Are your expenses outpacing your earnings currently?

[progree]

20. I'm retired, so my only income is Social Security. I supplement that with drawing down my retirement accounts

Last edited Thu Nov 9, 2023, 02:14 PM - Edit history (1)

My Social Security is about the average amount and doesn't begin to cover all my expenses..

My retirement accounts -- both stocks and bonds have gone way down in the past 2 years. I tap them to cover the spending gap.

On top of its reduction in nominal dollar value, its purchasing power has been reduced 12% in the past 2 years, based on the CPI. Meaning that $100 today buys what $88 bought just 2 years ago. So even if my retirement accounts had been flat, their real value would be 12% less in purchasing power.

So its a double whammy.

EDIT - I looked at some of my bond funds - they are down 20% in value in the last 2 years. But given that they earned about 7% in interest payments over those 2 years (averaging 3.5%/year), those accounts are down by 13%. On top of that, the purchasing power is reduced 12% by inflation.

Combining the two impacts (the reduction in the nominal dollar value of the account, and the reduction of the purchasing power of a dollar), I've had a 23% reduction in the purchasing power of those accounts.

1-0.13 = 0.87,     1-0.12 = 0.88
0.87 * 0.88 = 0.77,   1 - 0.77 = 0.23

And these are bond funds, supposedly a self haven investment.

Fortunately the ones I have are all intermediate term bond funds. Longer term bond funds have been slaughtered.

Note this isn't Biden's fault - Federal Reserve policy sets the interest rate, not the White House or Congress or the Supreme Court (yet)