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The health care inflation projections also offer a strong argument for keeping some part of client portfolios in equities, says Katherine Roy, chief retirement strategist at J. Consider modeling health care expenses differently than general expenses, and plan conservatively.
A Separate Consumer Price Index for the Elderly? - Digital Library
The second phase is less active but with more health care costs, and the third definitely has less overall spending but health care costs rise. See chart above. Planners can add value by learning how to assist clients with complex Medicare policy shopping options.
This starts with the basic question of enrolling on time to avoid costly penalties, and deciding whether to go with traditional Medicare or with Medicare Advantage, the all-in-one managed care alternative. The trade-off is flexibility, since enrollees must use in-plan health care providers. The inflation rate experienced by seniors is higher than that of the overall economy. The culprit is health care.
The Context and the Case for Chained CPI
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What is Core Inflation and Why Doesn’t It Include Food and Energy?
Sponsored Content. It also adjusts that price change for changes in quality or features.
An example on the Labor Department web site compares televisions over time. Because of the much higher quality of the current television, however, the CPI says the price declined by 7.
What Is the CPI?
More and more items in the CPI receive a hedonic adjustment. The BLS web site lists 21 categories of items receiving hedonic adjustments. You might be surprised that different types of clothing and apparel comprise more than half of the categories that receive the adjustments.
As a retiree, you might like the improved quality of an item. But the amount of cash you pay for the item matters greatly to your spending plan. You should assume your inflation rate will be higher and put more of a cushion in your plans.
About the Author
You can safely assume that almost everything you buy will increase in price over the years, and that for you the overall increase is likely to be higher than the CPI says. I am the editor of Retirement Watch, a monthly newsletter and web site I founded in I research and write about all the financial issues of retirement and retireme. Share to facebook Share to twitter Share to linkedin.