What do you think is the number one concern that most people have in retirement? If you guessed running out of money, congratulations, you get a gold star!
American retirees face a large decline in living standards during their final years of retirement because of inadequate savings, according to HSBC bank. The bank says that the median length of retirement in the United States is 21 years, but the median time before savings run out is 14 years.
A big contributor to depleting retirement savings too fast is not planning for inflation.
Inflation is simply rising prices over time if prices at the gas pump and the grocery store are going up, and your own income isn’t, then after a period of time you may have trouble paying your bills.
Let’s look at some different inflation scenarios: In the 1970s inflation averaged 7% a year. If you are averaging 7% inflation over 20 years, this would reduce the purchasing power of $50,000 down to $13,000. In the 1980s inflation averaged 5% a year. Averaging 5% inflation over 20 years would reduce the purchasing power of $50,000 down to $19,000. In the 1990s inflation averaged 3% a year. If you average 3% inflation over 20 years it would reduce the purchasing power of $50,000 down to $27,500.
While no one can say with absolute certainty, many economists believe the stimulus measures implemented over the last ten years by the Fed could eventually cause more severe inflation, which could cause an even more severe erosion of your purchasing power.
Retirees are living longer than ever and this means it is more important than ever to keep up with inflation and maintain your purchasing power to make sure you don't run out of money later in retirement. This is an area where we can help. If you have questions, just contact our office (815) 455-6453.
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. 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