Inflation: The Silent Retirement Killer
Ination is oen times called the silent killer o otherwise healthy retirement plans It’s like a slow-growing cancer thatdrains your fnancial strength and depletes your purchasing power When you see prices go up, ination is oen thecause Unortunately, many retirees realize too late that uture dollars have less value than current dollars For example,today you can buy a tube o toothpaste or about our dollars In fve years, that same tube o toothpaste may cost yousix dollars And in ten years, it could cost eight dollars
Greg McBride, senior nancial analyst at Bankrate.com said, "I infation averaged 5 percent, it would cut your buying power in hal in just ourteen years.” In that scenario, a retiree living on $70,000/year today would actually need $140,000/year ourteen years rom now!Te bottom line:
I you’ve planned your retirement income based on what today’s dollars can buy, you will likely end up with signifcantly LESS money when you need it most – in your later retirement years
Consumer Price Index (CPI):
Measures ination at the retail level. The CPI, whichtracks the total cost of retail goods and services, is the one most often reported bythe media. It is published monthly by the US Bureau of Labor Statistics.
Producers Price Index (PPI):
Measures ination at the wholesale level, and thereforemay also predict future retail prices. However, wholesalers may not always pass the fullincrease along to retailers during a sluggish economy or when they think the increaseis temporary. Published monthly by the US Bureau of Labor Statistics.
Gross Domestic Product Defator (GDP Defator):
The broadest indicator. Itmeasures prices for all nished goods produced domestically, including those forgovernmental purchase, capital investments, and net exports. The GDP Deator isproduced by the US Department of Commerce.
Measures of Inflation
Many Retirees Will Outlive Teir Income
- Calculating the Impact o Infation
One of the most logical ways to understand ination is to measure the change in yourability to buy something common. The three most widely used measures of ination in theU.S. are: