Inflation

Inflation can be a real problem to those who live on a fixed income. Even a moderate increase in the cost of living will have a significant impact over a retirement period that can extend 20 years or longer. At an inflation rate of only 2 percent, an item that costs $100 today will cost about $155 in 20 years.

For example, an inflation rate of only 3 percent would have the following effects on living expenses:

The significance of inflation on retirement is apparent, given the length of time one can expect retirement to extend.