The Rising Cost of a Good Time
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How much will you spend in retirement?
This is an important question, and we can get nearly there by looking at your current expenses. However, the biggest determinant of your future spending is actually inflation.
What costs you $1 today is likely to cost $2 or more in 25 years and you need to account for this when thinking about a retirement that could last that long or longer. To pay for this, our assets must grow at least at the rate of inflation, or we must have far greater assets and plan to spend them down in retirement.
This is why investment plans geared to pay for retirement have a significant portion invested in stocks. By tying your assets to investments that offer growth above inflation, we can have some confidence of meeting your expenses in the future with the assets you have today.
And why do we think stocks will provide a higher return than inflation? Because the companies those stocks represent must grow at a pace higher than inflation simply to pay their own costs.