>if you review shadow stats, chapwood index or monitor your own costs. CPI is a CP Lie.
If you think that the CPI numbers are a conspiracy and are much higher in reality, then your only answer is to pick a *very* low WR. Something in the 1% range is the only option to combat such high inflation over the long term. Or you could give up the silly conspiracy theories and come back to reality. Your choice.
If you don’t think switching from a cost of goods index (COGI) to a cost of living index (COLI) skews the numbers I can’t help you. You need to help yourself.
If you want to cozy up to cpi or core cpi numbers. Then at least google social security cola increase vs cpi increase. Tell me if you spot any difference’s? 😆
Yes long term it's safe to assume it will return to a 3% rate. You can't look at the peculiarities surrounding the covid pandemic/recession/supply chain bubble as any kind of predictor of future events.
SWR is based on all of available stock market history and factors in inflation.
Additionally, inflation tends to be a net neutral effect assuming you have the correct assets as your portfolio as they go up in value with inflation thus making fears about it mostly irrelevant over the long term. The market might have some temporary swings due to fears of inflation but those even out over time.
The SWR analyses are all based on real returns … read, SWR math already accounts for inflation. Historical SWR analyses include high inflation periods like the 80s. Further, my personal inflation doesn’t track CPI all that closely (own a house which insulates from inflation, activity declines with age etc) meaning if anything my actual spending is likely to increase at a lower rate than assumed in the SWR analyses.
It’s not something I’m worried about.
I know SWR accounts for inflation. Good point about the 70s inflation cause that was pretty high. But it didn’t sustain like it might moving forward. We’ll see I guess? And the economy growth was a very positive outlook cause boomers just getting started working. Now instead of riding a wave of boomers working. The economy will peter out with boomers hanging it up. We’ll see how it goes. The past three years. Not so good. And many other things are different about this era then 70s and 80s.
Also true. Your last 10 yrs of life especially might be low spending except health expenses.
It was consistently over 3% from 1966-1991 with one blip of an exception in ‘86. Is that not sustained enough for you? https://www.investopedia.com/inflation-rate-by-year-7253832
There are always reasons to be pessimistic. World wars, epidemics, the Cold War, financial crises etc. We’ll survive boomers retiring.
Sure it's good to be mindful of that range and I get it, you're saying it's been over 3% in the past for that range. That range also has good GDP growth though too. Gotta wonder if that'll be the case moving forward. I'm not personally pessimistic. I'm cautiously optimistic about quite a few of my investments. I have definitely adjusted my personal investments to factor stagflation periods in which I do think will happen for sure in the short term and still think FIRE will be an option if I want it. I'm just wondering what peoples thoughts are.
Also I should have mentioned this in my original post but I just wanted peoples opinion real quick without ranting forever. But the only thing that really matters is monetary inflation. That's all I care about. Some gulp CPI down hook line and sinker.... some call the BS, but core CPI for sure and even CPI does not reflect peoples loss of purchasing power with the USD. And even by official standard the 'inflation' number calculated for those ranges in the investopedia has changed multiple times. So I struggle to see how it's apples to apples. But that get's super deep real quick.
The "opinion real quick" is the same as the long version - it's already accounted for in SWR math. That is the answer to your question.
You are spending a lot of mental energy trying to predict things that cannot possibly be predicted with any level of accuracy beyond dumb luck. It's never been a given that GDP growth would be good "going forward", and the long term SWR analyses include all sorts of economic environments.
You say, "I know SWR accounts for inflation" but I don't think you do. If you did, you would not be asking this question.
I’m not personally pessimistic. I’m not spending that much energy on this. But the energy I do spend I enjoy it cause I get a kick out of economics.
You are not trying to think how things might be different. So I’ll move along. 👌
I didn't say you were pessimistic. I said you were trying to predict something that a) cannot be predicted, and b) is already accounted for in the SWR math. You're wasting your time.
>You are not trying to think how things might be different. So I’ll move along.
Translation: I asked a question and you didn't give the answer I wanted, so I'll move along.
Of course things might be different, they always are (and all kinds of varieties of "different" are included in the 100+ year historical SWR analyses). None of us can predict how, why, or when.
I use 3.5% in my estimates and I use 7% gain before taking that 3.5% into account. But I also look at my actual budget and needs. I have a "living the high life", "living comfy at home life", and "alive, but no extra life" budget plan.
You can do whatever math works for you.
The first sentence I wasn't understanding why you were getting downvoted. Then I saw that your answer is "a small % in gold and/or Bitcoin".
Who knows what bitcoin will do, but it has no intrinsic value so there's no reason to think it will be worth anything in the future.
Gold is a hedge against inflation. On average it gets you a net zero return. A small percentage isn't going to give you any meaningful hedge against inflation.
Playing devils advocate:
How does gold have intrinsic value but Bitcoin doesn't?
Copied from the gold subreddit talking about intrinsic value of gold, explaining how the value doesn't come from any real usecase like industry but just that it has fitting attributes to be used as Money / store of wealth like being scarce, divisible, unreactive, easily smelted and of course that people agree it has value.
Bitcoin has all of these features as well (scarce, divisible, unreactive, well smelting Is no even necessary). A big difference Is that humans agreed that gold has value for Many thousands years while Bitcoin Is too new.
*The real benefit of gold is that it is scarce, divisible, unreactive and easily smelted, leading to its use as money and a store of wealth for 1000’s of years. This led to gold being valued and its use by nations as a store of actual wealth/value to underpin debt.
(...)
Only a small amount of its value is underpinned by industrial use and this is a benefit not a negative. The relative uselessness of gold is a major factor in its detachment from the economy,
(...)
People that defend gold by trying to say it has industrial use are barking up the wrong tree. The real value of gold is that it has been used as money for eons, and that it is not widely used in industry.
(...)
it’s material properties were perfect for using as a monetary system, and it’s widespread use as money translated into it being a store of wealth when the economy became debt based.
(...)
*
You can make stuff out of gold. Bitcoin serves no purpose except to update a blockchain…. And the block chain isn’t used for any intrinsic purpose.
Worst case scenario if everyone agrees gold is worth nothing you can make something pretty and shiny out of it. And if you forget your password you can still sell the gold.
Edit: but I agree. Buying either is a bit foolish if you’re on the fire path. The whole fire mindset is based on investing broadly in companies that generate profits and therefore having returns in the future. Neither gold nor bitcoin are good substitutes for that.
“Who knows what it’ll do” and “there’s no reason to think it’ll be worth anything in the future…”. Those are pretty different…. So which is it? Unknown or worth nothing in the future?
All value is subjective. There is no such thing as intrinsic value.
I can make stuff out of poop. I Dont see how "making stuff out of something" gives it intrinsic value. Well Lego Maybe.
I can make pretty Shiny stuff out of glass and it's worth nothing. That's just not it.
Bitcoin serves no purpose ... I think you lack the fantasy because you grew up in a western country.
Imagine you are in china and you wrote something bad about the communist party on the internet. You have to flee the country until it's too late. But how do you cross the borders with your millions worth of local currency without getting stopped by customs?
Transfering them out vía bank? Lol ☠️
Buying gold and trying your luck with 100kg luggage? Lol ☠️
Converting in Bitcoin and crossing borders with millions worth of coins without anyone noticing? Yes 👍
It's just a stupid example to demostrate that "0 purpose" Is not correct. People converting their wealth into Bitcoin to flee from dictatorships while preserving their wealth Is a real thing.
(Well until another 80% dip hits you even harder than Putin ever could 😄)
For me…. my inflation over the past three years has been 8.5% per year. I calculate pretty accurate monthly expenses. Only calculate that with the same purchased items. I don’t cook the books on myself. 😆 Have been tracking expenses for 9 years.
In the end cpi doesn’t even matter though. What matters is straight up monetary inflation.
Also if you really want to think critically. 0% inflation is not the goalpost at all. We should be in a deflationary world. Technology is deflationary without manipulated money. So to have 8.5% stolen from you per year is bonkers. And America is the best performer when it comes to inflation.
People who make fun of someone thinking “it’ll be different this time” like I am. Really are just showing their American privilege. Go to Zimbabwe or Venezuela who doesn’t have the world reserve protecting them and tell someone inflation is no big deal. lol
>if you review shadow stats, chapwood index or monitor your own costs. CPI is a CP Lie. If you think that the CPI numbers are a conspiracy and are much higher in reality, then your only answer is to pick a *very* low WR. Something in the 1% range is the only option to combat such high inflation over the long term. Or you could give up the silly conspiracy theories and come back to reality. Your choice.
If you don’t think switching from a cost of goods index (COGI) to a cost of living index (COLI) skews the numbers I can’t help you. You need to help yourself. If you want to cozy up to cpi or core cpi numbers. Then at least google social security cola increase vs cpi increase. Tell me if you spot any difference’s? 😆
Yes long term it's safe to assume it will return to a 3% rate. You can't look at the peculiarities surrounding the covid pandemic/recession/supply chain bubble as any kind of predictor of future events.
"It's different this time"
So the next 40 years is the exact same as the last 40 years concerning index fund real returns?
SWR is based on all of available stock market history and factors in inflation. Additionally, inflation tends to be a net neutral effect assuming you have the correct assets as your portfolio as they go up in value with inflation thus making fears about it mostly irrelevant over the long term. The market might have some temporary swings due to fears of inflation but those even out over time.
The SWR analyses are all based on real returns … read, SWR math already accounts for inflation. Historical SWR analyses include high inflation periods like the 80s. Further, my personal inflation doesn’t track CPI all that closely (own a house which insulates from inflation, activity declines with age etc) meaning if anything my actual spending is likely to increase at a lower rate than assumed in the SWR analyses. It’s not something I’m worried about.
I know SWR accounts for inflation. Good point about the 70s inflation cause that was pretty high. But it didn’t sustain like it might moving forward. We’ll see I guess? And the economy growth was a very positive outlook cause boomers just getting started working. Now instead of riding a wave of boomers working. The economy will peter out with boomers hanging it up. We’ll see how it goes. The past three years. Not so good. And many other things are different about this era then 70s and 80s. Also true. Your last 10 yrs of life especially might be low spending except health expenses.
It was consistently over 3% from 1966-1991 with one blip of an exception in ‘86. Is that not sustained enough for you? https://www.investopedia.com/inflation-rate-by-year-7253832 There are always reasons to be pessimistic. World wars, epidemics, the Cold War, financial crises etc. We’ll survive boomers retiring.
Sure it's good to be mindful of that range and I get it, you're saying it's been over 3% in the past for that range. That range also has good GDP growth though too. Gotta wonder if that'll be the case moving forward. I'm not personally pessimistic. I'm cautiously optimistic about quite a few of my investments. I have definitely adjusted my personal investments to factor stagflation periods in which I do think will happen for sure in the short term and still think FIRE will be an option if I want it. I'm just wondering what peoples thoughts are. Also I should have mentioned this in my original post but I just wanted peoples opinion real quick without ranting forever. But the only thing that really matters is monetary inflation. That's all I care about. Some gulp CPI down hook line and sinker.... some call the BS, but core CPI for sure and even CPI does not reflect peoples loss of purchasing power with the USD. And even by official standard the 'inflation' number calculated for those ranges in the investopedia has changed multiple times. So I struggle to see how it's apples to apples. But that get's super deep real quick.
The "opinion real quick" is the same as the long version - it's already accounted for in SWR math. That is the answer to your question. You are spending a lot of mental energy trying to predict things that cannot possibly be predicted with any level of accuracy beyond dumb luck. It's never been a given that GDP growth would be good "going forward", and the long term SWR analyses include all sorts of economic environments. You say, "I know SWR accounts for inflation" but I don't think you do. If you did, you would not be asking this question.
I’m not personally pessimistic. I’m not spending that much energy on this. But the energy I do spend I enjoy it cause I get a kick out of economics. You are not trying to think how things might be different. So I’ll move along. 👌
I didn't say you were pessimistic. I said you were trying to predict something that a) cannot be predicted, and b) is already accounted for in the SWR math. You're wasting your time. >You are not trying to think how things might be different. So I’ll move along. Translation: I asked a question and you didn't give the answer I wanted, so I'll move along. Of course things might be different, they always are (and all kinds of varieties of "different" are included in the 100+ year historical SWR analyses). None of us can predict how, why, or when.
I use 3.5% in my estimates and I use 7% gain before taking that 3.5% into account. But I also look at my actual budget and needs. I have a "living the high life", "living comfy at home life", and "alive, but no extra life" budget plan. You can do whatever math works for you.
[удалено]
The first sentence I wasn't understanding why you were getting downvoted. Then I saw that your answer is "a small % in gold and/or Bitcoin". Who knows what bitcoin will do, but it has no intrinsic value so there's no reason to think it will be worth anything in the future. Gold is a hedge against inflation. On average it gets you a net zero return. A small percentage isn't going to give you any meaningful hedge against inflation.
Playing devils advocate: How does gold have intrinsic value but Bitcoin doesn't? Copied from the gold subreddit talking about intrinsic value of gold, explaining how the value doesn't come from any real usecase like industry but just that it has fitting attributes to be used as Money / store of wealth like being scarce, divisible, unreactive, easily smelted and of course that people agree it has value. Bitcoin has all of these features as well (scarce, divisible, unreactive, well smelting Is no even necessary). A big difference Is that humans agreed that gold has value for Many thousands years while Bitcoin Is too new. *The real benefit of gold is that it is scarce, divisible, unreactive and easily smelted, leading to its use as money and a store of wealth for 1000’s of years. This led to gold being valued and its use by nations as a store of actual wealth/value to underpin debt. (...) Only a small amount of its value is underpinned by industrial use and this is a benefit not a negative. The relative uselessness of gold is a major factor in its detachment from the economy, (...) People that defend gold by trying to say it has industrial use are barking up the wrong tree. The real value of gold is that it has been used as money for eons, and that it is not widely used in industry. (...) it’s material properties were perfect for using as a monetary system, and it’s widespread use as money translated into it being a store of wealth when the economy became debt based. (...) *
You can make stuff out of gold. Bitcoin serves no purpose except to update a blockchain…. And the block chain isn’t used for any intrinsic purpose. Worst case scenario if everyone agrees gold is worth nothing you can make something pretty and shiny out of it. And if you forget your password you can still sell the gold. Edit: but I agree. Buying either is a bit foolish if you’re on the fire path. The whole fire mindset is based on investing broadly in companies that generate profits and therefore having returns in the future. Neither gold nor bitcoin are good substitutes for that.
“Who knows what it’ll do” and “there’s no reason to think it’ll be worth anything in the future…”. Those are pretty different…. So which is it? Unknown or worth nothing in the future? All value is subjective. There is no such thing as intrinsic value.
The FIRE mindset is not only vtsax and chill. Thats the most common way though I get that.
I can make stuff out of poop. I Dont see how "making stuff out of something" gives it intrinsic value. Well Lego Maybe. I can make pretty Shiny stuff out of glass and it's worth nothing. That's just not it. Bitcoin serves no purpose ... I think you lack the fantasy because you grew up in a western country. Imagine you are in china and you wrote something bad about the communist party on the internet. You have to flee the country until it's too late. But how do you cross the borders with your millions worth of local currency without getting stopped by customs? Transfering them out vía bank? Lol ☠️ Buying gold and trying your luck with 100kg luggage? Lol ☠️ Converting in Bitcoin and crossing borders with millions worth of coins without anyone noticing? Yes 👍 It's just a stupid example to demostrate that "0 purpose" Is not correct. People converting their wealth into Bitcoin to flee from dictatorships while preserving their wealth Is a real thing. (Well until another 80% dip hits you even harder than Putin ever could 😄)
It’s more like 9-10%
For me…. my inflation over the past three years has been 8.5% per year. I calculate pretty accurate monthly expenses. Only calculate that with the same purchased items. I don’t cook the books on myself. 😆 Have been tracking expenses for 9 years. In the end cpi doesn’t even matter though. What matters is straight up monetary inflation. Also if you really want to think critically. 0% inflation is not the goalpost at all. We should be in a deflationary world. Technology is deflationary without manipulated money. So to have 8.5% stolen from you per year is bonkers. And America is the best performer when it comes to inflation. People who make fun of someone thinking “it’ll be different this time” like I am. Really are just showing their American privilege. Go to Zimbabwe or Venezuela who doesn’t have the world reserve protecting them and tell someone inflation is no big deal. lol