INFLATION

INFLATION

Do you remember when the price of gas averaged around $1 a gallon? Or when a loaf of bread cost even less than that? It’s an unfortunate fact of life that things more expensive now than they used to be.

The price difference is due to inflation—and you likely have a pretty good understanding of its effects.

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Do you remember when the price of gas averaged around $1 a gallon? Or when a loaf of bread cost even less than that? It’s an unfortunate fact of life that things more expensive now than they used to be.

The price difference is due to inflation—and you likely have a pretty good understanding of its effects.

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Things tend to rise in cost over time, and hopefully, so do wages. But this has a drag on purchasing power. According to the U.S. Inflation Calculator, something that cost $100 in 1990 would cost $197.38 today. That’s a cumulative inflation rate of 97.4% over 30 years.

How Will Inflation Affect My Retirement?

The answer to this depends on what products or savings vehicles you use to build your retirement resources. Some strategies can result in a drastic difference in your purchasing power upon distribution than it was when you started saving. If your retirement accounts have little or no growth to beat inflation, the real dollar purchasing power you have in retirement can be significantly altered.

When saving for retirement, people will typically go with “safe” financial products (like 401(k), IRAs, CDs, or mutual funds) that have low interest rates or investments that have more growth potential, but with more risk exposure. However, these are not your only options for an inflation-proof retirement. Other strategies include:

  • Indexed Insurance Products
    • There are several different products available that work to provide growth potential with guaranteed returns.
  • Optimizing Your Social Security Benefits
    • Waiting longer to claim your Social Security benefits until or after you turn 70 will increase the amount you receive each month by up to 8% per year past your full retirement age.
  • Inflation-Protected Investments
    • Set aside a portion of your existing assets into various investments and savings vehicles that are better aligned with inflation rates.

Because inflation rates are hard to accurately predict from year to year, it can be difficult to determine which strategy would best protect your retirement portfolio. Get in touch with our team of financial experts to plot your course to an inflation-proof retirement.