7 Ways to Stay Ahead of Inflation in Retirement

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I plead guilty to being a fan of Krugman and I am happy to be tagged a “post-neanderthal” (very post) though I think something different was intended.
I am not a fan of hyperinflation, having talked to German victims of it years ago, and I do not know anyone who is: I am willing, however, to tolerate a measure of mild inflation along the lines I described already, but only, as I made clear then, as a last resort to repair the damage done by Cheney et al. The alternative is another depression, comparable to Hoover’s but not, I would hope, as severe. That may be overly optimistic: if we keep on listening to the House Republicans, we may find out.
It is worth remembering that the Clinton administration left behind a surplus. That was part of a Keynesian (excuse my filthy language) counter-cyclical policy. The hot topic then was whether the national debt would be paid off in the not-too-distant future. The fiscal responsibility crowd, of course, embarked on a binge of irresponsible tax cuts which ensured that that problem would not arise.

Brian A Jones of NY 1:25PM June 11, 2011

All you lovers of inflation, lovers of Paul Krugman, and other confused post-neanderthals might benefit from this passage I just came across.
"Since striking workers were paid benefits by the state, much additional currency was printed, fueling a period of hyperinflation. The 1920s German inflation started when Germany had no goods with which to trade. The government printed money to deal with the crisis; this allowed Germany to pay war loans and reparations with worthless marks, and helped formerly great industrialists to pay back their own loans. This also led to pay raises for workers and for businessmen who wanted to profit from it. Circulation of money rocketed, and soon the Germans discovered their money was worthless"
Sounds familiar, huh? Is our great student of history and depression (Mr. Ben Shalom) going to save us or do the exact opposite?
What will economically MURDER retirees is inflation. It will murder them. And unless Congress feels the hand of God (i.e. nonreelection), that's what retirees are looking at. That's the cold reality, no matter what smug Keynesian drivel is thrown up to justify the slaughter of the elderly by targeted inflation.
So, the 8th way to stay ahead of inflation: squeeze your Congressman to outlaw money printing - inflation itself. *Insist* on spending caps, and *freeze* them (don't index them for inflation - duh). Do not exempt "emergency appropriations" - rather, apply them against the cap, one-to-one.
Just say no to inflation, and tell your Congressman you'll settle for nothing less.

Another Actuary of WA 5:49PM June 10, 2011

Slow theft is theft. Sleep well at night with that knowledge.
P.S., smart-a: I'm not a "devotee of that crowd." I just decry theft by inflation. My parents raised me not to take from others.
However, if you are on the receiving end - where you profit from the fruits of inflation (most likely from the disbursement of those fragrant, freshly printed sheets of cotton, via entitlements or federal contracts) - your comments are elegantly understandable.

Another Actuary of WA 4:52PM June 09, 2011

Our problem is not the inflation which those terrible Keynesians will allegedly produce in the future. Rather, it is the inflation in the real-estate sector which the “fiscal-responsibility” crowd have already produced - the fruit of the Cheney mantra that “deficits don’t matter, Reagan taught us that.” To hear devotees of that crowd lecture us on Keynesian policy folly is really too much.
As the country tries to pick up the pieces, I suggest we face a distasteful choice: either permit significant inflation in other areas—essentially allowing other sectors to catch up with what has happened in real estate—or suffer major deflation in the real estate sector. My guess is that we will choose, or perhaps have already chosen, the former, though without admitting it.
It will be interesting to see where we are a decade from now compared to countries such as Spain and Ireland. They are facing similar problems, again largely rooted in real estate, but they do not have the same option as we do. They gave up independent national monetary policy by adopting the euro.
Paul Krugman advocates lifting the inflation target. I think he is right though if his advice is accepted and it succeeds, he will still be denounced by the Neanderthals including, I expect, Another Actuary of WA.

Brian A Jones of NY 4:41PM June 09, 2011

Mr. Harrington is in some tragic respects correct. Many will never be able to obtain enough to be assured that they can coast - ever. Current Keynesian policy folly is to steal from savings by inflation. The Keynesian dictum is:
- Don't bother to save; consume to the max (no, go BEYOND the max)
(the mentally defective Keynesian centerpiece)
- Ergo, work until you drop.
Most sadly, there are no exaggerations above. This is what you've got.
This condition has been brought to you as a public service by the U.S. Federal Reserve, U.S. Treasury Department, and impotent/complicit U.S. Congress, to protect your financial stability, prosperity and employment.

Another Actuary of WA 3:13PM June 09, 2011

Refuse to retire. Picasso never retired, nor did Brahms, Wagner, Tolstoy, Einstein, or Edison.
The only retirement should be on grounds of disability.
Otherwise, one should work (at something one enjoys doing) until one dies.
That eliminates the problem of inflation in retirement - since there is only disability retirement in which to experience inflation.
As to the assets accumulated with the goal of using them for retirement, they should be available to those who own them for any purpose.

Jan Harrington of NY 2:50PM June 09, 2011

Convince wouldbe investors that they need to 1) live at their current standards/income forever, 2) devote excessive amounts of their income to buying securities (diversified and re-balanced regularly), 3) ignore the fact that they may live within their means, regardless of strong income, thus need less than they currently earn, and 4) accept the advice of people who get compensated to convince wouldbe investors to pay to invest in risky markets that have failed to deliver real profits, and even created a loss due to fees and taxes. Finally, ignore any examples you may see that suggests that previous generations' retirees have mastered ways to function after their working years-- many without pensions, and a couple of million dollars in the bank. If what they say is true-- that we'll need to keep pace with 3% to 4% inflation over the next decade or two, then as tracer2 of MD says, today's low fixed rate mortgage ought to be a predictable safe harbor and an asset. I sure wish someone would create a realistic assessment based on how others have done it successfully in the past, and not just promote hyper-savings by depicting massive shortfalls in cash to get through the Golden Years. Maybe it's as simple as A. Save Money, B. Eliminate Debt, C. Fix your costs where possible, and D. Scale to your new economy.

15YEARS of VA 12:46AM May 21, 2011

The suggestion that a person should pay off a mortgage to be better positioned for inflation is surprising...maybe a bit nutty. If I have a 30 year mortgage loan right now at 4 percent, and interest rates (inflation effect) rise to 10 percent, my mortgage becomes a real bargain with payments based on 4 percent.
Another idea, to reduce spending now for food and other living factors to prepare for inflation is a bit strange too. I would accumulate savings (maybe) that would erode in value with inflation. I think it would be better to eat well now and be prepared to economize if inflation demands it later.

tracer2 of MD 4:15PM May 20, 2011