Monday, November 28, 2011
The Cost of Money: It’s Called Inflation
4:51 PM | 
Posted by
pensionfinancialservices |
Over time, you need more money to buy things that used to cost less. Inflation will reduce your purchasing power over time. Inflation directly relates to your retirement income as prices rise and your money cannot go as far as it does now. Even a relatively low inflation rate will impact a retiree’s purchasing power. For example, with an inflation rate of only 2%, $50,000 today will be worth only approximately $30,000 in 25 years.
The benefit of retirement plans is that they can hold off inflation increases through the effect of compound interest, making another strong case for you to deposit as much money as possible to a retirement plan while you are young. Some retirement income sources, such as Social Security, some pensions, and variable annuities can help you keep pace with inflation automatically through annual cost-of-living adjustments or market-related performance. But others, such as fixed pensions and annuities or fixed-income investments, can’t.
Pension Parameters maintains a strong focus toward beating inflation for its clients through the use of mutual funds and creative plan construction. Talk to us about how mutual funds and other products will help you minimize inflation later in your life, when you will clearly need more than you ever thought possible.
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Inflation
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