Retirement Risks: What you should know about inflation risk
Not surprisingly, we all seem to be infatuated with Market Risk, the potential losses of your investments due to those investments losing value. How could you not? After all, at the very least you get a quarterly statement that clearly states the changes in the value of your investments. But in this instantaneous world we live in more than likely you get 24/7 online access of your investments. Many in "real time". To be sure, we are active asset managers and we too spend a large amount of time and effort trying to reduce one's market risk.
However, there are several other risks that you should be aware of as you plan for your retirement. Not the least of which is Inflation Risk. We see inflation risk every day. It is reflected in the price we pay for milk, bread, cable TV service, etc. It also appears in the quantity of the goods we purchase. Have you seen the size of the Snickers fun snack bar lately? Apparently "fun" is now smaller. Much too often when I discuss retirement income planning people calculate the level of income needed on what things cost today, not what things will likely cost 10 years from now. Have you ever had someone say “I am living on a fixed income?” Sure, we all have. The reality is they failed to plan for increasing expenses in retirement.
According to the Bureau of Labor Statistics Consumer Price Index Calculator, you would have needed $264.12 in 2010 to match the buying power of $100 worth of goods/services in 1980.
What will your retirement cost? Perhaps we should sit down for a consultation?
Hopefully this information has helped you make smart choices with your money.