1970s / 1980s inflation
Discussion
What’s the likelihood of seeing 70s and 80s style inflation again in the future?
I’ve been reworking my retirement planning spreadsheet to see when Mrs Oxgreen and I might be able to down tools. I decided to plug in the S&P returns starting from 1972, and we can more-or-less cope with the downturn of the early 70s near the beginning of our retirement.
But that was using a flat rate of inflation of 3% - realistic for the last twenty years or so. Then I thought I’d try plugging in real inflation data starting from 1972. And…
Yeah, 24% in the early 70s, 18% in the early 80s… it all adds up to effectively running out of money in short order.
But inflation has rarely been above 3% since the mid 90s. Even the recent spike is beginning to look short-lived. Are we ever likely to see soaring inflation in the future, or do we simply have better monetary controls these days?
(By the way, I also plugged in S&P returns starting from 1929, and unsurprisingly we couldn’t retire. I guess it was called The Great Depression for a reason!)
I’ve been reworking my retirement planning spreadsheet to see when Mrs Oxgreen and I might be able to down tools. I decided to plug in the S&P returns starting from 1972, and we can more-or-less cope with the downturn of the early 70s near the beginning of our retirement.
But that was using a flat rate of inflation of 3% - realistic for the last twenty years or so. Then I thought I’d try plugging in real inflation data starting from 1972. And…
Yeah, 24% in the early 70s, 18% in the early 80s… it all adds up to effectively running out of money in short order.
But inflation has rarely been above 3% since the mid 90s. Even the recent spike is beginning to look short-lived. Are we ever likely to see soaring inflation in the future, or do we simply have better monetary controls these days?
(By the way, I also plugged in S&P returns starting from 1929, and unsurprisingly we couldn’t retire. I guess it was called The Great Depression for a reason!)
With retiring, if you try to predict these things you will never do it?
You will also need to think about what you will really spend. You will not be spending on commuting, and lunch when working as a simple thing that could make a difference. There will be plenty of other small things that add up. Then you will have the things people do not want to think about. Like you will not be wanting to spend much when you get into your 80's. This will more than likely happen even if all the people here come back with stories of their great grandma skydiving at 110 years old. But think about all the people you know who are over 80 and still buying new cars and going on expensive world tours.
So if you are retiring at 67, you may only be spending big on holidays and stuff for 13 years. If you leave this till you think you have enough cash you may find you only have 5 years before you are too old to enjoy it. If you are really unlucky you may not even make it to retiring if you keep planning for the worst.
My advice is just do it as soon as you can.
You will also need to think about what you will really spend. You will not be spending on commuting, and lunch when working as a simple thing that could make a difference. There will be plenty of other small things that add up. Then you will have the things people do not want to think about. Like you will not be wanting to spend much when you get into your 80's. This will more than likely happen even if all the people here come back with stories of their great grandma skydiving at 110 years old. But think about all the people you know who are over 80 and still buying new cars and going on expensive world tours.
So if you are retiring at 67, you may only be spending big on holidays and stuff for 13 years. If you leave this till you think you have enough cash you may find you only have 5 years before you are too old to enjoy it. If you are really unlucky you may not even make it to retiring if you keep planning for the worst.
My advice is just do it as soon as you can.
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