest threat to a comfortable retirement - government controls inflation and taxes - both of which can decimate the savings of even the thriftiest miser.

@DR WD Jackson
"Don't forget the Obamaites want to kill off old folks" What a stupid thing to say. ...Yeah..I'm sure this is what they are trying to do.--... need to stop watching FOX news.

I think the word 'retirement' needs to be retired. With a decent nest egg, I've transitioned from high-pressure, time-demanding 'career' jobs to part-time work for nonprofits with a mission I care about. Sure, the hourly pay is less, but the work is still challenging and rewarding. I earn some money (helps to hedge against future inflation and pays our fixed living expenses, avoiding that uneasy feeling the goes along with drawing down one's nest egg), I have the opportunity to keep learning and building a network, and help to improve my community (I hope!). I plan to continue like this as long as I'm physically and mentally able. When people ask if I'm retired, I don't quite know how to answer. It doesn't feel that way!

To me, the era of retirement--meaning engaging in no paid employment--is over, and that's a good thing. Paid work doing something challenging and that you care about has many important benefits, of which stretching your nest egg may actually be the least important with respect to happiness.

You and I have very similar retirement plans. Anything I receive in Social Security will be considered a present. I am trying to invest so that I can live off dividends and such and leave the principal alone. I think about rental property, but I am not quite ready for that yet.

I too appreciate info from people living the situation, it definitely makes you think more!

The first comment is a truly asinine, antagonistic and ignorant line of BS.

Nobody wants to kill anyone. Low interest rates are supported by both parties. THe only tax increases I've seen anyone talking about are for very high income earners and hardly tantamount to murdering grandma. The social security cost of living increase formula is defined by law and based on the inflation index. It is not determined by the president or set year by year by congress.

I think the DR has been watching MSNBC actually...LoL. It's amaing the people I meet who know NOTHING about social security, the governemnts CPI (W,U etc.,) calculations and think they had no COLA the last couple previous years because: "to pay for deficit, it went to George Bush, It was war money, Medicare took it, yada" amazing but, true!

I appreciate Kurt's comments. There has to be some meaningful, paying work in the later years. Expecting to live off accumulated savings for 20 years or more without earning anything doesn't seem realistic or fun to me.

We retired in September 1992 and so far inflation hasn't been a problem. The biggest factor in our favor is that our investment portfolio has grown by 1,972% since 12/28/92 when I took over managing our investments. The explosive upward surge in the Nasdaq from the bubble was a huge factor, and it also helped that by March 2000 when it peaked I had become very skilful in the active management of our portfolio.

We both get SS checks and pensions. My pension is fixed whereas that of my wife's state government pension increases every year. We retired debt free and have lived in the same home since 1977. Our property taxes are very low because of California's proposition 13 law passed in 1978. Our family of five is now a family of two which cuts down on expenses considerably. I also take care of all of the gardening chores myself and have never paid for a car wash in my life. Our Cell phone costs are $5/month for a barebones plan for a an emergency phone in the car. Our Mercedes cars are old '91 and '98 models purchased used. We never eat in fancy restaurants, we prefer small friendly neighborhood ones close to home. Our biggest splurges during retirement were overseas vacations but even now, almost 20 years after retiring, our portfolio is generating lots of income, $346K for 2011. That income is either tax deferred or tax exempt but we do pay quite a lot of taxes because of the mandatory required distributions from our IRAs. We live the exact life that we like, have everything we need and seldom make a big purchase, but our children will eventually be the big beneficaries. My wife just received a large inheritance from a 92 year old uncle in the UK and is already planning on giving quite a substantial portion of it to the children.

We have been retired for about 10 years & have found few problems with inflation so far. I think that's because we didn't change our lifestyle much in retirement. We keep living at the same level as when we were raising 4 kids, including college for them.

They say you can keep your lifestyle with about 75% of pre-retirement income. We've been living on 60% of pre-retirement income and have done fine. Of course my husband is getting a pension that not everyone gets. We have had to adjust our spending upward a bit to use more money. We've done that so we can travel while we are still able physically to do it. But we're still not living much differently than when we had the kids at home.

Whenever you have an unknown variable it certainly can be added to the list of surprises in that article. I for one think that it is conceivable that inflation could accelerate faster than one's retirement portfolio. Therefore, money management through your retirement years is crucial so you can modify early before its too late.

Inflation is one thing but new technologies are another potential drain that they do not tell you about. 20 years ago when my parents retired my parents did not have a cell phone or the internet.$20 to $30 per depending on what they have and no pay increase in pension is something to consider. Then there is the hole HDTV transition. The digital converter thing did not work out with there analog TV's so new TV's.Then add the cable digital thing and more money.

Then there are healthcare concerns in that you may not be on any drugs when you retire but then the doc wants you to be upt on Plavix and even with the copay of insurance it is a dollar a day. Have a health scare of a heart attack or stroke and the next thing is you are on 4 to 6 different drugs with $20 to $40 co pays for each.

I would classify these as changes in expenditures for living. Some you need and some you want.

I am glad my parents live below their means so this expense is not a burden.

Who knows what will things be like in the future and at
what cost.

@Matt: Hello! Cellphones are NOT a surprising drain on retiree income, they are an OPTION as is Internet service. On the other hand, if they use them to save money on landlines and shopping, then they are a net positive.

Well, inflation has been quite low of late. However, there have been periods of time where inflation was quite a bit higher. I think it's important to take this long-term retrospective view when looking at future retirement plans. Basically, just because low inflation may have been a pleasant surprise for current retirees, it doesn't mean that really high inflation won't be a nasty surprise for future retirees.

Oh, and I don't think counting on Social Security is going to be a part of my plans. Hope it happens, but lets not count on it down the line.

Life's surprises don't stop after you've retired. Here are three different views of inflation.

Inflation is raising grandchildren when you qualify for the maximum Social Security benefit. Inflation is having your home of 45 years condemned for a public works project. Inflation is learning your life savings vanished with the bankruptcy of MF Global.

I guess Mark would prefer to have his 84 and 77 year old parents be without a cell phone when they have car trouble and need to call a tow truck and it is snowing and 20 degrees out.
20 years ago they did not have a choice ( due to there location) but now they do and it is not something they planned for but a cost of being safe and secure. They dropped there internet due to cost.

Franky I don't think I could live without internet service.

20 years from now what choices will you absolutely need and what will you do without? Data plan? Streaming movies?

You don't know becasue technology will continue to evolve and it will cost you money.

Good post!!
Inflation does have a great effect on our life as many of you realize lately. The cost of living is going up rapidly. The cost of gasoline doubled when i start driving and many items is getting higher, unfortunately our income are not increase as fast as cost of living. we end up with less buying power, imagine what will happen on your retirement. Depend on when you going to retire, cost of living may double or triple up. It is wise to save money and invest it, so we would have more money on our retirement and you don't need to go back to work when you are on your 70s. Also we need to choose investment product wise, don't invest on something that lose value over time. Invest in product that beat inflation. Good Luck to all of you!!

I'm of the opinion that deflation (not inflation) will be a more dominant issue over the next 20 years or so. My reasoning is based on the demographic nature of vast numbers of baby boomers exiting the work force and entering a more conservative retirement period. The associated reduction in spending will have a negative impact on markets including commodity prices. This will in turn have a crippling effect on people's inability to get out of debt. There are limits to how much the US Fed can counteract this effect by printing more money since they need to assure that the dollar retains its value as the world currency of choice. That said, people nearing retirement age who have large positions in cash and investment vehicles such as bonds will benefit. The real key will be positioning yourself such that your debt profile is minimized and that you can survive and even thrive living off your investment income without having to spend your nest egg.

For what it's worth, from 1960 to 1992 my salary increased at an annual rate of 6.7% for a total gain of 797%. From 1963 to 2006 my home increased at an annual rate of 8.8% for a total gain of 3,758%.

We all know the current annual rate of increase of homes and from what I read the annual rate of salary growth has been pretty flat for workers that aren't in a highly specialized and sought after field. Fortunately the inflation rate is low because the national savings rate has gone from negative to positive as people lower their debt and save all they can. The Federal Reserve has also pushed the prime rate down to almost zero and there's no sign of an imminent increase.

Inflation won't rear its ugly head again until the situation reverses with people living beyond their means, saving little, spending a lot, and increasing their debt. The unemployment rate would also have to return back to somewhere around 5%.

As the previous writer indicated so lucidly, governments fear deflation (not inflation). Whether we like it or not the economies of the industrialized world are all predicated on GROWTH. It would be nice if they were predicated on EQUILIBRIUM but that would require that world population remained the same (or decreased). This is why there's no hope for solving the potentially disasterous problems of "Climate Change" and "Famine".

@Matt: No I don't think that they should be without a phone for emergencies. But that is actually an exacmple of DEFLATION improving their quality of life, not a surprising added cost.

20 years ago, their choice was a $1000 satellite phone, which they (and pretty much everybody else) chose to forgo and instead they lived with the risk of being stranded.

Now that it is so cheap (cellphone instead of sat phone), it is probably a very sensible choice to increase their quality of life (security). The only "surprise" is that technology has brought them a wondeful benefit that they could not previously afford.

•Just imagine the implications of 5% or 7% inflation! Yikes!

The true rate of inflation IS between 5% and 7%, when calculated using the 1990 CPI. The new CPI dramatically understates inflation, which is dangerous to retirees and those approaching retirement. They are planning for 3% inflation and it's more than double that.


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