What rate of inflation have you put into your RetireEasy LifePlan calculations

There’s new evidence today that while using overall CPI or RPI may provide a rough guide to how much your cost of living has gone up in the last year, it can never be an absolutely precise measure – because not everyone makes the same purchases.

The Government’s “target” for CPI is actually 2% – more honoured in the breach than the observance in recent years, and one wonders just how often the Governor of the Bank of England is actually being asked to explain missing that figure…

According to analysis from the first of Fidelity International’s generational inflation series, Millennials (or under 30s to you and I) suffer greater inflationary pressures than any other generation, with their actual inflation rate three times higher than retirees and almost double the UK’s average inflation rate.

In the 12 months from March 2015 to March 2016, under-30s suffered a real inflation rate of 0.9%, compared to 0.4% for both the Gen X (30 – 49 years old) and Baby Boomer (50 – 64 years old) generation, and 0.3% for those over 65.

While more older people are immune to rises in rent because they own their own home,  and dine out less – so benefiting from the overall reduction in food prices in the last year or so, Under-30s spend proportionally more on dining out, smartphone and internet subscriptions, rent and household bills.

But by far the biggest weekly expense is education, which significantly drives up their average cost of living.

In contrast, those over 65 spend a bigger slice of their income on categories that experiencing lower inflation like food and non-alcoholic drinks.

And finally…

It is interesting to note that RetireEasy LifePlan users are on average predicting that in the long term CPI will average 2.2% – we’d love any feedback on what our readers think about this thorny issue!

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