Warning: The Silent and Deadly Threat to Your Retirement Success
Inflation is a silent and deadly threat to your retirement success and happiness. Inflation has been relatively quiet the last few years, but it’s still there eating away at your purchasing power. The current rate of inflation is approximately 2.2.% and it’s rising — the rate was .1% in 2015 and 1.6% in 2016.The average rate over the last 50 years is a little over 4%.
Here is a simple illustration of the impact of 4% average inflation on a retiree’s living expenses. Assume a retiree spends $7,000 a month to live in 2018. At 4% inflation, the same retiree will spend$10,362 per month to maintain the same standard of living in 10 years and $15,338/month in 20 years.
This means your retirement income sources (Social Security, pension, investments) must increase at least as fast as inflation or your standard of living will need to be reduced. Keep in mind that Social Security does increase at the official rate of inflation, but there are two problems with this. First, Social Security is probably only a small part of your retirement income and, second, Medicare premiums are going up faster than Social Security is increasing so a retiree is losing purchasing power when it comes to their Social Security income.
Keep the silent retirement killer in mind as you plan for your retirement.