Will Inflation Wipe Away Your Retirement Plans?
Let’s be honest – when it comes to the future of our economy, there are many reasons to be concerned. Unemployment remains high, with no end in sight. The stock market remains volatile. The federal government is continuing to spend much more than it takes in each year, driving the deficit higher and higher.
Amidst all of these problems, it is easy to lose sight of what is potentially the biggest threat to your retirement: the corrosive power of inflation, combined with declining or stagnant income. This has been a real problem over the past several years, as a recent article published by the Newark Advocate indicates:
Consumers’ incomes have recovered about a quarter of the ground they lost during the recession and its aftermath, but progress has stalled in recent months, a new report says.
Median household incomes, before taxes and adjusted for inflation, have risen 2.2 percent in the past year through June, according to Sentier Research, a consulting firm founded by Census Bureau researchers. They remain 7.2 percent below where they were in December 2007 — the start of the recession — and 4.8 percent below when the recession ended in June 2009, Sentier reported.
The recent improvement was concentrated in late 2011, but the median has slipped slightly this year, in part because of inflation, Sentier partner Gordon Green said.
“Inflation is a big player now” in future household budgets, Green said. “Incomes have flattened out, and gas prices are going up again.”
The damage has been much worse, predictably, in homes where the person listed as the property owner or renter has been unemployed. Their incomes are down 22.6 percent since June 2009. But even households where the primary earner has been employed continuously also have incomes almost 5 percent lower than in June 2009.
To summarize: consumers today are earning substantially less money than they were making five years ago. Yet, costs of living continue to rise. The net result is much less disposal income for the typical consumer.
If your investments aren’t protected against inflation, you could be in trouble when it’s time to retire. Living costs are going to continue to rise, and if you’re not protected, you won’t be able to keep up.
The good news is that there are a variety of options available to protect your assets from the corrosive power of inflation. If you’d like to learn more, please get in touch with us today!
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Depaul University—O’Hare Campus in Chicago IL
July 31, 2012 7:00 PM