Irregular Inflation
You are often told that inflation is the worst enemy for your long-term financial well being. Inflation gradually lowers the value of your retirement dollars, and that’s the reason, if your cash sits under your mattress, it is going to purchase less once you remove it.
But inflation is not a constant threat. In other words, the price increases do not evenly occur over the things we purchase. In fact, for some items, the costs decline. For example, consider the cost of a 50 inch TV today compared to 20 years ago. Items such as automobiles, TVs, mobile phones and computer software have become less expensive over the past 20 years – along with a couple of items which may surprise you: furnishings and clothes. Food and drink prices have grown roughly at the rate of total inflation, while items such as college tuition, textbooks, and medical services (that tend to be used more frequently by retirees) became much more costly.
What is the point? Your inflation rate will probably be different than your neighbor – it will be based on actual items you (and they) are purchasing. It is perhaps helpful to know that, you will have to put more aside for the healthcare part of spending vs. that new TV purchase.