Understand the Risks
Inflation can take a toll on your retirement nest egg and long-term financial security. Fortunately, there are several strategies you can employ to help combat rising prices
Rising prices erode your purchasing power. In December 2007, a pound of coffee cost $3.69. By December 2016, that figure had risen to $4.28¹ As shown in the chart below, a hypothetical 2.65% annual rate of inflation will double expenses over a 25-year period. Second, inflation serves to undermine the "real," or post-inflation value of your investment portfolio.
Inflation Can Increase Cost of Living
Of particular concern for retirees is the rising cost of health care, as it has surpassed the overall rate of inflation for a number of years. The number of employers offering health care coverage to their employees during retirement is on the deline and affording heatl care is a top concern from many baby boomers.
1. CPI Average Price Data, Bureau of Labor Department Statistics, March 2017.
Rising Health Care Costs Have Been Outpacing Inflation
Work with your financial professional to develop a plan to try and offset rising costs. For example, whenever possible, consider cost-of-living increase options/riders on any accounts, contracts, or policies. While there are incremental costs associated with these optional features, they may be instrumental in helping you stay one step ahead of inflation. Also consider sources of guaranteed income in retirement, such as annuities, to help pay for the rising cost of medical care and prescription drugs. To learn more, speak with your financial professional or call 800-MAINSTAY (624-6782).