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I retired with a comfortable nest egg designed to get me through to the end. That said, in the past year I have really curtailed spending. We very rarely eat in restaurants or travel, and any major purchases are put off until there are no other options. I foresee a huge worldwide economic downturn turn coming and I intend to have as much under the mattress as possible.
The only thing that I remember about the 1970s stagflation was the high gasoline cost. We both had steady good jobs in the late 70s so unemployment problem did not affect us. We even managed to buy a house in 1977, had it paid in 2 years, invested in 40 acres of land, saved enough money to quit our jobs, went back to graduate schools while having our child in the early 80s.
I think there is a very small chance that we will see another period of stagflation since the last one was due many factors with the main one being the oil embargo.
Stagflation is a combination of high inflation and economic stagnation i.e. high unemployment rate. If a retiree's income like Social Security and some pensions have COLA, it will lessen the impact of inflation and high unemployment rate does not affect retirees unless one needs to work to supplement their income.
Bottom line is that stagflation affects working age people a lot more than retirees.
Personally, I am not at all worry about another period of stagflation. We are living well with our social security payments, a bit of pensions, a small rental income and decent dividends. Our investment strategies have been working very well for us in the last 40+ years. Our networth has doubled since my retirement so we just stay the course and enjoy the 'fruits' of our years of labor.
Our property taxes were recently reassessed, it's done every 3 years here. They were low before, and still only a little higher, despite home value doubling in 11 years. It's semi-rural Tennessee and things here are different, both the amounts and how they are calculated. Home and car insurance is still pretty much the same as it's been for several years. We've had few claims EVER on either, and no wrecks or tickets for 25 years. We use USAA and they are very good to us. I just had to check our bank records to see, as they are on auto-pay so I never even see the bill. HO Insurance went up $300/year. Not awful. Property tax went up a few bucks, less than $100 increase in 3 years. Before anyone says we're "lucky", we made our choice on where to live in large part due to the low COL here.
Yes, restaurants are significantly higher than in the past. We eat out once or twice a week, so the 50% increase isn't a big deal to us. Two $40 meals/week are now two $60 meals. If it were big to us, we'd just eat out less. I travel several times a year and, for my travels, I haven't seen any big increase in airfares, but I've really always searched out good fares, even if we have to fly out at the crack of dawn. Maybe we travel different routes. I'm not trying to be a contrarian, just not seeing any big impact to our annual spending. YMMV. I am very SHOCKED at the reports of the increases in Florida. I predict there will be a lot of seniors leaving FL. Halfbacks will be knocking down our doors!
My property tax bill in Bristol basically doubled last year with the reassessment. That's about an $80/month increase for me. My kWh power rate has gone up about 15% since this time in 2022.
Gas remains over $3/gallon. Pre-COVID, I used to set myself a budget of about $10 for a typical weekday lunch. I could get a sandwich, chip/side, and water for that usually. Today, you can't get even the sandwich for that. It's at least $15. If you go to a sit down chain type place, a lunch special, drink, with tax/tip is often pushing $20. If my girlfriend and I go out, get two drinks and an entree each, it's usually at least $80 with tax/tip.
I got a notice from Verizon that my smartwatch fee on my phone bill was increasing about $5/month. I ended up canceling Verizon, switching to Visible. I'm going to save about $75/month, and have noticed no difference in phone service. My Netflix bill went up to $26/month - canceled that. Luckily, we are getting a 5% COLA this year on top of last year's near 8%. I was able to not pay NC state income tax this year for the days I work from home (about all of them), which is a 5.5% savings there.
I had some legal bills last year, and am slowly either increasing my income or shedding random expenses here and there.
Groceries are through the roof.
I don't know how someone making $1,500/month after tax, even with no mortgage, is making it right now.
My homeowner's insurance and car insurance did not seem to go up through the pandemic, though they had gone up prior to that time (to where I noticed). Property taxes go up every year (more than doubled in 20 years).
I hear that natural gas and electric rates have gone up. My bill is the same. I think I am being more careful. I am also driving less ($5 a gallon again now). My driving went from 12k to 7k to 6k to 4k. This also means my mechanic is not getting the same business from me. Driving 2/3rds less means less maintenance.
My girl cat had her teeth cleaned and 3 teeth pulled in 2022 for $1,600. Now the estimate is $4,000. $1,000 is she is so old now she needs an anesthesiologist. But, the $1,600 was already a doubling of prices from the prior year.
With groceries it is hard to remember what prices were like back in 2019. But, I remember back during the GFC when grocery prices increased dramatically and I thought they would never go back down they actually did come back down somewhat.
Inflation can have a field day as it takes me back to my non-consumption roots. Feels comfortable and familiar.
I don't know how someone making $1,500/month after tax, even with no mortgage, is making it right now.
I did an experiment during the winter. You can buy 4 pounds of zero sugar bacon (I think Fletcher's) for $22 at Costco and then 18 premium pasture raised organic eggs at Whole Foots for $12. Eat for a week for $35 to $60 depending on what you buy. Drink water. Eat broccoli and meat. Buy chuck roast instead of steak (and let it cook). My dad used to make stuffed pork chops. Make a stew. Make chili. All home made is better than any prepared foods or restaurants anyways. You don't even need to shop at the cheapest stores you just need to dial in the diet. Buy baby broccoli, cauliflower, brussel sprouts (the most nutritious veggies that also clean your liver). Buy nutrients, not food. Shop around and use several stores for different things priced differently.
Wilie, I thought our vet prices were insane but yours are way worse. I can’t imagine paying 4K for a dental. I paid 1500 for my small dog to have a dental with 3 teeth pulled. Here they go by the amount of time it takes so I once paid as much to have one molar pulled on a dog as I did for 5 regular teeth.
Then vets wonder why people don’t do dentals anymore or very rarely. I do them on my two every 2 years. I know people with a lot of money that will never do them because of the cost.
If we are embarking on a decade of the 1970s redux stagflation, what do you plan to do about it in retirement? I can't think of doing anything differently (except that my Soc security, when I take it at 70, may be a somewhat larger component of my retirement income than I expected), but wonder if other people approach it differently. Comments?
One way to look at it is, is there any reason to suspect the economy's growth for the next 2-3 decades will differ significantly from the past 2-3 decades?
The primary inputs to an economy are:
Labor
Capital
Know-how & Intellectual Property
Raw materials
Energy
Is there something coming in the market for Labor that might be different? Many people who look at birth & death rates and legal immigration rates say we have a long-term problem on our hands.
How about Capital? There seems to be plenty of capital, subject to a caveat on tax increases, which seem inevitable & which have a dampening effect on the economy.
What about know-how and Intellectual Property (IP)? The development of new IP is accelerating and its impact on the economy is quite positive.
How about Raw Materials? There seems to be supply, but geopolitical threats abound, and the Federal & State governments effectively prohibit much raw materials extraction & refinement inside the USA.
What about Energy? This is a huge negative for economic growth going forward. We have a "circular firing squad" of regulators forcing the price of energy ever higher in support of green religious purity. Even with a fully green energy economy (which will never happen), acolytes want to push energy consumption down as they view energy consumption as a religious sin.
So will there be a major shift in the growth of the economy going forward, and hence on investment returns? Tough to say, as the advances in IP tend to counterbalance the circular energy firing squad.
On the one hand, if growth in IP (where AI is quite promising) exceeds the increasing price of energy, then investment returns could be good.
On the other hand, it is possible that the increase in the price of energy will permeate the economy and drag it down. One only needs to look at regulations forcing the nation's transportation system of heavy diesel semi tractor/trailer trucks to change to pure EV in the coming half-decade. Each truck will have a much lower payload because a third of the weight will be battery (thus transportation of all goods will increase in price) and each truck will be out-of-commission longer during the 24 hour day for battery charging (a heavy truck that would normally drive from, say, the Port of Los Angeles through to Las Vegas in a day might have to stop for 4 hours of recharging along the way. If rising energy costs are negative enough, the economy and hence returns on investment will not be pretty and we have have a stagnant economy.
Wilie, I thought our vet prices were insane but yours are way worse. I can’t imagine paying 4K for a dental. I paid 1500 for my small dog to have a dental with 3 teeth pulled. Here they go by the amount of time it takes so I once paid as much to have one molar pulled on a dog as I did for 5 regular teeth.
Then vets wonder why people don’t do dentals anymore or very rarely. I do them on my two every 2 years. I know people with a lot of money that will never do them because of the cost.
I have been going to the Animal Dental Clinic. I was getting conflicting diagnosis from my regular vet office on Bailee. He is my orange rescue boy. His teeth were a Big problem and for the first few years every cleaning he was having teeth removed or they were telling he didn't need a cleaning. So, I decided to take him to the experts and get him stabilized. The vet I used was flying up from CA. What happened was he bought the practice out and moved up here and doubled the prices.
Bunny is 17.5 and needs an anesthesiologist (which is $1,000 of the cost). They do charge by the hour for the surgery, but, they give you a low and high estimate and it's like $3,200 to $4,000. She has resorption starting on the canines, so, I am assuming $4,000. She has only ever had the three little bottom teeth out in 2022. I was holding out because she was so frail. She is starting to get stabilized and the new arthritis drug is helping a lot with that. I could not put her under as frail as she was and now I just want more assurance she is regaining some muscle in her legs and not actively circling the drain. Probably do it in the Fall.
So, yes, it is more expensive here. But, also because it is a specialty clinic. This area is very expensive. I have seen articles pointing to it being only a lower cost of living compared to Hawaii. We have Intel and the silicon forest as well as Nike, Columbia Sportswear, Adidas and we have major insurance companies. There are many private businesses. There for a while a lot of Silicon Valley start ups were moving here. That was back when prices were heading up, but, had not peaked. When I first moved here there was a huge part of the business park that was empty land (not true any longer). I felt like I lived in the country at the edge of the urban growth boundary (no longer true). Real estate is now infill in my area (except, instances like out back 13 acres will be 79 $1M+ homes.
The place changed dramatically since 2002 (as I know a lot of places have).
By the way, of course I am going to deal with her teeth. Not only does it affect the rest of her health as I do not want her to suffer. She may only have a year or two left to live and I do not want her curled up in a ball silently suffering. She's on arthritis medicine as well as pain meds (gabapentin). The old girl should be comfortable for her last couple of years of life.
Money is only worth what it can buy you. If it buys peace and serenity for my faithful old cats then so be it. Like I say I could have had a nice new luxury vehicle for what I have spent.
Yes, generally property taxes, insurances, gasoline prices, travel cost, restaurant bills and grocery bills have gone up in the last few years BUT they vary with locations.
In our area (just west of Boise, Idaho), property (both market and assessed) values are more than double in the last few years but our property taxes actually went down about 10%. Idaho has had budget surpluses in the last few year so both property taxes and income taxes have gone down. Our car and home insurances have gone up a bit but the increases were the typical year-to-year (similar to all previous years and locations).
Gasoline prices went up early last year but were back to normal later in the year. Even at the peak prices, the prices were no where as high as some previous years when there were oil embargos or supply issues (hurricanes etc.). We don't drive a lot in retirement so gasoline cost is only a tiny part of our expenses.
Our power bills have pretty much stayed constant (average $125/month) in the last several years. We have geothermal heating/cooling so the power bills are our only utility bills.
Some grocery items like eggs and chickens went up in prices during the bird flu pandemic but have pretty much gone back to normal. If you buy only fruits and produce when they are in season, certain dairy products/meats/seafoods when they are on sale or happen to be at the cheapest prices, your grocery bills may not be affected too much by inflation. Few days ago, I bought honey crips apples at $0.99/lb, boneless pork loin at $1.19/lb and ahi tuna at $6.99/lb. I was surprised to reverse pricing of fishes in the last few years: ahi tuna, wild caught salmon, trout and mahi mahi are ~40-50% cheaper than tilapia and cat fish (which we don't eat anyway).
Yes, it seems that restaurant prices have gone up but if you hardly eating out like us, you are not affected!
So personally, we have not been affected much by the current inflation.
Last edited by BellaDL; Yesterday at 04:14 PM..
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