We have not heard much about inflation recently, as it has been very subdued over the last 15 to 20 years. However, a recent study sponsored by Allianz Life of 1,213 US adults in July of 2017 noted that inflation is still a top concern of US adults. This may be due to the fact that many of them lived through the high inflation and high interest rate years of the 1970s and early '80s. They remember the impact that this had on themselves or their parents. Nearly 2/3s of adults who responded to the survey ranked inflation as a top economic concern, and many said they do not know how they are going to address this within their financial and retirement plans.
It is important to remember that understanding and managing expenses in retirement is important, but frugality is not a strategy that will help you manage the risk of inflation in retirement. Inflation has been likened to the carbon monoxide of savings and investment throughout a retirement lifetime, a silent killer that worries most Americans, even though they are not addressing this in their retirement plans.
More concerning is that the survey's respondents did not fully understand the potential impact of inflation over a retirement life expectancy that could last 20 to 30 years. Based on a 3% inflation rate, cost of living would double approximately every 24 years, meaning that you would need approximately double the amount of cashflow in your late 80s, to equal the same income that you were living on in your mid 60s. This is a very important consideration that needs to be taken into account in your financial and retirement plans in order to live successfully the rest of your life.
We at Impel Wealth Management take inflation and its corrosive impact very seriously, and would be more than happy to discuss how you can address this in your retirement plans, so that you can "Move Forward" toward the retirement life you envisioned.