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Section 6

Inflation

One of the most frequently overlooked challenges facing retirees
is inflation. A recent study by the Global Atlantic Financial Group

says that 39% of retirees are spending more money than they
had expected to spend before they retired.

I have many clients who are engineers who retired from
aerospace companies in the last three decades. Almost without

exception, they had pensions from their companies, some of
them good for the life of the retiree and some good for the joint

lives of the retiree and his or her spouse. What many of those
pensions didn’t have is a cost-of-living adjustment.

What seemed like a very generous pension in 1995, say $2,000
a month, doesn’t seem nearly as significant today. The spending

power of that $24,000 a year has been eroded dramatically by
inflation. The average annual inflation rate over the last 30 years

is 2.47%. If we assume a retiree had a pension of $24,000 a year
in 1995, that would be the equivalent of approximately $14,300

annually in 2019.
need to recalculate this

Chapter 5: Things That Can Wreck Your Retirement