On June 9, 2021

Inflation: Back to the future?

By Kevin Theissen

Inflation sometimes seems like one of those afflictions of an era long since passed into the history books. While it’s true that double-digit inflation has been absent for the last 30 years or more, you may remember the high inflation years of the 1970s.

Will the levels of U.S. public debt, loose monetary policy and the current economic and political policies revive the inflation rates of yesteryear? No one really knows. However, one thing is certain—even low inflation rates over an extended period of time can impact your finances in retirement.

A simple example will illustrate.

An income of $50,000 today at an inflation rate of 3% would have a purchasing power of just over $32,000 in year 15—a 35% erosion. Said differently, to maintain the desired lifestyle that a $50,000 income would provide requires $77,900 of income after 15 years of 3% inflation.

Here’s something else to consider. Retirees may be subject to a higher rate of inflation than the headline Consumer Price Index. Why might this be the case?

Healthcare inflation has outstripped CPI inflation by as much as 3% in recent years. And retirees may expect to spend more on medical expenses than most Americans.

Inflation is a thief; it steals the purchasing power of your retirement savings. But, as with your other possessions, there are strategies that may help you from being robbed of your purchasing power. For example, you may want to review the amount of debt, emergency savings and allocation of stocks and bond holdings.

Kevin Theissen is the owner of HWC Financial in Ludlow.

Do you want to submit feedback to the editor?

Send Us An Email!

Related Posts

Working it out on the skin track

January 15, 2025
“How much longer until we get to where you are taking me?” I hear the voice reach out from behind me. We’d been skinning (or climbing uphill with our skis on) for about an hour when my ski sister finally decided to ask where we were going. We had started with some work road and…

The sweet sound of success: ‘Norman’s Rare Guitars Documentary’

January 15, 2025
In September of last year, I put my son on a flight to Australia, where he would spend the next month backpacking throughout t that country’s eastern coast. He then flew to Bangkok, Thailand, for another month, this time enjoying the jungles and beaches in the surrounding regions. Finally, he concluded his Pacific trek with…

Civil engagement: Brown M&Ms

January 15, 2025
In the late ‘80s, the rock band Van Halen was taken to task when journalists discovered that their concert contract contained a clause stating, “There will be no brown M&M’s in the backstage area, upon pain of forfeiture of the show, with full compensation.” Immediately dismissed as the excess of party-band celebrity and unrestrained hubris,…

Bohemian waxwings: Intrepid winter wanderers

January 15, 2025
Walking along a dirt road last winter, I heard a collection of pleasant, sputtering trills coming from a stand of conifers and hardwoods nearby. I’m used to the winter conversation of chickadees around feeder and woods, the cawing of crows and blue jays in the yard, and the high-pitched calls of golden-crowned kinglets sounding from…