Posted on 23 March 2011
By Mark Miller
Although inflation has remained quiet, it’s still a potential threat to retirement security, since a well-constructed plan looks out over a 25- to 30-year horizon. Yet inflation protection isn’t baked into nearly enough retirement plans, according to a new survey by the Society of Actuaries.
Inflation poses several retirement challenges. Healthcare is a major area of expense and risk in retirement, and those costs are rising about four times faster than overall inflation.
Meanwhile, sources of guaranteed income are faltering. Social Security is replacing a smaller percentage of income due to the increasing full retirement age implemented in 1983, rising Medicare Part B premium deductions and more Social Security income subject to income tax. The near-disappearance of traditional defined benefit (DB) pensions in the private sector also hurts retiree purchasing power.
How can you add inflation protection to your retirement plan? Read my post today at Reuters Prism Money.