Inflation is top of mind for many people lately, and with the Consumer Price Index (CPI) hitting 40-year highs, your clients could be wondering how high it will go. According to the Bureau of Labor Statistics, the CPI rose 7% last year – the largest 12-month increase since the period ending June 1982. Energy prices jumped a staggering 29.3% over the past 12 months, and food prices increased 6.3%. Those numbers are eye-popping for many Americans, with 74% saying they are concerned about their purchasing power over the next six months, according to a recent Allianz Life study.*
This is particularly concerning to retirees who could lose purchasing power throughout retirement, or risk erosion of their retirement savings. Over the past 20 years the CPI rose on average by 2%. At a modest 2.5% rate of inflation, costs would double in about 28 years – which is entirely possible with people living longer and retirements stretching 25-30 years.
How much savings erosion a client can experience due to rising costs varies widely by individual. Exposure is based on a number of things such as longevity, overall expenditures, and related inflation during retirement years.