Protect Your Retirement Savings from Inflation

With a record-high stock market and low-interest rates from the Federal Reserve, inflation if not already here, seems to be right around the corner.

Inflation, a general increase in prices for goods and services, which reduces the purchasing power of money, may sound scary.

Yet inflation, at least in moderation, is part and parcel of a healthy economy.

When consumers think prices will continue increasing over time, they’re more likely to buy products now, rather than waiting until later, when products might be more expensive. This leads to an increase in production, which means more jobs in our economy.

However, when you’re planning for retirement, higher-than-average inflation rates can eat away at the purchasing power of your nest egg. So, it’s essential to consider its effects on your retirement planning.

What Causes inflation?

Inflation happens when the amount of money entering the economy is more significant than its economic growth.

If the government prints more money to cover debts but people slow down their purchase of goods and services, that flood of extra dollars into the economy will cause prices to rise.