Posted on Monday, 18th June 2012 by Dennis DampPrint This Post
My wife and I moved last month and in the process we went through everything to purge what we didn’t need. We ended up donating, giving away or throwing out many things we accumulated over the decades. I kept all of our check registers back to the late 1960s and as we went through them, Mary and I were amazed at just how things have changed these many years later.
The changes I’m referring to aren’t subtle. I remember my mother telling me that in the early 1930s she could buy an entire meal at a restaurant including a drink for 35 cents! Our Aunt Mamie’s mother, Mary’s grandmother, lost their home in the 1930s because she couldn’t pay the $11 a month mortgage! In the early 60s I vividly recall stopping at a local drugstore in our neighborhood to order a cherry phosphate for 5 cents.
Back in December of 1971 we paid $15 a week for 5 day a week 9 hours a day childcare; my wife worked while I was in the Air Force. A typical gas station fill up for our 1963 Chevy Impala with a 20 gallon tank cost $4.60 to $8.70. Here is a list of some of our 1971 typical expenses:
- Rent $113
- Telephone $15.36
- Gas (heating) $5.00
- Electric $7.79
- Trip to grocery store $8 to $15
- Doctor visit $5
Our 1971 check register’s balance ranged from $6 to $300 with most days well below $100. In 1975, when I first transferred to the FAA, I was living in a boarding house in Phillipsburg PA, paying $20 a week for rent. A local restaurant offered a breakfast of 2 eggs, home fries, toast, and coffee for 75 cents!
Today prices are something to marvel at especially for those of us who remember the cost of things 40 plus years ago. Many today, especially the young, think nothing of paying $5 for a cup of coffee or $50 for a manicure. We are numb to the cost of things as we pay $70 to fill up our cars and shell out $200 at the grocery.
The reasons for the obvious inflation are diverse and difficult to understand for many. Retirees and savers of all ages get it on both ends. As prices continue to escalate our savings are worth less each day as government continues to print money without any thought to the long term consequences. Many long for the days when they could get 5% on bank savings accounts and CDs paid more than enough to compensate for inflation.
What many don’t understand is that the low interest rates are a tax. I listen to Hefren Tillotson’s “Your Money and You” show each Sunday morning, hosted by Jim Meredith. Their June 3rd show explained just why interest rates are low and are in effect an onerous tax on all of us. If you listen to the June 3rd pod cast he addresses this when he answers the first caller’s questions, about 10 minutes into the show.
Jim explains that a tax is a transfer from you and me to the public sector. The loss of earnings on bank deposits is effectively a silent tax. If you had $10,000 in the bank you made 5% ($500 a year) several years ago. The earnings on that $10,000 today is lost due to the artificially low interest rates and is transferred to federal government in the form of lower borrowing costs. This is basically a way for the government to transfer your wealth to them. The government is keeping interests rates low so they can continue to sell bonds (borrow money) at extremely low interest rates thereby reducing the amount they must pay bond holders (creditors).
Jim also explained that each day the federal government borrows around 5 billion dollars and 3 billion is purchased by the Federal Reserve with money they simply print out of thin air to reduce the deficit! If interest rates reset to normal levels the deficit would double to 2 trillion a year. The impact is that the federal government is paying less to borrow money and you are earning much less on your money so they can borrow more and pay less.
Here are ways to be better prepared and possibly earn higher yields:
The long and short of it is that we all have to be cautious and watch what we spend to ensure we have a safe and secure retirement. Can you imagine how bad it will get for retirees if costs continue to rise and the value of our savings shrinks drastically with inflation?
The best way to protect ourselves is to have little to no debt and savings and investments available for when you will need them. Hopefully this country will change course and stop trying to borrow its way out of debt, only time will tell.
Recent Forum Host Articles:
- Important Issues Regarding Your Benefits – By Paul Risser, host of our Financial Planning Forum.
- Early Out Offers Revisited Plus Updates by Dennis Damp
Request a FREE Retirement Benefits Summary & Analysis from a local adviser. A sample analysis is available for your review. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. This service is not affiliated with www.federalretirement.net.
Visit our other informative sites
- Federal Government Jobs & Career Center
- FREE Federal Employee’s Retirement Planning Guide
- Federal Employee’s Career Development & IDP Center
- Post Office Jobs & Career Center
- Job Search – All Sectors
- Environmental Health & Safety Jobs Center
- Nuclear Jobs & Careers – High Paying Jobs
- Stolen Car Plates & Recovery Guide
- Educational Opportunities
- Take Charge of Your Federal Career
- The Book of U.S. Government Jobs
Distribute these FREE tools to others that are planning their retirement
- 2012 Excel Leave Chart (target 2012 retirement dates and determine exact leave balances for each date)
- How to be Emotionally and Physically Prepared When You Retire
- How to be Financially Prepared When You Retire
- Master Retiree Contact List (Important contact numbers and information)
- Survivor’s Guide
- Estate Planning Guide (An 11 part series that will help readers prepare for retirement, understand basic estate planning techniques, and compile their personal “Survivor’s Guide” binder.)
The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.
Last 5 posts by Dennis Damp
- The 2016 COLA and Your Annuity - March 7th, 2015
- Have You considered Hiring A Financial Adviser? - February 13th, 2015
- 1099-R Forms, FREE Tax Software, and Updates - January 27th, 2015
- CAUTION - Do This Before You Retire - January 23rd, 2015
- Are You Ready For Retirement? - January 12th, 2015
- TSP Survivor Withdrawal Options - Update - January 5th, 2015
- Selecting Your Retirement Date - November 25th, 2014
- Connecting to FEHB Open Season Online - November 12th, 2014
- 2015 COLA Announced Plus FEHB Updates - October 22nd, 2014
- Social Security Statements, Medicare Sign-Up, COLAs, & the 2015 Pay Raise - September 24th, 2014
- Medicare Enrollment - The Process & Options - August 22nd, 2014
- Did You Hear That? - A Fitting End to A Frustrating Problem - August 7th, 2014
Print This Post