Managing Inflation Risk in Retirement
While there are many potential risks to consider when planning for retirement, one that is often overlooked is inflation. Most people factor in inflation when planning how much they will need when they reach retirement. But inflation does not stop the day you retire. In fact, your budget on the day you retire could look very different five, 10 or 20 years into retirement. Not understanding inflation -- and more importantly -- not having a plan to address it, can derail even the most well-planned retirement strategies.
Based on life expectancy or so. So even with a modest 3% inflation rate, day-to-day costs of living could double after about 24 years, based on consumer price index and Bureau of Labor Statistics data. And at the current rate, health care costs, which play an increasingly important role as we all age, will likely rise at an even greater pace.
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