How does inflation affect retirement planning?

Inflation significantly impacts retirement planning as it reduces the purchasing power of money over time. This means that the same amount of money will buy fewer goods and services in the future than it does today. As a result, individuals must account for rising prices when estimating their future expenses during retirement.

To maintain their standard of living, retirees need to save more to offset the effects of inflation. This requires careful planning and adjusting investment strategies to ensure that savings grow at a rate that at least matches inflation. By including a consideration for inflation in their retirement planning, individuals can make more informed decisions about how much to save and what types of investments to consider, ensuring they have sufficient resources to cover their needs throughout retirement. This underscores the importance of understanding and preparing for inflation when planning for a financially secure retirement.