This is the second part of a two-part blog on inflation. May I encourage you to read Part One if you have not yet done so?
What is the Primary Risk of Inflation?
The primary risk in inflation is that you lose purchasing power over time. Therefore, this is a topic we choose to emphasize and thoroughly explain to clients and their families.
Here are some examples I hope you will find interesting:
Year What $1 buys Money Supply*
1907 1 pair patent leather shoes $7 Billion
1913 1 Woman’s house dress $13 Billion
1930 16 Cans of Campbell’s Soup $46 Billion
1940 20 Bottles of Coca Cola $55 Billion
1960 2 Movie Tickets $211 Billion
1987 1 Bottle Heinz Ketchup $1,560 Billion
2000 1 Wendy’s Hamburger $4,917 Billion
2010 1 Song on iTunes $13,291 Billion
* the total amount of money in circulation or in existence in the U.S.
(Source: Jeff Desjardins Visual Capitalist 4-9-2017)
Retirement assets need to increase in value beyond inflation levels. Those retirement assets need to last 18.8 years for a 65-year old male and 21.2 years for a 65-year old female. (Source:superlike.com)
Of course, these are average life spans…. What does this mean for the person or couple who live into their 90’s?
Planning for longevity and the increased cost of health care is critical. The assumptions made for inflation and portfolio return have a huge impact on planning outcomes. If you do not yet have a retirement plan in place, please make it a priority. The peace of mind and sense of security a plan provides is priceless.
Barbara A. Culver
CFP®, ChFC®, CLU, AEP®