Of course, I also gave up working a few years ago, so I live on a "fixed income," supplemented by a little freelance work and a few consulting jobs. I can afford my lifestyle now. But I wonder, what happens in 10 or 20 or 30 years, when I don't have any supplemental income, and prices are a lot higher than they are now. Will Social Security keep up? Will my investments produce enough income?
I got thinking about this because yesterday I heard on my car radio that in 1980 a Corvette cost around $12,000. Today it's priced at about $60,000. The price of the car has gone up 5 times. I recalled my own experience. When I bought my first new car, a Saab in 1979, it cost $6200. Today, a Saab sets you back a little over $30,000. Again, it's increased by a factor of 5.
Earlier this year, I bought a new Acura TSX for $28k and change. So at that rate, in 30 years that new car is going to cost over $140,000!
How about a house? The house I live in is worth, according to zillow.com, roughly $600k, slightly above average for my area of New York. It was built at the end of the '70s when it sold for $60,000-and-something. That's a nine or ten-fold increase, even accounting for the recent slump in real estate. At that rate, in 30 years the house will be worth $6 million!
Of course in 30 years, if I'm alive at all, I'll be too old and decrepit to drive, and the only people interested in the value of my house will be my heirs. But I'll still want to eat or mail some Christmas cards or help my grandchildren pay for college. And I'll surely be interested in the price of medical care. So if prices continue for the next 30 years the way they have in the past 30 years (and I'm not predicting they are . . . could be better, could be worse) this is what reality will look like:
Item Cost in: 1980 2010 2040
1 gal. milk $ 1.60 $ 3.29 $ 6.77
box of cornflakes $ .69 $ 2.99 $ 14.29
book of 20 stamps $ 3.00 $ 8.80 $ 25.80
15 gal. tank of gas $17.85 $47.85 $171.00
1 yr. priv. college tuition $5,600.00 $35,600.00 $226,300.00
5 days in the hospital $635.00 $25,000.00 $984,000.00
Consumer goods index $100.00 $282.00 $795.00
Average mo. SS check $320.00 $1,170.00 $4,300.00
S&P stock index 115 1,255 13,700
These figures, by necessity, are estimates. Some of them are almost unbelievable. Nobody thinks, given the pressures on Social Security, that our checks will rise to over $4000 a month. And it really is hard to believe that a routine hospital stay will cost a million dollars. But then, who in 1980 would have dreamed that a year in college would cost $35,600 . . . plus room and board!
I don't mean to scare you. But forewarned is forearmed. And, hey, look at the bright side -- at least we'll be able to eat a decent breakfast!