A retirement plan including stamps? For real? I have several friends that have been blessed with living more than eighty years of life. Let’s say that rifling through the attic one of them finds an envelope from her birth year, 1932. The envelope reads, “Open on your 80th birthday.” She opens it and finds stamps*. The face value is .03 cents. The good news is that she has stamps. The bad news is that she now needs 15 stamps to send a letter. That’s what 3% inflation looks like compounded over 80 years. Too bad she didn’t have Forever Stamps to help keep up with inflation. However, its time had not come.
Do you know the inflation rate you’ll live through when you retire?
For the first 20 years of her life, stamp prices remained constant at .03 cents. Too bad she didn’t find the envelope when she was twenty. However, things changed dramatically between 1972 and 1982. Stamp prices skyrocketed from .08 cents to .20 cents. That is a compounded rate of 10%. Scary if she retired then. Since her retirement age of 65, prices have risen from .32 to .45 cents. That works out to about az2 % rate of inflation. Not too bad all things considered. Looking back she has seen the best and worst of times for stamps. She has lived through a World War, The Civil Rights Movement, Woodstock, and now the Information Revolution. No one knows what’s next. That’s why it’s important that you evaluate a worst-case scenario when doing your retirement readiness evaluation.
Will your retirement income be like the Forever Stamp and keep pace with inflation?
Does your retirement income have pay raises? Social Security has it. (Maynard has told me it doesn’t keep up with the rising prices of what she buys). Does the rest of your money have pay raises? If not, you should become a quick student of your options for turning your assets, such as your 401k, into a cost of living adjusted retirement income. And there is that other big unknown- tax rates. We’ll talk about that one in a future blog.
*Analysis based on Wikipedia History of United States postage rates