The next time you’re making retirement calculations, don’t forget one very important factor that can blow up the whole equation. Inflation.
If you have a dollar now, that dollar isn’t going to be worth nearly the same in 20 or 30 years, because of a loss of purchasing power. With the cost of almost everything going up every single year, that dollar is constantly eroding in value, even if you keep it safe under a mattress.
As an individual, there’s nothing you can do about broad national inflation numbers. But there is something you can do about your own portfolio, Current reports: try to ensure it outpaces inflation, so you aren’t falling further behind.
“Inflation is the silent pickpocket of our financial lives,” says Patrick Huey, principal advisor with Victory Independent Planning. “If your savings are sitting in a zero-interest account while the price of everyday goods and services is climbing, you’re quietly losing ground with every passing month.”
Consider: The average interest rate for savings accounts is now .62% annually, according to financial information site Bankrate, with some large institutions offering a paltry .01%.
Meanwhile, the latest Consumer Price Index stands at 2.9%, according to the Bureau of Labor Statistics. That’s not as crushing as the 8% average reached in 2022 during the pandemic — but it’s still enough to significantly eat away at the value of your savings over time.
Drill down into the inflation numbers further, and you see which costs are spiking the most. For August, for instance, shelter was up .4% in a single month, according to the Bureau of Labor Statistics. Food and apparel: Both rose .5%. Energy, up .7%. Used cars and trucks: 1%.
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