For years you have likely heard financial forecasters in Boulder and throughout the rest of the U.S. warning you of the need to start your financial planning now in order to cover your costs of living once you retire. Hopefully you have heeded that advice and begun to do so. Yet as you begin to plan your retirement savings, there is one factor that you will want to consider: the impact of inflation.
You can see the tangible results of inflation every time you go the gas station and pay in excess of $3.00 for a gallon of gas that may have cost only $1.25 20 years ago. Today, it is only an annoyance that you are able to deal with because whatever salary you earn typically increases along with the cost of living. However, what happens when you begin to draw on your nest egg? According to the U.S. Inflation Calculator, the current rate of inflation in the U.S. at the end of February 2017 was 2.7 percent. If that rate were to maintain that average for the next 30 years, then you might realistically needed to bring in an income up to three times that of what you’re currently making in order to maintain the same standard of living.
Fortunately, there are investment vehicles that typically outperform inflation. These include:
- Stocks
- Commodities
- Real estate
Other savings tools, such as series I savings bonds, have their interest linked to the rate of inflation, making them a considerably low-risk investment if you are trying to safeguard your savings from depreciation.
Another step you can take to protect yourself is waiting to collect Social Security Benefits until age 70. By doing so, your benefit goes up eight percent for every year past the retirement age you choose not to collect.