Why You Must Guard Against Inflation in Your Retirement Plan

Why not simply put your hard-earned cash in a savings account and call it a day? Won’t that be enough to
get you through retirement?

There’s a very good reason financial experts offer suggestions for diversifying retirement savings, and one of the
main principles behind their rationale is inflation. Simply put, money saved today will have less value ten, twenty, or
fifty years down the road. It’s just how the economy works. So how can you make sure the money you put to work today in
preparation for retirement will be just as useful to you when it comes time for your nest egg to be your main income source?
This guide can help you form a plan of action and put all inflated fears to rest.

How Could Inflation Affect Your Money?

When you retire, what do you dream of doing? If you’re like many, you want to have the freedom to travel. With no job, you’ll have
the freedom all right, but will you have the money?

If you save up $15,000 to tour Europe, that price may be good for next year. But in 20 years, the cost may have risen at a higher percentage
than you’re earning on your savings. Inflation at a rate of 5.44%, which is the 30 year high
mark for the U.S., could mean the final price of that Europe tour has more than doubled. Instead of $15,000, you’re looking at a trip that costs over $40,000,
especially when you take into consideration that global inflation rates have escalated much faster than the inflation rate in the U.S.

If you aren’t earning at least 5.44% on your $15,000 chunk of savings, you will not be able to accomplish the same goals you once thought possible.
And that’s only taking an international trip into consideration. If you’re falling thousands short on that, how will you handle keeping up with
daily living expenses living as if your money is worth exactly the same as decades prior? How much will health care cost? Will energy bills prevent
you from becoming the luxurious traveler you once thought you would be at retirement age? This is why growth is one of the most important influential
factors when deciding how and where to save your retirement cash.

How Should You Invest?

The key to inflation-protected retirement savings comes in two parts: first, focus on investing, not just saving. Second, make sure you diversify
where your money goes.

Traditionally, rising prices and inflation translate to good stock performance. If you expect to retire comfortably, you must have a stock portfolio
with equities in international stocks. As long as inflation stays under 5%, the funds will most likely perform well and keep pace with the current
market in terms of value. When purchasing bonds, make sure the average return is higher than the average inflation, otherwise your money is losing
its power the longer it stays tied up in the bond.

If you plan on purchasing an annuity, you will have the option to also purchase inflation protection, either based on a set percentage or
on an actual index. Other forms of retirement planning including the purchase of long-term car insurance comes with inflation protection against
all costs.

There are other methods of increasing your payout in retirement, including simply working longer to build up your cash flow.
If you are planning on staying at your current occupation long enough to receive a pension, delay your retirement as long as possible. This way,
since the pension you receive will most likely be based partially on the average of the highest earning-years, you will receive more money in the long
run. This also increases the amount of money paid into your Social Security, which has its own benefits down the road. Delay collecting Social Security
as long as possible, since monthly payments increase when the individual waits until they are 70 to collect.

What’s Most Important About Retirement Savings?

While preparing for your future is a worthy cause, you must begin. The biggest obstacle facing those who know they must
start saving for retirement is simply getting started. It should not take a sudden inheritance, a winning lottery ticket or
the services of an advisory professional to get you going – you should take charge today. While inflation could negatively affect
your overall savings results, not saving enough or anything at all would make inflation fall to the bottom of your worry list.

Here’s what to do if you want to start, but don’t know where to start:

  1. Make room in your budget for retirement savings – cut out a luxury or take on extra work.
  2. Open and fund your IRA to its maximum capacity each year.
  3. Use helpful online resource to learn about getting started in the stock market and open a free online trading account.
  4. Read one book every six months on how to budget, invest and save for retirement to expand your platform of knowledge.

Eventually, it might help you to use some of your retirement savings to chat with a professional about your current standing –
the advice might mean the difference in thousands of dollars down the road. Another roadblock you can attempt to overcome is debt.
Say no to credit cards and pay off your loans as quickly as possible. Less money going towards interest means more money in your
retirement savings for the future.

Saving for retirement and having enough funds regardless of the market climate and inflation standards when you retire is possible,
but it starts with today. Make a positive step forward today and thank yourself in the future when it pays off considerably. While you may
not be able to predict the inflation rate, you have complete control over the amount of money you’re saving for retirement and where
it’s going.

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