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Inflation And Retirement

Retirement planning, as you'll find out as you browse our site, is one of the most important things to consider in one's life. In fact, proper retirement planning, budgeting and saving is actually a way of life for many Americans. A very rewarding way of life, at that. But, even the best plans have potential for risk. Even with a 100% execution rate, your retirement plan could actually end up falling short. We should explain: it's the inflation. When calculating one's total needs and total planned results, this very important fact is often left out. And when this occurs, real danger of building up debt can come as the penalty. The fact is, if you cannot operate on your current budget, your credit will begin to get drawn from, and your debt will increase. Your best bet is to start fighting inflation now.


Inflation Defined

Inflation is the basic concept that over time, goods will always increase in cost with all things considered. A good way to develop an example of this is to look at the basic cost of a good in two different time periods. As an example, let's look at a car in the 1960s. List price back then was anywhere from $1500.00 to $4500.00, with higher end cars coming in quite above this. Now, if we take a look at cars today, we will notice that it is very difficult to get a new car for below $12,000. And, cars that once went for $4500 now go for ten times that amount. Some might say that cars have changed quite a bit, so that may not be the best example. As a better one, we would then say take a look at a package of chewing gum, which previously went for, say, three cents, now goes for 35. Same gum, but a great demonstration of inflation.


With retirement plans, then, inflation should always be a big concern. When looking for a value you would prefer to plan for, you need to consider how much your dollars today will be worth at the time you retire. If you do not do this, there is a real danger of building up debt when your retirement comes.


A Sad Example Of Improper Planning

Let's use an example of a man in 1975 who assumes that he needs a total of one million dollars in order to retire come 2005. Sounds reasonable, and it is his assumption that this particular amount will pay his expenses until he dies. But, because he forgot to add inflation to the mix, his actual needs are somewhere in the area of four million dollars! This is a huge difference which will require the man to either drastically change his lifestyle or perhaps worse, not retire until later. Either way, it's a sad comment on the negative power of inflation.


Remember Inflation Now, Be Happier Later

Recognizing that inflation is a power working against you is critical for your retirement planning. Start considering it now. Taking an average of inflation rates over the previous 30 years, you can safely assume that inflation will continue to increase at a level somewhere between three and four percent. Prepare for this now, and you will find your retirement a lot less stressful than if you don't.


Having issues with retirement debt? Contact us here for a free debt consultation. We may be able to provide debt help.

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