What is “real” inflation? By definition, it is “a general increase in prices and fall in the purchasing value of money.” The government tells us based on the latest U.S. Labor Department calculations that the current rate of inflation is 2.7% over the past 12 months ending in August 2018. They will also tout their Consumer Price Index (CPI) as the best way to gauge inflation, which based on the latest 12 months ending in September of 2018, is showing 2.3% increase.

How can that be? What I can tell you is that my dollar seems to be shrinking at a much greater rate than what the government is telling me. Maybe, I have been out of school too long since this sounds like new math to me.

Here are a few facts that are conveniently ignored by those telling us that inflation is under 3% and under control…

Try buying or refinancing a home lately? In the past 12 months, interest rates (the cost of borrowing) has gone up from 3.00% to greater than 4.50% for a average size home loan…that represents a 50% inflation rate!

How about gasoline? The National Average for a gallon of gas is currently $2.90, up from $2.50 twelve months ago. That represents a 16% increase. Since my gas is just under $4/gallon I believe that increase is much higher.

Food prices? My wife, who does the most of our grocery shopping, has been keeping tabs on this at our household and she has seen better than a 20% rise in costs over the last year…and she is better than any government study, that I am sure of.

Healthcare? Forget about it. We are all paying double-digit increases for reduced care and services. Many retirees are now forced to going back to work just to pay for the medical Insurance payment that is more than the mortgage payment they were paying on their first home.

What happened to that 2.7% modest increase in inflation that our trusted governmental agencies are talking about?

Sadly, for those of you that are on a fixed income, the wonderful CPI figures I noted earlier are one of the prime factors that the government uses for calculating your Social Security benefit increases and other “Cost of Living” programs. It amazes me still that the CPI number does not include Food or Energy costs… so I guess neither of those are very important to your budget?

For the average American, and more importantly, those that are retired or soon to be retired, the reality is that all that planning for a comfortable retirement has been undermined by “real” inflation and the inability for the average American to keep up with it.

Many have been forced to “gamble” with their family’s nest egg by increasing their exposure to unhealthy levels to an overheated Stock Market hoping that it will keep going up indefinitely, but full well knowing that isn’t the way it works. For the last 9 years that has worked out well…the problem is that inflation is just getting started and the Stock Market is at the end of its’ longest bull run in history. What happens as inflation continues and the Stock Market eventually sells off leaving you with potentially a substantial reduction in dollar-based wealth and at the same time those remaining dollars you have are shrinking rapidly?

Those that are paying attention, are restructuring their nest egg now to mitigate their exposure to a likely Stock Market correction or crash. At the same time, they are converting a small portion of that wealth to non-dollar based assets to get the diversification needed to fight the most relentless and feared enemy to all of us… “Real” Inflation.