Forever Stamp-ede: Consumers May Hoard Stamps This Week But Stop Buying Next Year

For the next week, Forever Stamps will be the hottest deal going, but a year or two from now the popular stamps could actually decrease in value.

The price of a First Class stamp will rise from 46 cents to 49 cents next Sunday, January 26. Someone who buys a Forever Stamp this week, for 46 cents, and uses it a month later in place of a normal First Class stamp will save 3 cents and have an annualized return on investment of 113%.

No wonder some are expecting a stamp-ede of buyers stocking up on Forever Stamps this week. (Do you suppose post offices will have additional people working the counters?)

But holding onto the stamps for more than a year or so may not pay off so well. Because of a new twist in the upcoming price increase, the price of a First Class stamp may actually decrease in 2015 or early 2016.

Next Sunday’s price increase for First Class letters has two parts. One cent of the increase is the usual, annual inflation-based postage hike. The other two cents are from a temporary “exigent” price increase that is slated to expire within two years. (An influential Senator has proposed making the exigent increase permanent, as the U.S. Postal Service had requested.)

If inflation continues increasing at about 2% annually, the cost of a First Class letter would probably rise to 50 cents in January 2015. But when the exigent increase expires, most likely in late 2015, the price would drop to 48 cents. If inflation remains at about 2%, the price probably wouldn’t hit 50 cents again until January 2017. If inflation is even lower, it might take even longer for a 49-cent Forever Stamp to reach parity.

This week’s stamp-ede should provide a nice cash infusion for the unprofitable USPS, which has come perilously close to running short of cash at times. By the same token, consumers are likely to hold off on buying Forever Stamps in 2015 as the exigent increase nears expiration.

The Postal Service will have difficulty figuring out how such fluctuations in the demand for Forever Stamps will affect its long-term finances. It can only guess at how many Forever Stamps have been purchased but not used. In fact, USPS realized last year that its guess was too high, resulting in a $1.3 billion favorable accounting adjustment.

Related articles:

• Why the Exigent Postal Rate Increase Will Backfire  
• Could Forever Stamps Become Worthless? What Bankruptcy Might Mean for USPS
• How USPS Is Like an Airline, and Why That Matters