TEMPLE, Texas — Two things make money. Time makes money, and money makes money. Young workers usually have a lot of time. Older workers tend to make more money.
But both need to plan accordingly when saving for retirement. Unfortunately, whether you are close to retiring inflation is a concern, and if you have decades before retiring, you'd better be thinking about inflation.
Inflation in a nutshell is the rising costs of goods over time. If you don't prepare for everything to get more expensive, you probably won't be living the retirement that you want to.
Financial Planner Rolandus Johnson explained it to 6 News.
"I've been in this business now for eight years and the one thing that I thought I wouldn't see is inflation on the scale of what we're seeing now. And what you kind of have to do is, it goes back to planning and the reviews and all of the things that come with it when your money is growing at a certain rate," he said. "And if you talk to any advisor that kind of has a metric and kind of an outlook on what inflation looks like right now, you always want to make sure that your money is outpacing inflation."
This proves what Johnson was talking about. According to Forbes, overall, prices in July climbed 5.4% year-over-year, that’s according to the Bureau of Labor Statistics, and 0.9% over the previous month of June.
The indexes for homes, food, energy and new automobiles were key drivers of inflation growth last month. As Johnson said, your age really changes things.
"So you take a 25-year-old and a 55-year-old. Well, for that 55-year-old we call that the 'retirement red zone.’ You know we are 10 yards in from retirement. And it's one of those deals where 'Hey, we've got to get to a million!' And inflation is going to be a killer, it's right there in our face, right," he said. "Where the 25-year-old, we've got a whole bunch of time to outpace and catch up to inflation and especially being a young person, you can put away, do a lot more damage without having to work so hard. Where for a 55-year-old there's a lot of specialized planning going into making up that ground for 10 years."
All we can really do is know that inflation will be there. Since 1960 inflation has averaged 1.23% per year. But since inflation has been so low for the past decade, this recent 5% jump has really been noticeable.
"You have to understand that the cost of goods are going to rise, the cost of goods are going to go lower and so it goes off of a number of factors, interest rates, political climate, you name it there's a lot of stuff that we can't control."
Also according to Forbes, saying that higher prices are transitory, and inflation was too low before the pandemic, is easier than actually living through the increase, especially as July wages only gained 4% from the year prior. So we'll see what the next year ahead holds.