Inflation
The value of a dollar is changing all the time. Simply said, it is becoming less all the time. Average hamburger in 2000 is 77cents. Can you still buy a hamburger today with 77 cents? Economists call this Inflation, and inflation is part of daily life.
It seems to be a scary thing that I will no longer able to do what I want with the money I saved in the future or when I retire. With proper planning, there is nothing to be afraid.
With Proper Planning, nothing to be afraid
After Inflation is 1.73% in the past decade, using this as projection into future. I saved 100 dollars in 2021. In 2031, my 100 dollars is still 100 dollars, but I will only be able to buy 84.2 dollars worth of 2021’s goods in 2031. Why should I even save anything? There are 2 reasons to save. Number one, if you don’t save, you will have no money to buy anything in 2031. Number two, there are ways to make your money off the 100 dollars you saved. There are a whole range of investment that could gave you returns ranging from 0% (checking account) to 10% (NASDAQ for average past 15 years). Therefore, your 100 dollars today could become 250 dollars (if you invested in NASDAQ index fund and it continue to grow at 10% like past 15 years). And that 250 dollars will be able to buy about 217 dollars worth of goods in today’s value. With planning, not only your money will not worth less, you may even be able to double the value in 10 years. Granted this is an extremely optimistic case, knowing the fluctuation of the stock market, there are significant risks involved. Therefore, it is important to find the appropriate investments that fit your risk tolerance level. With 2-3% stable return funds, that would help you protect the value of your savings.
How Much do I need when I retire in 20 years
I work very hard to save for my future, but how much will it worth in 20 years. To understand your retirement savings in 20 years, the best measurement is to budget your retirement using “Today’s dollar” in your calculation. What does it mean? When you calculate retirement using today’s dollars, you can project what you will be able to do with the money in the planned budget using today’s dollar value. In other words, using our retirement calculator, if your projected retirement budget (in today’s dollar) is $2,500, that means you will roughly be able to do as much as you can with $2,500 a month today. You will be able to budget your life as today on rent, car payment, utilities, internet, mobile phone payments and even vacation just like today’s.
Use our RETIREMENT CALCULATOR to try out your scenarios.
