The Impact of Inflation on Your Savings and Retirement Planning​

Inflation and Your Financial Future

In recent months, inflation has been making headlines, with the rate reaching approximately 3.2% as of July 2023. This figure indicates that the cost of goods and services, encompassing everything from groceries and housing to fuel, has risen by 3.2% compared to the previous year. At first glance, this percentage may appear relatively small, and you might not have noticed a significant surge in your day-to-day expenses. However, even this seemingly modest rate can have a substantial impact on your savings and retirement plans.

Let’s break down how a 3.2% inflation rate can add up over time. Consider your grocery bill: if you spent $10,000 on groceries last year, a 3.2% inflation rate means you’ll spend approximately $10,320 this year. Now, projecting this rate into the future, let’s say inflation remains at 3.2% in 2024. Your grocery bill for that year would be roughly $10,650. This simple example illustrates how even a modest inflation rate can lead to noticeable increases in your regular expenses over time.

The Erosion of Purchasing Power

Another critical aspect to understand is how inflation erodes the purchasing power of your money. As the cost of goods and services rises annually, the value of each dollar you have saved diminishes. Consequently, keeping your money in a non-interest-bearing checking account can be risky in the long term. Many financial experts recommend exploring alternatives such as market-invested accounts like IRAs, 401(k)s, or other investment vehicles that have the potential to outpace inflation. While these options carry inherent risks, they also offer the possibility of higher returns that can help protect your savings against the erosive effects of inflation.

Balancing Risk and Reward

Deciding where to invest your money to combat inflation and align with your risk tolerance is a complex task. This is where the expertise of a financial professional becomes invaluable. Together, you and your financial advisor will address questions like how to plan for inflation and make informed decisions to meet your retirement goals.

Planning for a Secure Retirement

Planning for and safeguarding your hard-earned savings is a multifaceted endeavor, and considering the impact of inflation is a crucial component. To ensure that the lifestyle you’ve worked diligently to achieve endures throughout your retirement, it’s essential to factor inflation into your financial strategy.

Professional Guidance Matters

Navigating the complexities of financial planning, especially in the context of inflation, can be challenging. Seeking the guidance of a financial professional is key to avoiding costly mistakes along your financial journey. Contact us at SHP Financial today for a complimentary review of your finances and let us help you develop a robust strategy that addresses inflation and aligns with your retirement aspirations.

If you’d like to learn more about how inflation could affect your retirement savings plan, contact Goldstone’s fiduciary advisors to get help planning for your future.