Retirement Planning Summer 2022
Inflation’s Impact on Your Retirement Savings
Inflation is at an incredible level not seen since the 1980’s, The Consumer Price Index, which measures a broad range of goods and services, rose 8.6% in May, the fastest advance in more than 40 years. A U.S. Bureau of Labor Statistics (BLS) report shows inflation figures for various decades. In the 1970’s inflation averaged 7.4%, in 1980’s inflation averaged 5.1%, 1990’s averaged 2.6%, in the 2000’s averaged less than 2%, (1.7%) in the 2010s. From the 1970’s through year-end to 2021, inflation averaged about 3%, however, inflation’s impact on the value of your retirement savings compounds over time. Inflation can gradually reduce its worth overtime. For instance, thanks to inflation, from the start of 1980, the purchasing power of a dollar fell more than 70% by the end of 2021. One dollar left under a mattress in 1980 is worth about thirty cents today. In other words, everything became 70% more expensive to buy. Inflation can reduce the purchasing power of your retirement savings thereby possibly jeopardizing fixed income retirees’ retirement plans.
A Couple of Things You Can Do to Manage It