You Have Planned for Inflation

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You Have Planned for InflationInflation right now is still high and you are probably smarting at the now infamous “cost of eggs.”High inflation can have a devastating effect on your retirement spending power. As Sam Ewing said:

“Inflation is when you pay fifteen dollars for a ten-dollar haircut you used to get for five dollars when you had hair.”Sam Ewing

When you are working — your wages generally rise as the costs of goods and services increase. Your earnings “keep pace with inflation,” so normal inflation is not generally quite as big of a big concern as it is in retirement. In retirement, when you are living off of savings, inflation robs you of income.For example: When you are retired, you need some way to enable your savings to outpace inflation. If inflation is at 5% and you are earning a 5% return on your investments, then your financial situation is flat. You haven’t lost money, but you haven’t gotten ahead either.The good news is that Social Security and some pension programs adjust your income for inflation. The bad news is that if you are living in retirement by withdrawing from investments or savings, then the value of your money will dramatically decrease over time. You will require far more money to support your lifestyle in the future.