For many Americans the honest answer is no. Cook Pierce walks through what to look at in your own household economy to see how large the gap is for you, and what it means for your retirement plan.
When you read the economic headlines, do they describe the economy you actually live in?
For many Americans the honest answer right now is no. The headlines are describing one economy. The kitchen table is describing another. Both are real, and both are telling the truth about something.
The question is useful because the gap between them is where retirement plans quietly succeed or quietly fail. A plan built for one of those economies behaves very differently from a plan built for the other. Knowing which one your current plan is built for is worth doing.
Below are four places to look. None of them require a spreadsheet. All of them can be answered from your own household in about ten minutes.
Pull your latest renewal notices for car, home, and health. Compare them to the equivalent notices from two years ago. The gap between the two is one of the clearest signals of what is happening in your personal economy that doesn't show up anywhere in the headline inflation number.
If the premiums have risen 20% or more across the three, your household is experiencing meaningful insurance inflation regardless of what the official CPI data is saying. That gap is one line item in a retirement budget. Multiplied across the dozen fixed costs that make up a typical retirement, it adds up.
Not your overall spending. Your actual receipts. Grocery costs are one of the places where the gap between headline inflation and household inflation shows up clearly. The headline numbers average across categories that a typical household doesn't spend evenly across.
If your grocery bill has risen more than the headline inflation rate suggests it should have, you are experiencing the category-weighted version of inflation rather than the headline version. That is useful information about your household economy and it is nowhere in the economic data a typical reader sees.
Credit card. HELOC. Car loan. Mortgage if it is adjustable. Compare the current rate to the rate you had on comparable debt two years ago. The 10-year Treasury has risen from under 3% to over 5% in the last three years. If your debt rates have risen with it, your household economy includes an additional cost that the headline economy is not measuring.
If you are not carrying debt, this one doesn't apply. If you are, the carrying cost of that debt is probably higher than it was and is reducing what your retirement income has to work with.
Pull up the fund breakdown of your largest retirement account. If more than 60% of it is in US large-cap equities (an S&P 500 fund, a total market fund, or a target-date fund with a heavy equity allocation), the account is primarily tracking the headline economy. The one that is at record highs because of a narrow concentration of tech companies.
That isn't inherently a problem. But it does mean the account's current value depends on the headline economy continuing to do what it has been doing. If the gap between the headline economy and the household economy eventually closes through a market correction, that account participates in the correction. Which matters more now than it did when the retirement timeline was further away.
If you looked at the four and found that the insurance premiums are up more than you expected, the grocery bills are up more than you expected, the debt costs are higher than they were, and the retirement account is heavily concentrated in the equity market, you have located the gap in your own household. The headline economy is doing something. Your household economy is doing something else. Your retirement plan is sitting at the intersection.
The question the four exercises raises for your plan is specific. Is the retirement income you are counting on coming from a source that doesn't move with the headline economy, or is it coming from the exact category that would absorb the sharpest adjustment if the headline economy stops behaving as it has?
If you don't know, that is the question worth starting with.
