Are you taking steps to protect your retirement from inflation? Inflation drives up the cost of goods and services, meaning your dollar does not go as far as it use to. A recent Time Magazine article stated that what a $100 bought in 1998 would only buy $73 worth in 2008, just 10 years later. To compound the problem, Time Magazine said the average 401K Plan balance in 1998 was $47,000, but in 2008 it had dropped to only $45,000. Do you see the problem? While the cost of living went up 27%, the average retiree's 401K went down 5 to 10%. That math just can't work for very long.
Inflation creeps up on all of us. What cost a dollar just a few years ago now costs a dollar fifty or so. Over time, inflation seems to draw up prices 3 to 4% per year on the average. These price increases can be extremely hard on retirees who are living on a fixed income.
So what can an investor do to offset the damaging effects of inflation? You must start by not losing more of your principle. Your money needs to be working for you, not against you. Then make sure you are getting a fair rate of return on your money.
