The Number Nobody Believes
Here's a question we'd love every listener to answer honestly: does inflation feel like 3% to you?
The Fed talks about a target of 2 to 3 percent. The official releases debate which basket, which sectors, what's "transitory." And then you step up to the checkout counter, see the number on the machine, and reality settles the argument. Prices are going up, they are not coming down, and we simply spend more to buy the same things. There is no way to deny it — you don't need a news channel to find it, it's staring at us every day.
This week's show is about closing the gap between the number they report and the number you live — where the inflation is actually coming from, why it isn't going away, and the four practical levers a retiree can pull to fight it.
Inflation vs. Affordability: The Distinction That Changes Everything
Here's the framing from the show that we'd put on a wall:
Inflation is the rate at which prices rise. Affordability is the level of prices you have to live with.
When something jumps from $100 to $125 in a year and the Fed then celebrates getting inflation "down to 2.5%," understand what that means: you now pay $125, rising 2.5% a year, forever. The old price never comes back. That would be deflation, and deflation isn't coming — nobody actually wants what that did to Japan. So the pain you feel today gets multiplied out over the next 15, 20, 50 years, from a permanently higher base.
That's why "inflation is coming down" and "things are getting affordable again" are two completely different sentences. The Fed is only ever commenting on the velocity of the increase — not the level. And the level is the thing your retirement has to live with.
Where It's Actually Coming From
Start with a barrel of oil. If you want to know what real inflation is, watch crude. Not everything is made from oil, but nearly everything you buy arrived on a diesel-powered ship, moved to a diesel-powered truck, rode a gas-powered forklift around a warehouse, and got delivered to your door by a gas-powered van. Oil is the one commodity every participant in the manufacturing and delivery chain touches — which is why a roughly 24% jump in diesel prices shows up in the price of everything, including that bag of chips. Crude itself is up hard in just the past month. The question haunting retirees: is this a temporary oil shock, or the front edge of another inflationary wave?
Then look at what the CPI undercounts. A retiree doesn't buy an abstract basket of goods. You buy housing, property taxes, insurance, healthcare, prescription drugs, food, gasoline, utilities, travel, home repair, and the occasional service professional whose bill makes you wince. Shelter alone is rent or mortgage plus insurance plus property taxes plus maintenance plus utilities — and every one of those lines is climbing. Mortgage rates just crossed back over 7% on the 30-year, which hits even the "I'm locked in" homeowner through home values, insurance, and taxes.
Shrinkflation is the quiet second tax. The gallon that isn't quite a gallon anymore. The container with two, three, four fewer ounces at the same price. The sticker says the price held; your pantry says otherwise.
Tariffs stacked on top. Whatever you think of tariff policy, the consumer math has been ugly: companies raised prices to pass tariffs through, the invalidated tariffs were refunded to those companies, and the raised prices never came back down. When importers absorb tariffs instead, corporate margins and the stocks in your 401(k) take the hit. Either way, it points back to us.
And the one nobody talks about enough: healthcare. Healthcare is retirement inflation. Medicare premiums, Part D, supplemental coverage, dental, vision, prescriptions, out-of-pocket costs — and then the big one, long-term care, where Medicare steps away after 100 days and care facilities can run $12,000 to $14,000 a month. The heaviest healthcare spending of your entire life tends to arrive in the last few years of it. If your plan hasn't priced that, it isn't priced.
What Inflation Rate Should You Actually Plan For?
The August PPI ran 5.4% year over year. Alternative inflation trackers that include the things you actually buy routinely read 6, 7, 8 percent and up — numbers that feel a lot more like the checkout counter than the official 3%.
We're not saying build your plan on any single alternative statistic. We're saying stress-test yourself. Take your plan and run it at an inflation assumption well above the Fed's stated goal — use the recent years' experience, not the long-run average — and see if it still works. Because here's the failure mode we see constantly: someone plans on 2 to 3 percent, reality runs far hotter, and the plan quietly breaks years before anyone notices. Planning at a realistic number isn't pessimism. It's the difference between adjusting on purpose now and adjusting under duress later — cutting the trips to the grandkids, or worse, cutting corners on your own health to keep them.
How to Fight It: The Four Levers
1. The right equities. Don't run from stocks because inflation is rising — the market is one of the few places that can outgrow it. But it's not all equities; it's the right equities: companies with genuine pricing power, strong free cash flow, low debt, reasonable valuations, and a track record of paying and raising dividends the cash flow can actually support. Nobody stops buying toothpaste and toilet paper. And mind the value-versus-growth question: paying 15 to 20 times earnings for what people need every day is a very different proposition than 40 or 50 times someone's projected future — especially with the baby boomer wave consuming exactly what value companies sell.
2. Bonds, honestly reconsidered. Longtime listeners know we've never been reflexive bond fans — but bonds aren't the enemy, and we owe the record that sentence. There are no bad investments, only suitable and unsuitable ones. With Treasury products and banking instruments paying in the 4 to 5 percent window, the "risk-free rate" world is finally offering a reasonable return — enough to catch much of real-world inflation. And if the Fed eventually lowers rates, bonds bought at today's yields become worth more. For investors without the appetite for full equity risk, that's worth a fresh look.
3. Annuities — for the problem they actually solve. An annuity doesn't beat inflation, and that's not its job. It solves longevity risk. The structure that works: guaranteed income pays the bills; the investment portfolio fights the inflation. Do the math on your core expenses, subtract Social Security and other predictable sources, and build a personal pension that covers the gap for life. Now an inflation spike only asks your portfolio for the extra 2 or 3 percent — not the entire year's income — which is dramatically easier on the portfolio, especially in a down market. (The sequence of returns video in the resources section at brayshawfinancial.com shows exactly why.) One honest caveat: some annuities simply spend your money down, and those deserve their reputation. The ones worth considering pair lifetime income with real market opportunity and principal protection. Suitability is everything.
4. Tax mitigation — the most powerful lever of all. This is the one that separates real planning from portfolio management, and we don't understand why it isn't part of every planner's conversation. If you need $50,000 a year from a million-dollar portfolio and inflation jumps 5%, you don't need $50,000 anymore — you need $52,500. But if smart tax planning — brackets, IRMAA, asset location, distribution sequencing — means you only need to pull $45,000 to $48,000 to net the same lifestyle, you just funded the inflation gap without touching your risk. Three, five, even ten percent of savings can be scraped out of a well-managed tax proposal. The money is already yours; you're just keeping more of it.
And one more reason tax planning can't wait: we are sitting at some of the lowest federal tax rates in 100 years, with the largest deficit we've ever known. Look up the history of the top federal bracket — it used to run roughly three times higher than today. Groceries rising 3% is inflation. Your tax rate jumping from historic lows is something else entirely — and it's the piece almost nobody is planning for.
Final Thoughts: Plan for the Number You Live, Not the Number They Report
However temporary or permanent this wave turns out to be, the conclusion is the same: you have to plan for it. The affordability level you're living with is not going back down, the drivers — oil, shelter, healthcare, tariffs — are not resolving themselves, and the difference between a retirement that works and one that quietly erodes is whether the plan was stress-tested against reality or against a press release.
"Inflation is taxation without legislation."
— Milton Friedman
Next Steps
Want your retirement stress-tested at real-world inflation instead of the official number? We'll run your income plan at the rates you're actually living, look at where guaranteed income and tax mitigation can close the affordability gap, and put numbers on the plan. And ask us for this week's white paper — seven things retirees can actually do about inflation.
Call: 855-226-8551
Email: info@yourmoneyontap.com
Frequently Asked Question
Why doesn't inflation feel like the official 3%?
Because inflation is the rate at which prices rise, while affordability is the level of prices you have to live with — and that level never resets. Retirees also buy a different basket than the CPI emphasizes: shelter costs, insurance, property taxes, healthcare, prescriptions, food, and fuel, several of which run far hotter than headline inflation. Oil compounds it, touching every leg of the delivery chain. A resilient retirement plan stress-tests income needs well above the Fed's target and fights back with pricing-power equities, reasonable bond yields, guaranteed lifetime income for core expenses, and tax mitigation that lets you keep more of every distribution.
The views expressed are educational in nature and should not be construed as personalized investment, tax, or legal advice. Investing is subject to risk, including loss of principal. No strategy, product, or tool mentioned can assure a profit or protect against loss. Annuity guarantees are backed by the claims-paying ability of the issuing insurance company; annuities may carry surrender charges, fees, and holding periods, and are not suitable for everyone. Dividend payments are not guaranteed and may be reduced or eliminated at any time. Bond values fluctuate with interest rates. Figures cited, including commodity moves, PPI, rate levels, and healthcare costs, are approximate as of the air date, drawn from sources believed reliable, and subject to change. Alternative inflation measures are unofficial and methodologies vary. Hypothetical examples are for illustrative purposes only. Individual situations vary — coordinate any strategy with professional advice. Past performance is not a guarantee of future results. Securities and advisory services offered through Osaic Wealth, Inc., member FINRA/SIPC. All other services offered through Brayshaw Financial Group, LLC are independent of Osaic Wealth, Inc. Osaic Wealth, Inc. and Brayshaw Financial Group do not provide tax or legal advice.
Money on Tap is your trusted resource for investing, retirement planning, and building long-term financial confidence.