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URL:  https://boards.fool.com/hi-2old-i-actually-use-a-dual-stage-inflation-22043090.aspx

Subject:  Re: Inflation Rate Poll Results Date:  2/9/2005  5:09 PM
Author:  babyfrog Number:  44443 of 97463

Hi 2old,

I actually use a dual stage inflation projection in my analysis. I have one stage that projects "inflation in my working years", and another that projects "inflation in my retired years." The last time I ran my numbers, I used 3% for my working years rate and 5% for my retired years rate.

My rationale for the dual stage approach is that most of the high-inflation items (save energy and food) seem to be in the "services" side of the economy. The price of goods seems to be relatively stable, especially when compared to the rapid price increases in medical and other personal services. In my working years, I expect to be less dependent on personal services, only to see those needs increase over time as I age. Since as I age, more of my money will be going towards high inflation services, I expect my inflation rate to pick up over time.

If I had to make a wild guess, I would probably guess that the younger among us are probably using the lower rates, whereas the more seasoned among us are likely using the higher ones. Why? If my analysis is correct that the older folks get the higher the proportion of their money gets spend on services, then those who are experiencing the higher inflation associated with skyrocketing service costs are those more likely to use a higher inflation rate in their personal analyses, because that's what they're seeing in their lives.

Regards,
-Chuck
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