Forever stamps “investment”? Probably not a good idea.

The question on the table is simple: How many of the new USPS ” forever stamps ” should you buy? To simplify I’m not taking into account convenience factors. Obviously you do not go down to the post office to buy a stamp each time you need one – you buy extra to have them on hand. Below I just want to get a sense of whether the forever stamps are a good investment or bad.

Seems to me that if postage cost increases are going to exceed your expected return on *other investments* then the answer is to buy a lifetime supply of stamps the day before the forever program ends. However, since US postage is subsidized by tax money (I think to the tune of 3 billion for next year!), and for political reasons, it seems likely that postage price increase will be *less than* what you can reasonably expect from alternative investments of your stamp dollars.

In this case you should buy a convenient number of forever stamps to refresh your current supply, and then just absorb the increased postal cost. Invest the money you would have put into forever stamps in a long term CD, or (often better) pay off loans or other debt that is at a higher post tax rate than CD yields.

Let’s see – assuming you can get a guaranteed CD 5% on your money, then how much would stamps need to go up to match this? The answer is 5% per year which is just over .02 next year, increasing slightly with each stamp cost change (ie 5% of a greater number will get bigger over time). So, since political pressure and public displeasure with the inefficiencies of the USPS keeps the stamp increases to a minimum it seems like the answer is:

Forever stamps are a poor investment.  They’ll return less to you than alternatives.   Wait until the next increase and then buy enough to get you through the following increase.

Note:  A different issue from “how many should you buy” is that the Forever stamps are a good idea in terms of solving the “remnant postage stamp” problem since their price will change over time but you can keep using the forevers regardless of rates.   This solves the problem when rates increase and you have to buy a bunch of .02 stamps and then you run out of the .37 stamps before you run out of the .02 stamps so you have a drawer full of .02s and look funny when you plaster them on an envelope.