From Retirement Now Newsletter June 17th 2021
A lady named Melanie Faithful was going through some of her books when she came across a copy of Little Men she had checked out from her Indiana library back in 1969 when she was a young girl.
She had never returned it all these years and the book had moved multiple times with her, to where she currently resides in Santa Fe.
So she mailed it back with a library donation.
Fortunately the library doesn’t charge late fees on children’s and young adult books.
But thinking about a late fee compounded over 50 years got me thinking about inflation that retirees face. And it seems I hear people talking about inflation all the time right now, especially in my neck of the woods when it comes to building costs of new homes.
Consider:
If you retire at 62 and live to the average life expectancy of 78, that’s 16 years.
Also consider, average means that 50% made it beyond that age. And many people live into their 90’s. today.
So let’s say a retirement can last 25 years just to keep the math simple.
With a 3% inflation rate prices will double in roughly 25 years.
Did you ever hear your parents or grandparents talk about how they used to buy a hamburger for 25 cents?
One local fast food chain in my town even has a picture up on the wall of one of their old facilities that actually had a sign up advertising 25 cent burgers.
You’d be lucky to find a cheap burger for $2 at most fast food restaurants today.
Using 3% inflation that 25 cent burger becomes 50 cents in twenty-five years.
After another twenty-five years it’s a dollar.
Then two dollars.
Little numbers like 3% can add up given enough time. Which is why it’s important for many retirees to have investments that outpace inflation. So if you plan for your retirement to last 25 years, it’s good to have a plan in place to keep your portfolio growing during that time. If you don’t have that plan in place, then your default plan could very likely be plan on cutting back on my lifestyle spending as I get older.
If you don’t have a plan like this in place, click here to reach out to me for a 15-minute phone chat to see if we can help you with this.
Regards,
Chris Hammond
