WHAT WILL YOUR BUDGET BE IN THE FUTURE BASED ON INFLATION



As stated repeatedly, the budget is the key to retirement success. By defining the numbers as accurately as possible- even 10 or more before retirement, you can establish an investment/risk that, hopefully, can match your desires. If not, you need to adjust the budget accordingly.

Anyway, assume you have determined an acceptable retirement budget at age 55. You need to be aware that the requirements will be higher once you reach age 65 (or whenever you retire) since inflation will push the numbers up. I have assume inflation rates below for 3.5%, 4.0% and 4.5% so you can see the ramifications at age 65.





Budget at age 55 Budget at age 65 with 3.5% Inflation for 10 years 4.0% 4.5%
$25,000 35,000 37,000 38,800
$30,000 42,000 44,400 46,600
$35,000 49,000 52,000 54,300
$40,000 56,400 59,000 62,000
$45,000 63,000 66,700 70,000




HISTORY OF COST OF LIVING ADJUSTMENTS



Year Cola Year Cola Year Cola Year Cola
1975 8.0% 1981 11.2 1987 4.2 1993 2.6
1976 6.4 1982 7.4 1988 4.0 1994 2.8
1977 5.9 1983 3.5 1989 4.7 1995 2.6
1978 6.5 1984 3.5 1990 5.4 1996 2.9
1979 9.9 1985 3.1 1991 3.7 1997 2.1
1980 14.3 1986 1.3 1992 3.0 1998 1.6