It’s hard to talk about inflation without sounding like an old
geezer:
”
I remember back in 1940 when gas was only 18 cents a gallon!
”
But this is 2005 and times have changed. Since the ’40s we’ve
experienced over population, over consumption and over-the-top
inflation.
By Eric Heckman
It’s hard to talk about inflation without sounding like an old geezer: “I remember back in 1940 when gas was only 18 cents a gallon!” But this is 2005 and times have changed. Since the ’40s we’ve experienced over population, over consumption and over-the-top inflation.
Although, The Wall Street Journal reports that inflation should remain at the same level nationally through at least 2006, the truth is, we spend more money than ever before because of price increases. According to CNN, some kids are struggling to pay for higher-priced school lunches due to ever-rising prices of gas. One can only assume that transportation costs and gas prices affect the prices of many other products and services as well.
According to the U.S. Department of Commerce and a statistical abstract of the United States, in 1940, a loaf of bread cost 8 cents and a first class postage stamp cost 3 cents. By 1970, those prices had inflated to 24 cents per loaf and 6 cents per stamp. By 2002, inflation had pushed those prices to $1.04 per loaf and 37 cents per stamp. These numbers indicate the steady inflation of prices that has occurred over the past three decades. Even though the inflation rate appears steady for the mean time, it is bound to rise again. As always, things will only get more expensive with time.
Inflation is particularly hard on retirees living on fixed incomes, who experience inflation as the loss of purchasing power. Low interest rates and the possibility of inflation are driving the trend among today’s retirees to seek out more conservative alternatives. These retirement options combine better earning potential while providing “pockets of money” they can depend on.
According to the Administration on Aging, the median Social Security income in 2002 for the average older male was $19,436 and $11,406 for females. This is not very much for people who are retired and living off their life savings. To supplement lost income, retirees can turn to “conservative” alternatives. These vehicles offer a guaranteed principal backed by the claims paying ability of the issuing insurance company and a reasonable rate of return.
One that has been popular with investors in the past is the fixed annuity. Fixed annuities typically offer competitive interest rates, with the principal guaranteed by an insurance company.
Regardless of which retirement option you choose, consider following the Golden Rule of 100. The rule states that the percentage of assets you allocate into more conservative alternatives should be equal to your age, with the balance available for more risk-oriented investments. Over the long-term, this could help offset the effects of inflation.
Many of us paid less for our first home than we pay today for a new car. But times change and people must learn to adapt to these changes. Instead of simply hoping things will get better, get involved and be active in your financial health. If you are unsure of your financial picture or of where to find those pockets of money, talk with a pro. A qualified financial professional can help you sort through today’s choices and find the financial solutions that fit your situation.
Eric Heckman is president of Heckman Financial & Ins. Services, Inc. Eric is a CFP®, ChFC, CLU brings a wealth of knowledge and over 13 years of experience to the field of financial planning. Contact him at www.WealthCreator.com or 297-9800.
