**For the purposes of this discussion, let's assume that CPI is an accurate representation of inflation**
Every inflation calculation/simulation I've ever seen uses CPI data for the US when calculating withdrawals. And of course the point of this is to maintain your spending power and standard of living when living off your portfollio. But what bothers me is that this is a completely US centric approach. I'm looking at simulations showing S&P 500 returns coupled with US CPI. The best thing I've come up with are a handful of Vanguard white papers (
this one, among others), that show that a globally diversified portfolio is supposed to have similar returns with lower volatility. Which sounds great, but of course the sample sizes are small and the results aren't all the customizable. Not to mention that we don't really have inflation numbers for this. What is the impact when investing using a globally diversified portfolio? How would it impact the yearly inflation adjustment? Does it matter?
To further complicate matters, I plan to retire outside of the US, with a focus on cheaper countries. In most of the developing world, inflation is much greater than in the developed world. As such, if I choose to follow US CPI inflation adjustments, my standard of living would be continuously eroded by inflation. If I choose to follow local inflation to maintain my standard of living, I'm at risk of withdrawing too much over the course of my retirement and am greater risk for portfolio depletion. How would you reconcile that issue?
I'm struggling with how to wrap my brain around the impact of having both international investments and being subject to higher inflation rates.