Why We Save For Retirement
Three distinct reasons we save for retirement are:
- We cannot borrow money to retire on like we can to buy a home.
- Social Security typically is not enough to cover our retirement income needs.
- Inflation makes the goods and services we need more expensive over time reducing the buying power of our money.
Inflation may be the most important aspect of retirement to plan for. The reason is that inflation historically has run between 2-4% and that can have a huge impact on your retirement spending needs. Past data shows that the effect of inflation will cause goods and services to double in price every 15-20 years.
This means that you must plan on saving twice as much money than someone retiring today if you are retiring in 15 to 20 years from now to be able to purchase the same amount of goods and services as today's retiree.