Neither my husband nor I work for the government or any pseudo-governmental companies so we are not getting an indexed defined benefit pension when we retire. We are not getting any kind of retirement benefit that will increase with the rate of inflation, other than our CPP and OAS. That makes it important to me to know roughly what rate of inflation we might expect in retirement because any inflation means that what our income can buy will diminish over time. So what was our personal rate of inflation for 2014 and will it impact our retirement plans?
It’s Worth Tracking Your Expenses Even If You Are Saving Lots of Money
We don’t budget the “normal” way. We plan on meeting our bills and saving for various short- and long-term goals and then we spend what we want. Our hobbies are low cost and very satisfying. So usually we end up with some extra that we add to our long-term savings.
We do track our expenses though.
And at the end of the year, I back calculate how much we spent on discretionary things to ensure it hasn’t increased dramatically over previous years.
Tracking our expenses lets me spot things like leaking faucets and the long-term trend downwards in the price of natural gas. That helps avoid complacency in planning for retirement: eventually that nat gas is going to go back up and probably even above what we paid in the early 2000s.
Adding up the monthly bills also lets me estimate what our personal rate of inflation was for the previous year or years.
How Much More Did 2014 Cost Us than 2013?
And the actual retail value was….
I knew we paid more for nat gas last year because of the colder winter (and various other reasons.) Our usage climbed about 20% and so did our cost.
And I knew that our property taxes had climbed again thanks to local government issues.
But I had no idea the total was so bad.
Our electricity costs, for example, rose 10%. But our hydro usage only increased less than 3%. Thanks Ontario Hydro! I remember they said they were going to shoot up the costs for all times of use but somehow I didn’t expect to see it actually happen.
And our water costs increased 10%, even though the volume of water we consumed stayed the same. Crumbling infrastructure” comes with a high price tag.
How Does This Personal Inflation Rate Affect Our Retirement Plans?
Well, it makes the beach house in the tropics look increasingly unlikely.
4.3% means we might have to work longer or spend less in retirement. We could try investing for higher returns, too, but discussing that would take a whole separate article.
Sheesh. I think I’d better go have a drink to recover from this shock. It can’t be water, though: I can’t afford a higher usage bill on top of the increased rate. Maybe I’d better go squeeze some of those crabapples still clinging to the tree: I can only hope they’ve fermented.
- Retirement Planning: What Rate of Inflation Should I Use?
- Budgeting for Retirement Requires a Good Estimate of my Personal Rate of Inflation
Was your personal rate of inflation close to the CPI that Ottawa calculates? Or do you wonder what on earth they buy and live on to get such a low rate? Please share your views on whether you are losing ground to inflation with a comment.