Ok, I've been meaning to post about this for a while.
Inflation really sucks!
Today my buddy and I had lunch and his soup, 1/2 a sandwich and a drink was more than twelve dollars! He looked to be enjoying it but the price seemed excessive.
I don't want to go all "I remember way back when..." but food prices have risen quite dramatically over the years. To some, perhaps it's a minor inconvenience but for us in the helping people plan for retirement business, the effect of inflation is not to be underestimated.
Often, I'll ask a simple question to a future retiree. How much money will you need to live on in retirement. Let's say the answer is $100K. The problem is that he or she is answering in today's dollars, not tomorrow's dollars. For a 50 year old, $100K today really means $150K in twenty years. So the planning is not to provide $100K a year (for the rest of his/her life) but more so to provide that number PLUS a measure of inflation (2 -3%) for each successive year.
Today's meal might have cost 10 dollars a decade ago and that might not seem like much but it adds up quickly.
The message today is if you ignore the effects of inflation, you'll be sorry.
That's just the way it works.
By the way, if you're so inclined, visit http://www.usinflationcalculator.com/. Throw some numbers in the inflation calculator and see what you come up with! (Spoiler alert: It's kind of depressing so I recommend calculating on an empty stomach!)