Prizm Financial Group

909-456-8095

Inflation - Back to the Future

Inflation sometimes seems like one of those afflictions of an era long since passed into the history books. While it’s true that double-digit inflation has been absent for the last 30 years or more, you may remember the high inflation years of the 1970s.¹

Will the levels of U.S. public debt and loose monetary policy revive the inflation rates of yesteryear? No one really knows. However one thing is certain—even low inflation rates over an extended period of time can impact your finances in retirement.

A simple example will illustrate.

An income of $50,000 today at an inflation rate of 3% would have a purchasing power of just over $32,000 in year 15—a 35% erosion. Said differently, to maintain the desired lifestyle that a $50,000 income would provide requires $77,900 of income after 15 years of 3% inflation.²

Here’s something else to consider. Retirees may be subject to a higher rate of inflation than “the headline” Consumer Price Index. Why might this be the case?

Healthcare inflation has outstripped CPI inflation by as much as 3% in recent years.³ And retirees may expect to spend more on medical expenses than most Americans.

Inflation is a thief; it steals the purchasing power of your retirement savings. But, as with your other possessions, there are strategies that may help you from being robbed of your purchasing power.

  1. InflationData.com, 2017
  2. This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.
  3. YCharts.com, 2018; USInflationCalculator.com, 2018

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2018 FMG Suite.

Share |
 

Related Content

Rightsizing for Retirement

Rightsizing for Retirement

What does your home really cost?

Healthcare Costs in Retirement

Healthcare Costs in Retirement

Without a solid approach, health care expenses may add up quickly and potentially alter your spending.

Investment Strategies for Retirement

Investment Strategies for Retirement

Investment tools and strategies that can enable you to pursue your retirement goals.

 

Have A Question About This Topic?







Thank you! Oops!

Retirement Income and the Traditional Portfolio

Experiencing negative returns early in retirement can potentially undermine the sustainability of your assets.

Is a SEP-IRA Right for Your Business?

For some, the idea of establishing a retirement strategy evokes worries about complicated reporting and administration.

Caring for Aging Parents

As our nation ages, many Americans are turning their attention to caring for aging parents.

View all articles

A Look at Systematic Withdrawals

This calculator may help you estimate how long funds may last given regular withdrawals.

Potential Income from an IRA

Estimate your monthly and annual income from various IRA types.

Roth 401(k) vs. Traditional 401(k)

This calculator compares employee contributions to a Roth 401(k) and a traditional 401(k).

View all calculators

An Inside Look at Retirement Living

A number of questions and concerns need to be addressed to help you better prepare for retirement living.

Retirement Plan Distributions

There are a number of ways to withdraw money from a qualified retirement plan.

Investment Strategies for Retirement

Investment tools and strategies that can enable you to pursue your retirement goals.

View all presentations

How to Retire Early

Retiring early sounds like a dream come true, but it’s important to take a look at the cold, hard facts.

Tuning Your Social Security Benefit

When should you take your Social Security benefit?

Retirement Redefined

Around the country, attitudes about retirement are shifting.

View all videos