Do You Know the Cost of Our Postage Stamp?
By: Brian A. Magnan CFP®, AIF®
Director – Magnan Family Wealth Management
The US Postage Stamp has been our proxy for inflation for my entire career. It is listed on the top of every agenda that we give to all our clients at every meeting. Our preference on wealth planning is at least 30-year increments. Therefore, your 2025 agenda will compare the price of a stamp in 1995 to 2024. For the record, the cost of a stamp in 1995 was 32 cents.
The reality is the stamp has had about the same compounding rate as overall inflation over that period. The inflation index, as measured using the US Consumers Price Index, registered an increase of 2.53% from 1995-2024.
If inflation averages about 2.34% then the cost of living does in fact double over a 30-year period.
What does this mean to folks that have retired?
But wait, there is a solution. The rate of return on US Large Companies from January 4th, 1926, through January 31st, 2025, has been 10.43% per year. (US Small Companies have had a higher rate of return since 1926, but I digress.) Of course, the prices of these companies horrifically decline temporarily in price every few years by 30% to 50% or so. However, we can prepare the plan for that too.
https://en.wikipedia.org/wiki/History_of_United_States_postage_rates
Director – Magnan Family Wealth Management
The US Postage Stamp has been our proxy for inflation for my entire career. It is listed on the top of every agenda that we give to all our clients at every meeting. Our preference on wealth planning is at least 30-year increments. Therefore, your 2025 agenda will compare the price of a stamp in 1995 to 2024. For the record, the cost of a stamp in 1995 was 32 cents.
On April 9th, 2024, there was an official announcement of the increase of this stamp to take place on July 14th, 2024. Perhaps it was not in your news feed, and you missed it. You wouldn’t be alone, of course. The cost-of-living increases are something that normally happens in the shadows. It is, however, an important example of how inflation effects our budget and, ipso facto, our investments.
The current price of an official United States domestic first-class stamp is $0.73.
73 cents! This seems outrageous. More than a double increase over 30 years???
73 cents! This seems outrageous. More than a double increase over 30 years???
The reality is the stamp has had about the same compounding rate as overall inflation over that period. The inflation index, as measured using the US Consumers Price Index, registered an increase of 2.53% from 1995-2024.
If inflation averages about 2.34% then the cost of living does in fact double over a 30-year period.
What does this mean to folks that have retired?
We must be prepared for our INCOME to double over the next 30 years.
I just don’t think enough folks know this stuff. Living on an income stream that is not increasing with inflation can be financial cancer. Inflation slowly deteriorates our lifestyle year by year. The inevitable outcome of a fixed income may only be to reminisce about how far the dollar used to go at the grocery store instead of enjoying the usual standard of living.
But wait, there is a solution. The rate of return on US Large Companies from January 4th, 1926, through January 31st, 2025, has been 10.43% per year. (US Small Companies have had a higher rate of return since 1926, but I digress.) Of course, the prices of these companies horrifically decline temporarily in price every few years by 30% to 50% or so. However, we can prepare the plan for that too.
**Rule of 72 is an estimate of the amount of time it takes a number to double at a specific interest rate. (72/2.34 = 30yrs cost of living double)
https://en.wikipedia.org/wiki/History_of_United_States_postage_rates