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At a rally in Vandalia, Ohio, on Oct. 3, President Donald Trump told the crowd, “We have almost no inflation, by the way, and we’ve taken in trillions and trillions of dollars.” (1)
I’ve been a CPA since 1981. So let’s check the number.
The government’s own figure says prices rose 3.4% over the 12 months ending in August. (2) PolitiFact called Trump’s claim “misleading,” noting that inflation was 3% when Trump began his second term. (3) The Federal Reserve’s target is 2%. (3)
And 3.4% may not sound like much. But if you live on a fixed income, here are five things it does to your money — and what you can do about it.
1. ‘Almost no inflation’ is 3.4% — and some bills are rising much faster
Let’s give credit where it’s due. Some prices are behaving. Food at home rose 2.2% over the past year, and medical care just 1.6%, according to the Bureau of Labor Statistics. (2)
But energy is up 16.3% over the same 12 months. (2) Gasoline alone jumped 3.9% in August, accounting for more than a third of that month’s increase. (2)
That’s the problem with an average. Nobody lives on an average. If you drive a lot, your personal inflation rate may be higher than 3.4%.
2. At 3.4%, your money loses half its buying power in about 21 years
Here’s a handy shortcut: the Rule of 72. Divide 72 by the inflation rate, and you get roughly how many years it takes prices to double — or the value of a dollar to be cut in half.
At 3.4%, that’s about 21 years.
Now think about a retirement. If you retire at 65, 21 years gets you to 86. If your retirement lasts that long, a dollar you count on in your first year could buy only half as much by the end.
3. Your Social Security raise always looks backward
Social Security’s annual cost-of-living adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, comparing third-quarter averages from one year to the next. (4)
The current COLA is 2.8%. (4) Overall inflation is now running at 3.4%. (2) So the raise you got in January was based on last year’s prices, while you’re paying this year’s.
The September inflation report, the last piece of the 2027 COLA math, comes out Oct. 14. (2)
And for many retirees on Medicare, rising premiums eat part of the raise. The standard Medicare Part B premium rose $17.90 this year, to $202.90 a month. (5)
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4. Fixed payments take the hardest hit
Social Security at least adjusts. A payment that never changes, such as a pension or annuity with no cost-of-living adjustment, doesn’t.
Here’s an illustration. Say you get a $2,000 monthly pension with no inflation adjustment. If prices rise 3.4% a year for 10 years, that $2,000 will buy about what $1,430 buys today. Same check, roughly 28% less buying power.
That’s why it pays to know exactly which of your income sources adjust for inflation and which don’t.
When the fixed part of your income shrinks in real terms, in my view the fastest relief often comes from the fixed part of your spending: recurring bills.
A tool like Rocket Money connects securely to your accounts and puts every subscription on one screen — cancel the ones you don’t want in a few taps. It negotiates cable, internet, and phone bills and flags fee hikes before they hit.
5. Inflation is a planning problem, not a headline
Whether there’s “almost no inflation” or 3.4% matters less than whether your plan accounts for it.
Start with the bills you can change this week. Your cellphone plan is a good example. With Tello Mobile on T-Mobile’s network, you can see plans from $10 a month, with unlimited US calling, international texting and hotspot access standard, and no contract.
Then look at the bigger picture. How much of your savings is still growing faster than prices? How long will your money last if inflation stays at 3% or 4%? Those are the questions a good advisor runs the numbers on.
When it’s time to talk to a pro, SmartAsset matches you with up to three fiduciary advisors — legally required to prioritize your interests. They can spot tax savings, Social Security strategies and planning gaps you might miss.
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My honest take
Some prices really are behaving, and that’s worth acknowledging.
But “almost no inflation” isn’t true, in my view. Inflation doesn’t announce itself. It just quietly takes a little more each year until one day the math doesn’t work.
So don’t plan around the slogan. Plan around the number. The latest number is 3.4%. Ten years from now, you’ll be glad you planned for it.
Sources: 1. Roll Call Factba.se; 2. U.S. Bureau of Labor Statistics; 3. PolitiFact; 4. Social Security Administration; 5. Centers for Medicare & Medicaid Services
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