Inflation Can Raise Your Annual Retirement Expenses by $54,000. Here's How to Prepare
Retirement planners say you should plan for retirement living expenses of 80% to 100% of your working salary, but that could put you in the poorhouse if retirement is decades away. Why? Because inflation is slowly eroding your purchasing power over time. Your salary today might be sufficient to cover your living expenses, but you'll need far more in 30 years. Specifically, annual living expenses of $50,000 today will cost $104,000 by 2050, assuming inflation of 2.5%. That's a $54,000 increase, without any change at all to your lifestyle.
You may not think about inflation much today, because it's far easier to manage when you're earning a paycheck. You probably get an annual raise that keeps your income growing roughly in line with inflation. And now and again you might get a promotion that comes with a bigger salary increase, which funds things like a bigger house, a nicer car, or a fancier vacation. But those raises and promotions go away once you retire.
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Source Fool.com
