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Can inflation hurt you?

1-minute video: Impact of Inflation in retirement


Can inflation hurt you?

Inflation is a rise in price over time. Commonly you will read about the Consumer Price Index (CPI) which provides the direction of prices of the component items upon which the index is based. Not everything you might buy in a week or month is in the list, but the idea is to get a representative sample of many important items.

Lately, news stories have talked about the rise in inflation. A rise in prices, or CPI, in isolation does not tell you much especially if not compared to something meaningful to you. For many years this rate has been low by historical standards, but now it is beginning to rise. Along with this rise is a rise in interest rates, both long-term and short term rates, which effects the rate borrowers pay for goods and services they pay for with debt whether a car, house or even a credit card debit that is not fully paid at month’s end.

So, can inflation hurt you? Yes, it might if your income fails to grow as fast as inflation. Hypothetically, if a grocery item you always consume costs $3.50 today and inflation is 4%, then in eighteen years you will need $7.00 to buy the same item. If you are on a fixed pension, you have a problem. The cost has doubled, but your income has not.

You can not control inflation, but you can control in what investments you place your money. For most people, some portion will need to be in assets which, in the long-term, rise in value faster than inflation. That way, when the item doubles in price, hopefully your investments will have more than doubled in value. Finding the right mix of investments for your situation will take time, effort, and expertise. The right mix is different for everyone and changes through time.


This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney. Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

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