How are $107 and $217.20 the same?
Let's talk about the effect of inflation on your retirement lifestyle.
Consider the inflation percentages for each of the last five years that are listed below.
- 2010 - 1.6%
- 2011 - 3.2%
- 2012 - 2.1%
- 2013 - 2.5%
- 2014 - 1.6%
That doesn't look so bad. But here is another number ($107). The basket of goods you bought in 2010 for $100 is now $107. That's not so bad. You could trim a little bit here, cut a little bit there.
But what if you retired in 1985 and lived for 30 years until now.
That $100 basket of goods? It's now $217.20.
That's a problem, isn't it?