Stamp prices increase on January 21: should you stock up on stamps?
A postage stamp price increase is coming soon and we wanted to talk about this topic because so many people have questions about what good financial moves are in regards to stamp price increases. So here’s what you need to know about postage stamp increase, including whether you should invest in a stock of Forever Stamps.
It seems whenever there is an announcement of postage stamp price increases, there is pandemonium and a rush of people to the nearest post office since the introduction of the Forever Stamp 11 years ago. Before that, there was just moaning and that the penny stamps were now going to have to be added to each letter.
But what is a smart move to make right before a postage stamp price increase?
Should you “invest” in the price of Forever Stamps today before tomorrow happens?
How many stamps should you buy before the price increases, just for everyday use?
We hope to answer these, and a few other questions regarding this price increase so that you should know whether draining that savings account in the form of Forever Stamps is a worthy financial cause.
Here’s what you need to know about the upcoming
Postage Stamp Price Increase
When does the price of the Forever Stamp go up?
On January 21, 2018, the cost for a Forever Stamp will increase from $0.49 to $0.50. This is a modest increase of 2%, and matches the official rate of inflation for the year 2017 at 2.2%.
This presents a bit of conundrum for those seeking to live thrifty: how much money, if any, should you spend purchasing stamps prior to this price increase? Yes, it’s an increase. But it’s not significant.
What is a Forever Stamp and how much is a regular stamp?
First, for anyone who isn’t familiar with Forever Stamps. A Forever Stamp is a one-ounce first class postage stamp, and it automatically adjusts in value to whatever the current rate of a one-ounce stamp. Remember years ago when postage rates increased, say, from $0.31 to $0.34, and you would have to buy a bunch of $0.03 stamps to use with your old stamps? Forever Stamps solve that problem. While other countries have used similar concepts for many years, the United States Postal Service didn’t create Forever Stamps until 2007. In 2007 a Forever Stamp cost $0.41. If you had purchased 1,000 Forever Stamps in 2007, you would have spent $410; the stamps would now be worth $490 and would be worth $500 on January 21st.
So what about a regular first-class stamp at $0.49? Well, the only stamp that exists is a forever stamp today. They do not sell $0.49 stamps that are actually stated as $0.49. This is good because after January 21st, 2018, you would have to add $0.01 stamp to the one-ounce letter as well. But there is no need for these. It’s just a Forever Stamp, purchased at the rate of the stamp that day. So yes, buying early savings you money. But let’s talk about that.
How are stamp rate increases determined?
Another factor in all of this is a little-known tidbit of information in relation to USPS stamp rate increases: previously, the USPS has been limited to not increasing stamp prices more than the rate of inflation (using the government-published rate) and had to get special permission for any rate increase that was higher than the inflation. While the USPS would like the freedom to raise stamp prices without limits, the USPS recently received permission to raise stamp prices “inflation + 2%” without needing any special regulatory approval.
While this upcoming January 21 increase is already “set”, it’s not unlikely that future stamp price increases will often be “rate of inflation + 2%”.
And something else: on December 29th President Trump tweeted that the Post Office should be charging “MUCH MORE” than they currently are. While the primary context of his tweet was in relation to package delivery for Amazon.com, any postage increase, especially a significant one, could impact first class stamp rates.
All of that means it would be good to rush out and stockpile Forever Stamps, right? Forever Stamps, an investment that is practically guaranteed to increase in line with inflation, and likely at a higher rate than inflation!
Whoa, not so fast! Let’s think this through.
How to know when the prices of stamps increase?
First, while future increases might be more significant, this particular increase is a modest increase. There will be plenty of heads-up about future increases that might be more significant increases. In fact, if you want to be notified about postage rate increases before they occur, you can enter your email address at ForeverStampValue to be notified a week or two prior to any increase. Your privacy is protected and the email list will never be rented or sold. Emails are only sent prior to a forever stamp rate change, which means you will probably only receive an email once, or maybe twice, a year. The media seems to generally discuss rate increases the day the rates go up – which is not the ideal time to buy stamps. That’s why we’ve already signed up for the notifications. We don’t have to worry about postage rate increases sneaking up on us.
If you are curious about the stamp price increases since the establishment of the USPS, this Wikipedia article is a fun way, showing quickly the changes over the years.
Is investing in the price of stamps with today’s price a good investment strategy for the future?
Second, anytime you are looking at converting one asset to another you should always evaluate how easy it is to get your money back out of that asset. In the case of stamps, while, yes, you “cash out” your investment one stamp at a time when you mail a letter, in general, to transfer the money out of stamps and back into cash you must sell your stamps. The problem with that is the market is currently flooded with counterfeit stamps selling for less than face value. The counterfeits are really good and it can be extremely difficult to tell the difference between real and fake stamps. When anyone can buy a genuine stamp directly from the Post Office at the current rate, how are you going to find buyers who will pay you almost-full-price for your stamps and trust you when you tell them they are genuine?
Along with this issue, although it is an asset, can it really be all that valuable of a return on your investment? Think about it. If you invest in stamps, is your return going to be greater than what the stock market itself has done over the past several years, with an average return of 10%? Stamps would need to increase in value by at least $0.05, which it likely will, but does the asset match the need? It’s doubtful.
Does anyone really need a lot of stamps in our day and age? What about 12 years from now?
Third, the volume of mail that the average person sends has been steadily decreasing. Think back on how many bills you used to pay via mail that are now electronically paid. While you might have a general idea of how many stamps you are currently using per year, estimating how many stamps you may use in the year 2030 is going to be much more difficult.
In fact, for us, rarely do we send anything in the mail. Today, it seems an occasional card, Christmas cards or wedding invites are they types of mail that are personally being sent out. I am sure it is obvious, but this is because of email, cell phones with no long-distance charges and social media. We are more connected to people than ever, that the need for the handwritten notes or typed-up letters in the mail is becoming more and more rare. It’s not just us personally, but it’s obviously a trend, to no surprise, because of the volume of personal mail that the USPS handles is dramatically decreasing each year.
So will Forever Stamp stockpile be all that helpful in the near future? Probably not.
So, what does all of this mean?
If you need stamps, of course now is the time to buy them. There is no reason not to save a penny per stamp. But, we recommend purchasing the amount of stamps you think you will actually use this year. Don’t feel badly if you end up buying extras, but do not purposely buy more than a 1-year supply of stamps unless you have paid off all your debts and fully stocked your emergency fund. And definitely do not go out and buy stamps as an investment. All you need to do is monitor the price of stamps and prior to any increase make sure you have at least a years’ worth of stamps on hand. If stamps are ever about to drastically increase in price, then THAT is the time to ensure you have multiple years’ worth on hand, but only for your own purposes, not as a financial strategy.
Our thanks to Christopher, who runs foreverstampvalue.com, for the heads-up on this.