How Inflation Threatens Your Retirement—and What to Do About It
How Much Will You Spend in Retirement?
This is an important question. We can get close to an answer by looking at your current expenses. However, the biggest factor affecting your future spending is inflation.
Understanding Inflation
What costs you $1 today will likely cost $2 or more in 25 years. You need to consider this when planning for a retirement that could last this long or even longer. To cover these costs, your assets must:
- Grow at least at the rate of inflation
- Be significantly larger so you can spend them down in retirement
Why Invest in Stocks?
This is why retirement investment plans often invest heavily in stocks. Connecting your assets to investments that beat inflation helps you feel secure about future expenses.
The Case for Stocks
Why do we believe stocks will yield a higher return than inflation? The answer is simple: the companies behind those stocks need to grow faster than inflation to cover their own costs.
So, what do you think?
- Do you have a portfolio that accounts for the rising cost of living?
- Are you confident that you can maintain your current standard of living in retirement?
- Does your financial plan support your perception?