Forever Stamps Make Bad Investments

Forever Stamp Thinking of buying up lots of forever stamps as an investment for the future? Think again. Slate Magazine published this May 17th article revealing why forever stamps make for a bad long-term investment.

The postal rate climbed 2 cents on Monday, about a month after the United States Postal Service introduced its new “forever” stamp. As of last week, the USPS had sold more than $82 million worth of the forever stamps, which lock in the 41-cent rate for eternity. One man in Pennsylvania walked into a post office and made an $8,000 investment on his own. Should we all be stocking up?

Absolutely not. Since 1971, postal rates have increased more slowly than the actual inflation rate, as measured by the U.S. Consumer Price Index. So, despite the numerous rate hikes over the last 36 years, stamps have actually been getting cheaper. The 20-cent stamp from 1981, for instance, would be equivalent to 45 cents in today’s dollars—which makes today’s rate 10 percent cheaper than it was 26 years ago. Should this historical pattern hold, you’d be paying more for today’s forever stamps than you would for any stamp in the future, no matter how high the rate goes.

The article goes on to explain why this pattern must hold for the future:

In December, President Bush signed the Postal Accountability and Enhancement Act, which ensures that future price increases will be kept below an inflation-based ceiling. In other words, postage hikes will never surpass inflation—and the forever stamp will never become a good investment.

In case you are wondering, the USPS announced the introduction of the forever stamp less than two months after Bush signed the new act into law. And apparently, the USPS is not the first postal agency to cash in on the benefits of forever stamps. Canada introduced them last November, joining a number of other countries including Finland, Israel, the United Kingdom, Belgium, France, Norway, Monaco, and Sweden.

The best time to buy forever stamps is just before an announced rate increase, but not long before.

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