7
Inflation Takes a Bite!
Inflation is the increase in the cost of goods and services over time. It means that every year, the same
amount of money buys less. Inflation can take a hefty bite out of your savings and purchasing power.
That’s why experts say it’s critical to factor the effects of inflation into your long-term financial plan.
Though the rate can vary greatly, the historical average inflation rate is around 3% per year. This
means a can of cat food that costs $1.50 this year will likely cost around $1.55 next year, and around
$1.59 the year after that. Inflation doubles the cost of goods and services approximately every 24 years, so
in 2036, the can of cat food that costs $1.50 today could cost
$3.00, or maybe more.
Imagine what the bite of inflation could do to your
hard-earned retirement savings. When you are living
off retirement savings, inflation nibbles at your
income. Your best defense is to be prepared, be
smart and save like a dog. Estimate how many times
your cost of living will double by the time you need
your retirement money, and plan accordingly. Get an
early start with Petco’s 401(k) Plan to get the power of
compound interest and matching contributions.
Also consider your investment strategy. If you are years from
retirement, consider the pros and cons of investing in stocks and bonds.
Despite their volatility and risk, stocks and bonds may potentially deliver higher
returns over the long-term, which could prevent inflation from biting your tail.
The price of a new car will dramatically increase over time due to
inflation. Look at what a new car priced at $21,440 today will cost
over the next 40 years, assuming 3% annual inflation.
For help calculating the amount
of money you’ll need during
your retirement years, try some
of Fidelity’s
online planning
tools
at
. After
you login, click on the
Guidance
and Retirement
tab then click
on
Retirement Planning
in the
middle of your browser window.
Here’s Help
Inflation Impacts Purchasing Power
10 Years
$28,414
20 Years
$38,724
30 Years
$52,042
40 Years
$69,940
$0
$10K
$20K $30K $40K $50K $60K $70K
Price in thousands
