I just read this on Market Watch
https://www.marketwatch.com/story/w...our-retirement-savings-9e0ba615?mod=home_lead
"U.S. inflation is officially
at 3.8%. But if you’re close to retirement or already there, the real rate feels closer to
8% after weighting a retiree budget to account for the rising cost of healthcare, insurance, property taxes, food and energy.
Meanwhile, most retirement plans still use outdated assumptions — and quietly drain your savings.
With the war in Iran unresolved and household and government bills both rising, U.S. inflation will likely stay higher for longer than many retirement plans assume. Even if you’re 10, 15 or 30 years from retirement, these forces are already reshaping what your future dollars will buy.
The price increases over the past five years have shown a trend. Here is why. Inflation does not mean prices go up and then come back down. Unless we experience actual deflation, which is rare, painful and something the Federal Reserve actively works to avoid, prices typically stay at their new higher level.
The Fed targets 2% inflation, not zero percent. Its job is to slow the pace of future increases, not to roll prices back to where they were before. When the headline inflation rate falls to 3.8% from 9%, it simply means prices are rising more slowly from their elevated floor — not that your grocery bill, rent, or insurance premiums are returning to 2020 levels.
Far from it. Fuel oil has surged 54% in the past 12 months. Medicare Part B delivered its largest dollar increase since 2017. ACA healthcare marketplace premiums jumped an average of 26% for 2026 coverage. Beef prices are up double digits. And the Strait of Hormuz is heavily restricted, meaning oil risk premiums flow into nearly every product you buy.
The latest
BLS consumer-price-index reading shows headline CPI at 3.8% over the past year — the highest since May 2023. Energy costs rose 17.9% and gasoline 28.4%. That is the number flashing on financial news and baked into standard retirement spreadsheets.
But the inflation that actually matters to your checking account — healthcare, insurance, property taxes, food and utilities — is running significantly hotter. This inflation builds on the already elevated prices from the past five years, similar to how compound interest builds on principal. Only here, it works against your cost of living, with little indication of a broad reversal.
Prices in these categories do not typically come back down. They compound. And the gap between that headline number (3.8%) and retirement reality (8%) is widening at the worst possible time.
Why 8%? Applying the category inflation rates (healthcare near 10%, energy near 15%, transportation near 14%, food near 7%, property taxes and maintenance near 5%, and insurance near 8%) to a retiree budget weighted for actual 65-plus household spending patterns from the BLS Consumer Expenditure Survey produces a blended rate that’s close to 8%."
The article goes on, but you gt the idea. Their advice:
"What actually works
First, stress-test your current financial plan for 3.5% to 4% blended inflation — not 2% — with healthcare and insurance modeled separately at hikes of 5% to 6%. Reassess your spending model in varied budget categories. Discretionary spending tends to stay flat or decline as households age, while healthcare, insurance and property taxes do not.
Next, maintain an appropriate level of growth exposure in the stock market, consistent with your personal risk tolerance and time horizon. High-quality investments have historically helped provide some defense against rising prices. Keeping investment expenses low can also help preserve more of your returns over time.
A 65-year-old today has a real chance of living another 25 or 30 years. Someone retiring in 15 or 20 years has an even longer horizon to consider. The retirement plan that assumes temporary higher inflation is the plan that runs short of money at the worst possible time.
The Federal Reserve is not focused on rolling prices back to previous levels, and healthcare costs are unlikely to decline meaningfully in the years ahead. The war in Iran continues to push risk premiums in oil, food, freight and many products on the shelves.
This is the higher-for-longer inflationary environment that most retirement plans aren’t built for. Your retirement plan does not need to be perfect. It simply benefits from being realistic and honest about the inflation rate it is actually solving for."
