Protecting Purchasing Power — Useful Finds #14

Hi from Stefan,

Welcome to the fourteenth issue of this biweekly newsletter.

Nothing here is sponsored or written for compensation.

Inflation

Edward McQuarrie and William Bernstein discuss inflation in Money Illusion — A User’s Manual.

This chart shows how dramatically the character of inflation has changed across monetary regimes. During the gold standard era, prices were volatile with frequent swings between inflation and deflation. But cumulative average inflation over decades was close to 0%. Since the transition to a fiat currency system in 1971, consumer prices have increased by nearly 4% per year on average. Maintaining purchasing power has become a much more difficult challenge for retirees.

It’s a useful reminder that “money illusion” isn’t just an academic concept—it has materially shaped the retirement experience of everyone who has lived through the past half century.

The No-Regrets Retirement

Diane Harris at Kiplinger’s writes on how to Master the Art of Spending in Retirement and why waiting too long to spend your savings is a bigger risk than running out of money. She mentions a few ways retirees can build confidence in their spending plans: annuities, working with an advisor, and financial calculators. The Best Third emphasizes building an inflation-protected income floor.

Whichever method you choose, be sure to take inflation into account when planning.

The One Big Beautiful Bill Act

Whatever your opinion on the policy merits of the OBBBA, it has made financial planning easier. Kevin Corbin in Barron’s explains the highlights of the Act and how its removal of sunset provisions on certain aspects of the tax code has made long-term tax planning more predictable (at least until Congress decides to make other “permanent” changes).

The Best Third’s tax estimates incorporate the OBBBA rules.

Canadian webinar

I recently joined TD Direct Investing’s Robert Moysey in a webinar for Canadian investors. In preparing for it, I learned about Canada’s retirement system—including how the Canadian government’s discontinued issuance of inflation-protected Real Return Bonds makes retirement income planning there more challenging than it is in the U.S. It gave me a new appreciation for just how fortunate U.S. retirees are to have a complete market for TIPS.

The webinar video is here.

Warmly,
Stefan Sharkansky, PhD
Founder of The Best Third