One of the most common mistakes of investors in to incorrectly under-estimate the anticipated consumption rate of the retirement fund. Inflation is a key factor that plays into accurately calculating how long funds will last. Faliure to consider all these factors is a mistake that can easily be avoid through proper diversification. The risks may not be as readily visible to a client portfolio value but the corrosive effects of inflation are very real risk factors all the same.
Jack Lane
of CA
@
Mar 10, 2009 20:34:51 PM
inflation in retirement
I am unsure about how to estimate the inflation of medical costs in retirement. I plan to retire in the next year or so,and have a good handle on what my expenses will be in the first year or so. Should I go 4%, 8%, 12%?
SaraBee
of FL
@
Oct 04, 2008 14:07:06 PM
This is one of many articles written to scare you. Remember good news doesn't sell advertising. Inflation should be a concern for retires but there is no reason to panic. The article fails to point out that, notwithstanding medical costs, retirement expenses tend to decrease with age. A recent study shows how median per capita household expenditures falls with age, declining from $17,409 per person at ages 53 to 64, to $15,414 at ages 65 to 74, to $13,678 at ages 75 and older. See: http://www.urban.org/UploadedPDF/411130_expenditure_patterns.pdf
This decrease in your expenses as you age will counteract some of the effect of inflation.
The article also does point out forcefully enough (for my taste) that by having more invested in stocks, you are taking on significantly more risk. Sure high returns are great, but not at the risk of losing a significant portion of your nest egg.
Given these two points, while it might be prudent to evaluate your current exposure to stocks and consider an increase if your exposure is low, I don't think you need to panic about inflation and be as agressive as this article suggest.
Jonathan D. Edelfelt
Author of Who Said You Need Millions? Retirement Strategies for the Rest of Us
www.WhoSaidYouNeedMillions.com
Jonathan Edelfelt
of TX
@
Jul 09, 2008 21:53:53 PM
Jack Lane of CA @ Mar 10, 2009 20:34:51 PM
SaraBee of FL @ Oct 04, 2008 14:07:06 PM
Jonathan Edelfelt of TX @ Jul 09, 2008 21:53:53 PM
Back to article