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This recent article in the WSJ got me thinking.
https://www.wsj.com/personal-finance/inflation-proofed-retirement-cd2a387a?st=cvZSf3&reflink=desktopwebshare_permalink
I read it and tried to relate to it. I wanted advice on how to invest with this inflation that is causing my nest egg to be worth less. I found the article telling me to stop spending. I got that under control but what about investing?
so HD readers what are you doing to inflation proof your retirement?
”During my years as teacher and professor”
Retired Karen very likely has a pension, possibly with a COLA and probably with retiree medical benefits too. That’s pretty typical in academia.
These type of stories often leave out a few relevant details. What’s the point of retiring to live like that?
Right. Retired Steve was an editor at the WSJ for many years. He likely knew Jonathan. I wonder how JC would have felt about Steve and Karen’s lifestyle.
Wow, yeah, Steve and Karen seem like fun people to hang out with…. Not. Karen seems a little more loose with the purse strings, ya know, buying the most expensive thread and all. And who needs a car when they can ride the bus for half-fare? We should all live like Steve and Karen; we can compete to be the richest corpse in the cemetery.
Seriously, two plans come to mind to deal with inflation. I think owning the market is still the best way to deal with inflation. Beyond that, “retire with a solid cushion between total spending needs and anticipated or planned income”. (I read that last part somewhere).😊
Just an FYI, it is nearly impossible to keep up with health care premium inflation.
Pure medical-care price inflation is currently low (~1.6–3%), but premium inflation is substantially higher (typically 6–15%+ depending on the market and driven by utilization, high-cost drugs/treatments, and provider pricing power. Exact rates vary significantly by plan type, state, and whether the coverage is employer based.
That’s we distinguished between inflation and trend.
For example, Federal employee (including Congress) are facing a 10.9% increase next year.
A health plan sets prices before all the years data is in and must set premiums to cover anticipated spending basically from July one year to December the following year. If they guess wrong, the following years premiums must play catchup to cover the loss. That can generate what appears to be an excessive increase but is not really.
One catastrophic claim in a group can cause a premium shock in one year. I had that happen back in 1990 or so when the 14 year old son of an employee incurred over a $1 million dollars in bills. We were self-insured so the group picked up the cost in the premiums we set for employees.
Keeping up with Part B, Part D and Medigap premiums with the SS COLA alone is quite difficult and very regressive because except for IRMAA, premiums are not income sensitive.
Fortunately for lower income retirees, there is a hold harmless provision in SS so they may not gain income from the COLA, but they won’t lose any either. Guess what, retirees who pay IRMAA premiums make up the lost revenue for Medicare when that happens by paying extra.