Inflation – we’re all tired of hearing about it, plenty tired of thinking about it, too. But we have to consider exactly how big a difference inflation makes in our future cost of living. And it seems like nobody knows exactly how to figure out how much today’s dollars will be worth tomorrow…
By Peter Reagan
Everyone agrees (if they’ve thought about it) that retirement planning is a good idea.
After all, who doesn’t look forward to having time after they’ve worked for decades to be able to enjoy life, to enjoy family, enjoy traveling and taking up the hobbies that you weren’t able to do during your working years?
And if you’ve made the right plans for retirement, then you have a good chance of being able to live that kind of idyllic retirement existence.
The problem is that many people (maybe most people) haven’t made retirement plans with what needs to be in place to be ready for even what we can see coming down the pike.
What the future holds that almost no one is talking about
Most retirement planning is based on the assumption that you can largely predict the future.
And, to be fair, some things are easy to predict.
You’ll likely still be able to buy food from some type of store twenty years from now. You’ll likely be able to travel to visit family in other parts of the country. You’ll likely be able to heat your home in winter and cool it in summer.
If you have the money, the purchasing power to do those things.
But most retirement planning is based on speculation that doesn’t take into account one of the biggest factors that ruin retirement plans: inflation.
Frankly, you tend to only hear about needing so much at retirement assuming that inflation won’t be a big factor during your retirement years.
How often do you hear of retirement plans that tell you to plan for the price of eggs to increase by 160% in a five year period (which we’ve seen over the last five years)?
Or how often do you hear of retirement plans that tell you to never plan on selling your home and moving into a smaller place near your kids and grandkids because the average home price where they live increased over 67% in the last five years (as happened in Naples, Florida)?
And to be fair, it’s not always easy to predict how much inflation is going to affect overall prices.
What we can predict with much certainty is that government spending and debt between now and our retirement years will devalue the currency and increase prices all around, which is exactly why we’ve had such high inflation over the last few years.
And we can pretty safely predict that government overspending will continue during our retirement years, too, causing continued inflation while we’re retired..
But it’s not just inflation overall that we need to watch
No, there are other factors specific to the retirement years that you need to think about in your retirement planning, too.
As we get older, medical care costs increase. An unfortunate fact of life for many people is that, as they get older, the more medical care that they need.
On top of that, the average American’s lifespan has increased by over 11 years since 1950 and advancements in medical technology mean that there’s a good chance that life expectancy will continue to increase.
Now, that’s great news! Three cheers for science!
On the other hand, all the research and development that goes into new life-extending medical interventions is expensive. And that means that there will be more years of increased healthcare costs that we need to consider, and to budget for.
And if you haven’t looked into how healthcare costs have changed in the U.S., you might want to sit down before reading on. Andrew Moran writes,
Medical care in the monthly consumer price index (CPI) report has risen by 143 percent since January 2000, according to data from the Bureau of Labor Statistics. Medical care commodities—prescription drugs, over-the-counter medicines, and medical equipment and supplies—have increased by 76 percent in the past 25 years.
You read that right: healthcare costs have increased by 76% in just the last 25 years.
And remember that healthcare costs, much of which is subsidized by the Federal government, made up 17.3% of the U.S. gross domestic product (GDP) according to the Federal government.
So, not only do you have overall inflation to plan for in your retirement years, you have something that takes up almost one out of every five dollars spent in our economy increasing at a rate where it has a good chance of doubling between now and the end of our retirement years!
And how much will the Federal spending to subsidize those increased healthcare costs continue to devalue the dollar, causing even more inflation in the overall economy?
To be fair, that’s just one example of how radically prices can change. But it’s an important one.
That’s why you have to take a contrarian view to retirement planning
Because you can safely expect inflation, especially in healthcare costs, to be an issue during your retirement years, you absolutely must find ways to protect your purchasing power from the impact of inflation so that your retirement funds can comfortably last you through those retirement years.
How can you do that? By doing your own research and making sure that your retirement planning meets your needs and wants, knowing of the likely inflation issues that you’ll see in the future.
And my recommendation for inflation-resistant investments is to diversify into precious metals. When you’re ready to find out more about that, you can request our FREE precious metals IRA kit to give you information so that you can make your own informed decisions for your retirement years.