Retirement IRA plan

Hi Boris, how well does this anticipated retirement income match your expenses? It's hard to comment very intelligently without this info.

I think the free asset allocation tools at the sites linked at

help one get some perspective on how to invest one's retirement funds. It's unlikely any of them recommend all insured money funds at this point.

My pension alone should cover listed expenses plus all other essentials, based on today's cost.

People are increasingly living into their 80s, and even 90s. You are 55, so you could potentially live 30 or more years. With that kind of investment horizon, I think you still want a good chunk of your nest egg in the market. You cannot afford to take the risk of inflation eating it up. Maybe work with your broker to find a way to hedge it a bit, or put in a stop loss to sell out if the market does take a big dip (though that is often the worst time to sell).

If you want some comparison of what can happen in 30 years, think back to what prices were in the 1970's and 1980's. The 30 and 40 cent gas is now ten times the price, $30K houses are now $300K, and the 19-cent hamburgers are over a buck, and often over $5 at a sit-down place. Do you still want to earn 3% to 4% when a burger could be $50, a starter home $3-million, and property taxes $30,000 a year?

-john-

"John A. Weeks III" wrote

God I love this historical financial data chatter. The numbers seduce me like a high class trash novel.

Admit it: A number of you regulars feel the same way. ;-)

Your intention is quite honorable, that one needs to account for inflation during retirement years is certainly true. Your suggestion that 30 year's worth of inflation is 10X is a bit extreme. From

the 30 years from 1975 to 2005 showed prices rising from an indexed 100 to 374.56, so 3.75X as a factor, or 4.5% geometric average (i.e. the 30th root of 3.75). The 10X number suggests 30 years of 8% inflation, that's hardly likely to happen. I think the number we're using here for forecasting purposes is 3%, close to 2.5X over the next 30 years, and a bit more manageable for planning purposes. Even housing didn't do the 10X you suggest, I have a nice graph lifted from the Chicago Mercantile Exchange, showing housing rising from a Median $50,000 in 1981 to $200,000 in 2005. Funny thing is this; even though that's 6%/yr over the period, the size of the homes the data is based on is not normalized, the data is for home sales not price per square foot. Homes grew 1.5% over that time, and so Housing costs matched inflation precisely. I posted this on my site along with the data source, Like Elle, I love pouring over the numbers. Unlike The Who, I hope die die after I'm very old.

JOE

Where your argument breaks down is that you cannot take the statistics of a population, and then impose that on any one member of that population. The reason is that no one is likely to be exactly average.

For example, house prices overall in the US may have gone up an average of whatever you said. However, people who live in Manhattan, New York, and Manhattan, Kansas, will both see those numbers as absurd. Prices in Manhattan NY went up far more than average, while the prices in Kansas were stable or even went down in places.

The numbers I quoted above are 3 examples taken from real life where I live. You cannot call me a liar by quoting a statistical average when these items are actual fact.

Both Pete Townsend and Roger Daltrey are in their mid-60's and show no signs of slowing down.

-john-

I did not call you a liar. I said "that 30 year's worth of inflation is

10X is a bit extreme." I think it's fair to cite median numbers, especially for statistics regarding inflation. To your point, warning the OP of the impact of inflation over the long term is warranted. In the old days, people retired at 62 and died at 67-70. That made for some good Social Security calculations, and inheritances. Less than 10 years worth of inflation wasn't the concern it needs to be today. But I think preparing for 8%/yr inflation is excessive.

I was only referencing the line from "My Generation", 'hope I die before I get old'. Well, we're all older that that now. JOE

While the point is sound, I think we need a reality check here. In the 1973 gas lines, regular gas broke 50c/gallon, well above the 30-40c mentioned; current prices are now about $2.30 (per CNBC today, though I think it's higher than that).

In 1976, McD's was giving out Olympics game cards for free Big Macs, fries, etc. I won so many of them that I still have a hard time looking at the stuff. But I can tell you that quarter pounders were running about 89c, 99c with cheese. Today, you can get a double cheeseburger for about the same price (okay, so it is missing the "special sauce" :-)

What seems to have really gone up is anything labor intensive - education, healthcare, etc. But "manufactured" goods like fast food and televisions don't seem to have gone up nearly as much.

Mark Freeland snipped-for-privacy@sbcglobal.net

John's 19 cent burgers were "White Castle" 1 ounce meat burgers. I believe a regular McD is 1/5 lb, about 3oz. Nice gas chart at

has unleaded gas at 61 cents in 1976, $2.30 in 05, not quite 4X, hardly 10X. As far as the housing number is concerned, I don't doubt there are places that saw 10X in 30 years. I suggest the OP shouldn't plan to retire to one of them. JOE

I am sure that you can find numerous examples. For example, I lived in a home in the 70's that was built for $30K, and was on a $5K lot. That same house would go for $325K today.

-john-