Since 1970, the cumulative rate of inflation has been 651%. The chart below shows what $1 in 1970 would be worth today, if it kept pace with inflation, meaning todays dollar would be worth 13 cents back in 1970.

In more recent history, since 2000 inflation has grown 68.08%, meaning that if a retiree in December 1999 was living off of an income of $100,000, he or she would have needed to grow his or her retirement income to $168,078 by February of 2022 to have the same purchasing power.

Inflation is the hidden danger in retirement. Considering retirement can last 30-40 years, increasing medical costs, food costs, housing costs and transportation costs can leave retirees far poorer if their savings do not keep up with inflation. Many retirees depend upon fixed-income investments during retirement, which are not designed to keep up with inflation. Social Security has cost-of-living adjustments, but sometimes it can be prudent to supplement this income. It is important to look at where inflation has been and where it may be headed to build a retirement income plan that factors in inflation risk.

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