Tuesday, May 14, 2019

Preserve Purchasing Power to Weaken Inflation's Impact

Key Takeaways:
  • Inflation can chip away at the wealth investors have built.
  • Part of financial planning requires figuring out what your purchasing power will be in the future to see how far your retirement savings will carry you.
  • Investors can inflation-proof their portfolio to withstand gradual increases in prices for goods and services.

Thirty years ago, a dozen eggs cost shoppers around 75 cents. Now, you would need to add more than a dollar to that to get them. This is just one example of a consumer item’s price that has increased during the past several years, showing how inflation affects our buying power.

The effects of inflation are not only seen in the grocery store. Inflation is persistent and can slowly erode at savings over time. Therefore, it threatens the retirement nest egg. For retirees, savings replace employment wages as the main source of income. This means it is crucial for investors looking toward the long term to build retirement funds that will keep pace, or even out-pace, inflation.