Page 2 - Inflation -The Killer of Your Retirement Savings

Inflation: The Killer of Your Retirement Savings
“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
– John Maynard Keynes, “The Economic Consequences of the Peace”1
Inflation can be destructive, even when it’s supposedly low. The constant rise of prices that results from monetary inflation erodes the purchasing power of your money, slowly stealing from your savings and investments. But it persists because not everyone is made worse off by low inflation, at least not in the short run.
Inflation may harm those who want to save and invest for the future, but it benefits debtors and spenders, because they are able to repay their debts in devalued currency. And because governments are the biggest debtors of all, inflation is all but certain in the economy today.
Even “low” inflation of 2% or so targeted by many central banks results in prices nearly quintupling over the lifetime of the average American. And if you expect to live at least 20 years in retirement, your cost of living will increase at least 50% as a result of this “low” inflation.
But we’re not living in an era of low inflation anymore. Inflation has returned with a vengeance. At current rates of inflation, prices would double in less than nine years.2 And they would nearly quintuple in 20 years. We haven’t seen inflation like this in over 40 years, and most Americans are unprepared and unsure of how to adapt to this new era of high inflation.
From housing to gas to food, prices have gone up and up while incomes haven’t kept up the pace. And no one knows when these price increases are going to stop.
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