“Inflation robs us all, but really sacks and pillages retiree savings.” Inflation is the percent increase (from one year to the next) in the cost of living. When you’re working, inflation pinches, but at least salary increases take the edge off. It’s a whole new ballgame when you’re retired. Then, income is fixed but costs continue to rise. Maybe you’re thinking, “What the heck. I’ll cut back on eating out, or skip going to the movies.” But, the longer you’re retired, the greater the gap between your fixed income and the cost of living.

Cost of several everyday items (May vary by region)

25 years ago 1	$67,000	$2.94	$1.25/gallon
Today 2	$219,000	$6.88	$3.61/gallon

1. Source:
www.huduser.org, 1982
National Association of Theater Owners, 1982
www.energy.ca.gov, 1982, nominal- not adjusted for inflation

2. Source:
National Association of Realtors, 2007 median home price
National Association of Theater Owners, 2007
AAA Daily Fuel Gauge report as of April 30, 2008, national average for April 2008 for regular unleaded

“Inflation can gut return-on-investment, too.” Let’s say inflation is running at about 4%. If you have your savings in an investment that pays 5.5%, you’re really only earning about 1.5%. Hmmm, that would be $150 of interest for the year on a $10,000 investment. That might pay the electric bill one month.