Inflation Is “Down.” Prices Aren’t.

If things feel more expensive, it’s not your imagination.

First a disclaimer: This isn’t political for me. In the recent State of the Union, I was listening closely to what was said about inflation. The message was as expected: progress is being made. Inflation has slowed. The worst of rising prices is behind us. The data supports that claim.

But we’re still feeling it like it’s 2022. (If nothing else, you’re likely seeing it at the gas pump this week, as conflict in the Middle East has caused the price of oil to skyrocket).

Let’s put this into context. About five years ago, inflation was nice and low, roughly 1–2% a year, barely enough for people to mention it. Then inflation spiked after Covid and peaked in June 2022 at about 9%, with prices surging at a pace we hadn’t seen since the 1980s. Since then, inflation has gradually slowed back down toward the 2–3% range.

I keep thinking about the conversations I have every week with readers, clients, friends, and family members and how different their experiences sound. Prices still feel high, and that sense of financial strain hasn’t really eased. I hear comments like, “This economy is terrible. I hope it turns around.”

That disconnect is what fascinates me.

And it’s not your imagination. If it feels like prices are still rising when you’re buying meat, coffee, a pair of 18k gold earrings, or eating out, that’s because they are more expensive. Certain everyday items are rising faster than the overall inflation rate.

It’s not that people don’t believe the headlines. It’s that government statistics and real life are measuring two different things.

Inflation statistics are backward-looking. They tell us what prices did over the past year, averaged across the country. That’s essential for policymakers and economists.

But we don’t live life backward.

We live in the now and think about what comes next. We budget for the next rent increase, the next insurance renewal, the next grocery run. And we worry about future costs even when the headline inflation number improves.

When inflation was running at 7% or higher, prices jumped quickly and painfully. Now inflation is closer to 2–3%. That doesn’t mean prices came down. It means prices are still rising, just more slowly than during the spike.

The biggest price jump has already happened. Slower inflation today can’t undo that. And this is where things can get confusing. This is often described as ‘disinflation’, which simply means inflation is slowing. Not to be confused with ‘deflation’ that would mean prices actually fall. That’s not what’s happening so prices aren’t lower.

So when people hear “inflation is down” and it doesn’t feel like it, it’s because everyone’s cost of living is still higher, just not as fast as prices were rising before.

Inflation doesn’t hit everyone the same way. It’s national in how it gets reported but local in how it’s lived. Housing, insurance, food, and energy costs vary dramatically depending on where you live.

And for people who are already retired and relying on their savings, inflation isn’t just a concept. It’s personal.

And if you’re wondering about tariffs’ impact on inflation, they can push up the cost of certain imported goods and have contributed modestly to price increases in recent years, but they are not the primary driver of inflation trends overall.

Brett Spencer, CFP®, CEPA in the Wealthramp network puts it this way: “In 2025, CPI was up 2.7%. For investors, that’s a hurdle your portfolio has to clear just to stand still in real terms.”

That threshold becomes even more of a challenge for retirees prioritizing stability. A “safe” bond fund paying 3.7%, for example, would have only delivered about 1% above inflation before taxes.

After taxes, the real return may be close to zero. That’s a real risk, especially if you plan to live to see your 100th birthday.

That’s why you hear me say this often: if you’re getting closer to retirement, now is the time for a full financial checkup, just like an annual exam with your primary care doctor. You want an honest assessment of whether your portfolio is actually keeping up after inflation, taxes, and withdrawals. (You can read more about why I recommend fiduciary financial advisors here, and you can also email me with questions anytime).

Even moderate inflation will steadily erode your purchasing power if a portfolio isn’t designed to keep up, especially once withdrawals start. And it’s not just about the numbers. It’s about the peace of mind that comes from working with a fiduciary advisor who helps you make decisions that impact your entire financial life.

Inflation statistics are averages, but your personal cash flow is your reality.