SCENARIO SIMULATOR
Inflation Reality Calculator
"3% inflation" is a single number that hides the actual problem. Healthcare has run 5-7% historically. Groceries 4-6%. Travel and services 4-5%. Housing 3-5%. Tech goods deflate. Treating retirement spending as one blob masks the categories that genuinely outpace what most plans assume.
Default category inflation rates derived from long-run BLS CPI sub-indexes. Adjust per category for your view. Social Security COLA defaults to 2.5% (long-run average). Educational only.
Today's Annual Expenses
Enter what each category costs you annually right now. Default inflation rates shown next to each input. Adjust if you have a stronger view.
Long-run avg ~2.5%
Optional, for COLA overlay
Why "3% Inflation" Misleads Retirement Planning
BLS CPI is a weighted average across all categories of household spending in roughly the proportions an average urban household consumes them. Retirees consume those categories in different proportions. They spend more on healthcare and less on transportation. Their inflation-experienced rate is structurally higher than headline CPI.
Healthcare costs have outpaced general inflation by 1-3 percentage points per year for decades. Compounded over a 25-year retirement, that's the difference between healthcare being 18% of your budget and 35%. The 4% rule, which assumes flat 3% inflation across the board, quietly underestimates this.
Defenses: budget for healthcare growth at 5%+ real, hold inflation-protected assets (TIPS, I-bonds) for a portion of fixed income, plan for spending flexibility (most retirees underspend the formal 4% withdrawal in non-healthcare categories anyway). Pair with the portfolio stress-test simulator for the full picture, and the retirement projector to model the savings target.