How Will Inflation Affect Your Retirement?

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How Will Inflation Affect Your Retirement?

When calculating which of your current expenses you will have in retirement, keep in mind that they are in today’s dollars. To get a better idea of what they will be when you are ready to retire, you should adjust them for inflation. Unfortunately, no one knows the future rate of inflation, so you are on your own to make a guess. The table below shows how much to multiply your expenses by for different rates of inflation.

How the table works

For example, if you have 15 years until retirement and expect a 3 percent inflation rate (the historical average), you should multiply your current expenses by the inflation table factor of 1.56.

A current need of $5,000 per year translates to a requirement of $7,800 per year 15 years later—just to stay even ($5,000 x 1.56)!

Inflation has been around or under 3 percent over the last few years, despite some notable spikes such as during the pandemic years of the early 2020s. However, we have experienced periods of double-digit inflation (in the 1980s). Once you have adjusted your expenses for inflation, you should add them up. That is how much cash inflow you need in retirement.