Retirement can bring you great joy if you plan it right. It is the culmination of a life’s work and is a time to relax and enjoy the luxury of constantly being on your own schedule. Even if retirement is not on your radar now, most likely it is the reason that you are putting together a financial plan and building your savings with this goal in mind. The end result should be a strategy that replaces your working income and allows you to live comfortably. In order to do this effectively, you must always consider a sneaky little number that can erode all of your wealth over time: inflation. Which brings us to the 2nd topic in our Retirement Income Planning Series,

Since 1954, prices in the United States have risen every year on almost every commodity available. Simply put, this means that what you can afford today will most likely cost more tomorrow. With the Consumer Price Index inflationary figure staying steady at an average of 3%, your basic cost of living will essentially triple over the next 20 years. Even now, in these summer months, inflation is at the forefront of the Federal Reserve Board’s recent discussions. Some speculate that interest rates will be raised in the near future (potentially as early as this August) following the recent string of cuts in order to combat inflation. In his Congressional testimony this past week Ben Bernanke, chairman of the Fed, noted that inflation is too high and remains a top policy priority.

Three critical factors in planning your retirement include your age at retirement, your desired standard of living in retirement, and your life expectancy. It should be noted that people age 100 or older are the fastest growing segment of the population by percentage. At Dominion Wealth we feel it is mandatory to begin with a life expectancy assumption of at least 95 years in the planning work we do, and this number should only be adjusted upward. Therefore it is impossible to ignore this powerful single digit number of inflation. Your money will need to last anywhere from 30-40 (maybe even 50!) additional years after you receive the last paycheck from your employer.

At Dominion Wealth we are constantly researching new and efficient ways to ensure you receive the income you need in retirement. The income you draw is only part of the picture though. We aim to develop sector diversified portfolios that provide investment growth as well. It is not enough to simply move your money to the sidelines (cash) in retirement and expect to sufficiently live off of that forever. We are here to help you avoid a retirement income shortfall. It is an ongoing process that requires continuous evaluation and monitoring. Ever changing investment markets and constantly rising prices require the foresight of solid planning and the ability to adjust the plan over time in order to be certain that you are able to live the retired life that you always envisioned.

Regards,