retirement planning tallahassee

Inflation—A Silent Thief

by John Curry

Let’s talk about the silent thief—inflation. If you ask ten people what they think the inflation rate is, I bet you’d get ten different answers. In reality, we all have a different personal inflation rate, because it really depends on how we use our money. If you have a tendency to travel and spend money, then you will have a higher personal inflation rate than someone who stays home and enjoys reading a good book.

I’m thinking of some friends now. They travel all the time. They’re going somewhere every month. They literally take ten to twelve trips a year. They both have retired. They’re still doing some work, but they’ve positioned themselves and designed their lifestyle so they can travel because they love to travel. They spend a lot of money doing that, as you can imagine.

I’m thinking of another couple. To them, retirement means sitting on the deck of their lake house, reading a good book, enjoying each other’s company, and relaxing. They rarely leave the State of Florida. Now which lifestyle is better? There is no better; it’s just different. You see, it comes back to the why. Why did you work so hard? Why did you save money? Why did you put it aside? Let’s face it, when you die, you’re not going to take it with you, but while you’re living, inflation and taxation can steal it from you. And inflation is the silent thief. See, you can tell when the taxes come out. You see that. That’s screaming at you. It’s not silent. It’s screaming, “Here I am! I’m taking your money!” But inflation sneaks up on you.

You see, inflation is chipping away at the purchasing power of your dollars. Imagine retiring and have all of your money in CDs that are paying three percent interest, and inflation is at three percent or higher. You see, you haven’t lost any of your principal, but you have lost purchasing power, and that is a big issue in retirement. You see, we can’t just stick our heads in the sand and ignore inflation. We should look at asset allocation of our investment dollars so that we have growth of our assets, especially in inflationary times.

You see, we have short memories. I believe we’ve forgotten about inflation rates back in the seventies and early eighties. Remember that? Inflation thirteen, fourteen percent? We’ve been told the last decade it’s only been around three percent, but remember, that’s what we’re told by government organizations, but if you look at your personal inflation rate, I bet it’s higher than three percent. What will it be when you retire? I don’t know, and you don’t know either, because it depends upon the lifestyle that you have in retirement and how you spend your money and what you spend your money on.

Now, let me leave you with this thought. The only way to outrun inflation is to have more money, more money. And the answer is not putting it in super-aggressive, risky programs. It’s putting it in programs where we have the use of our income, our money, during our lifetimes and access to it if we have an emergency or an opportunity come up.

I hope that you will focus on inflation to understand it, how it’s working, and when you read about it or hear about it on the news that you ask yourself this: “If the media is telling me inflation is three, four, or five percent, what is my personal rate especially as I buy groceries and use my money for other things?”

I hope you’ll take into account inflation as you do your planning, because you’re going to need to do so in order to maintain and have a secure retirement.

Previous post:

Next post:

Real Time Web Analytics