A fresh look at inflation
In the 12 months ending in December 2023, prices for consumer goods and services rose by 3.4%. This was a welcome reprieve after inflation rates of 7% in 2021 and 6.5% in 2022.1
The sharp increase in prices in 2021 and 2022 was a surprise to retirees who haven’t seen inflation rise above 4.1% over the previous 30 years.
Inflation represents a loss of purchasing power. Here’s a basic, hypothetical example:
- At the beginning of retirement, suppose that $2,000 of monthly income is enough to cover most of a retiree’s essential expenses such as groceries, gasoline, utility payments and healthcare.
- After a few years of rising inflation, purchasing power declines.
- Over a period of 20 years, a retiree may find that their $2,000 of income can pay for only $1,000 worth of goods.
The challenge when it comes to planning for the future is that no retiree knows in advance how much inflation will affect the cost of maintaining their lifestyle. Have you thought about how inflation may affect your spending power in retirement?
To learn more about inflation and potential ways to help combat it in retirement, download the complete article.
1Consumer price index, Bureau of Labor Statistics, February 2024.