At one point in time, one million dollars was a financial threshold goal that many Americans believed would grant them financial freedom.
At the very least, it would provide them with a more than comfortable retirement.
Sadly, this is no longer the case. With each year that progresses, we veer further and further away from this fallacy.
A model demonstrating inflation’s impact over a period of 20 years against the average Social Security benefit was constructed by LIMRA Secure Retirement Institute.
Their findings were disquieting.
Based on their research, an inflation number as low as 1% would result in over $34,406 of retiree’s benefits being eroded.
An increase to 3% inflation would equal $117,000 eliminated from one’s benefits.
Currently, the average inflation rate in America is 4.2%.
The results? A near $163,800 loss over 20 years due to inflation alone.
This is not taking into account the fact that the average health spending for elderly Americans on average comes out to be $19,098 annually.
And that was in 2014, nearly seven years ago, when inflation was 425% lower than where it currently stands.
To say that times have and are constantly changing would be a gross understatement.
In reality, the golden number of retiring is now closer to $3 million instead of $1 million, according to MarketWatch.
Another advisor believes that $4 to $5 million is the new goal for many.
It all comes down to purchasing power. And truthfully, even this newly calculated number could soon be irrelevant.
It truly depends on the future and what our current dollars today can purchase.
We’ve all heard the stories of how $0.10 could buy a loaf of bread in the early 1900s. What does $0.10 get you now?
Inflation is responsible for affecting much more than our retirement stature.
Inflation has turned once safe-haven and secured assets like bonds and CDs into near obsolete instruments.
Historically, a bond yielding 1.54% as it is today would be seen as a worthy instrument to many.
Unfortunately, since we are currently fighting an average annual inflation rate of 4.2%, one would be losing nearly 3% of their investment annually.
However, gold is one safe haven asset that historically continues to prove itself a worthy competitor against inflation.