BenefitJack

Comments:

• In my pre-retirement seminars, back in the 80's and 90's, I referred to inflation as Rule of 72, "in reverse". Rule of 72: Take the annual interest rate, divide into 72, and you get the number of years it takes for money to double (for example: 6(%) into 72 = 12 years, assuming earnings are tax deferred). Rule of 72 "in reverse": Now take the inflation rate, divide into 72, and you get the number of years for your purchasing power to be halved (for example: 3(%) into 72 = 24). So, assuming retirement at age 65, without an increase in the nominal amount, a 3% annual inflation rate will halve the purchasing power by age 90. That said, inflation ≠ CPI. The CPI is someone else's market basket of goods. You are a practicing economist - in terms of how you deal with price inflation - every time you go to buy something. At the grocery store, if beef is too expensive, you buy chicken or pork, or go meatless. These decisions are made almost unconsciously (except for the griping about ever increasing costs), at the snap of your fingers, one decision after another. So, your household market basket of goods is changing all the time - with exceptions for housing, and a few other essentials where demand is inelastic or difficult to quickly adjust. The only way to confirm what inflation you actually suffered is look back on what you spent, and how your market basket of goods changed.

  Post: Hedging your bet in retirement-dealing with inflation. What’s your strategy? R Quinn

  Link to comment from October 5, 2024

• Both are true because much if not all of the saving while working is for periods without employment or after employment ends (if you are a retiree). Modigliani called this the life cycle, and consciously or unconsciously, all are at risk who ignore it.

  Post: Can your retirement survive a financial shock? It seems many can’t. Have you thought about it? Rdq

  Link to comment from September 10, 2024

• Best option for financing LTC? Find an employer who is willing to innovate with respect to employee benefits. Innovative designs might include a modular cafeteria plan with employer contributions ordered in a specific manner/priority, group term life insurance with a LTCi rider convertible upon separation, and a Health Savings Account capable health plan. Working on this.   

  Post: Long Term Care? Who has it?

  Link to comment from August 17, 2024

• Regarding Income: It is not what you get that counts. It is what you get to keep, after taxes. Regarding Spending: In retirement, it varies from person to person, and varies throughout retirement. I favor the retirement "smile" where spending in retirement may be higher in the "go-go" years immediately after work ends, less once a person has exhausted their bucket list, the "slow-go" years, and more in the "no-go" years due to increased medical and custodial care spending. But, different strokes for different folks. So much depends on health (of the retiree and the spouse, and other family members), whether income sources are indexed for changes in price (no, not inflation) such as Social Security, longevity, etc.

  Post: Income or spending? Top priority in retirement.

  Link to comment from August 3, 2024

• Dick, you mentioned that: "The median income for retirement-age Americans is lower than average expenditures for that group, suggesting a savings shortfall that could threaten retirement for many." Well, first of all, median ≠ average. I assume you are comparing the median income for retirement-age Americans (age 65+) and the average expenditures for retirement-age Americans (age 65+). If so, I am sure that this age 70+ worker, and nearly 20% of the other older Americans who are still working, drive up the average while most of us are well above the median (if only because those of us age 70+ have incomes from Social Security and wages, and maybe even RMDs). Second, national surveys tend to underreport income: https://www.forbes.com/sites/andrewbiggs/2024/04/04/america-needs-a-fact-based-retirement-debate-part-2/?sh=52cc977e563a Third, yes, consumption exceeds income, yet, somehow, some "worry" that people are not spending their nest eggs a trend that appears to have continued despite the pandemic. https://www.cnbc.com/2021/08/25/most-retirees-arent-tapping-nest-eggs-before-required-withdrawals.html# Sure, many older folks wish they had saved more. But, at what cost? Life is not a dress rehearsal for retirement: https://401kspecialistmag.com/maximize-outcomes-not-incomes-die-with-zero/

  Post: Quinn relents. Apparently you can live on 66% of pre-retirement income. 😉😉

  Link to comment from July 22, 2024

• Dick, great article. Lot's of good discussion of the decumulation phase and challenge. With all the information and issues you and your readers mentioned/posted, I wasn't surprised about the dearth of guidance on how best to fund a retirement that may or may not include Long Term Care. Lots of material out there on LTC and more recently LTCi - including the great sources readers cited. Comparatively, here and elsewhere, there isn't so much information on prioritizing savings to leverage tax preferences in order to optimize the outcome ... after taxes. Further, and most importantly, with all the media focus today on our "retirement crisis" (Biggs, Ghilarducci, Bernie, others in NY Times, USA Today, Bloomberg, Forbes, Congressional hearings), how half of Americans aren't saving/preparing, etc., I remain surprised that there is NO discussion of America's true "retirement coverage crisis" - funding health care and LTC in retirement.

  Post: Confusing Ourselves

  Link to comment from June 8, 2024

• Without good health, nothing else much matters. Otherwise, self-respect - knowing you are worthy, treating yourself accordingly, with care (physically and psychologically) while staying true to your values and not compromising on what’s important to you. 

  Post: What’s your most prized possession?

  Link to comment from May 4, 2024

• You state: "... The trust is nothing but IOUs, or so it’s said. If you mean the trust purchased special interest-paying Treasury bonds as an investment, with the government promising to redeem those bonds, then—yes—the trust fund holds IOUs. But that’s virtually the same promise made to American investors and foreign governments when they buy U.S. government bonds. ..." Absolutely agree. However, we added $23+ Trillion to the national debt over the past 15 years (Presidents Obama, Trump and Biden), we continue to add $1.5 - $2+ Trillion a year, and, the CBO recently predicted that, without change, our national debt will be $146 Trillion in 2054 (30 years) - 172% of GDP - where interest on the debt is the largest expense in the federal budget. So, redeeming those bonds adds to the national debt (part of our annual deficit). Paying interest (let alone raising taxes to cover interest, and run a surplus to reduce debt) will either crowd out American's ability to properly fund Social Security and Medicare (national defense, etc.) or reduce worker and retiree standard of living. A unique scheme ... expect less in the future.

  Post: Making Claims

  Link to comment from April 21, 2024

• Thank you. I wonder how advertising or marketing firms (or perhaps Google and Amazon and others) have mastered and applied such insights.

  Post: What Our Dollars Buy

  Link to comment from April 21, 2024

• FYI, the anomaly here is that the percentage of older Americans who left employment coincident with the pandemic, what some called the Great Retirement, was followed by LESS not MORE individuals returning to the workplace. Many reasons, including: stock market gains, government dole, and of course, all those older Americans who were financially prepared who got a taste of retirement, and liked it. That's not so say that the trend won't reverse - especially as inflation spiked. The sleeper here may be tax increases because it isn't what you get that counts, but what you get to keep ... after taxes. Taxes are, interestingly, not part of the inflation calculation. We continue to add $1.5 - $2+ Trillion a year to our national debt, even though federal income and employment taxes have nearly tripled, from $2 Trillion to almost $6 Trillion, since the turn of the Century. The CBO recently predicted that, without change, our national debt will be $146 Trillion in 30 years. When the bill comes due, we may all have to go back to work when increased taxes reduce what we (workers and retirees) get to keep.

  Post: Back to Work

  Link to comment from April 21, 2024