Transcript:
Tom Vaughan:
Do you do my pensions keep up with inflation, especially in like a high inflation or environment like now? Yeah, we see a lot of different pensions. You know, they’re not as common as they used to be used to be that kind of private pensions like IBM and GE, and what have you that were out there. They were really nice pensions, but they had virtually no growth whatsoever. A lot of the public pensions, you know, civil service, or teaching and you know, those types of things, they do have a cost of living increase built in there. But that might be misstating it because it’s really just a simple flat amount that gets pushed up every year. So it’s the same amount every single year, which comes out to about, on average, from what I’ve seen, maybe a third of inflation, and a lot less during these periods of time when we have high inflation. So generally speaking, pensions don’t keep up. So security, which isn’t technically a pension, but it has some cost of living increase in it, it keeps getting adjusted, doesn’t quite match the total cost of the increases that people see. But it’s probably the best one. And you know, that might come under fire at some point, because it is the best one. And it’s expensive people living longer means that they have to pay more and more and more on those.
So, you know, we had a 5.9% increase on Social Security for this year, which is pretty phenomenal. But that, that that’s one of the reasons why when we do a financial plan, you really have to have something that’s going to keep up with inflation. You know, stocks are going up and down, we can have crashes that happen sometimes, and all these different types of things. But inflation is a pretty constant. There’s not many times in history where we saw big periods of time where prices were going down lots of periods of time where prices go up. So I mean, there’s just some great stories from clients, you know, from, you know, going way back. And, you know, I think I’ve told the story before, but we found the bids for my grandmother and grandfather’s house that they built in 1936, here in Willow Glen, and we found them in the basement. So they you know, the bid for painting inside and out labor materials, everything was $18. And the bid for you know, plumbing inside now including fixtures, labor, all of it. $20. Right. And, you know, I built this house that you’re looking at here in Willow Glen in 1997. And it was it was substantially more so, you know, over a period of time and your retirement should be if you’re you know, fortunate enough with your health and your longevity, you know, in that 15 to 40 year range, you’re going to have a lot more expenses.
And that’s where pensions, need some help. I think they’re fantastic. They’re really useful. But you need to have that other aspect growing out there. And stocks and real estate are two of the key things that seem to do pretty well against inflation long term, you know, because they grow at a higher rate than inflation, historically. And so that’s where you need to have some of that exposure to offset what you’re doing with your pensions. And we can tell that very directly inside of financial plan, right, we can go through and look and see what exposure you should have to make your plan work, including your pensions and some projection for some growth if there is some, but usually less growth and inflation, right. That’s kind of how it works. Yeah, that’s a good question.