The Year is 1981…

Written By: Anna Carlson, Financial Advisor

…You’re headed to the movie theater in a wood-panel station wagon as you listen to your new favorite song, ‘Jessie’s Girl’, play on the radio. You pull your wallet from the pocket of your acid wash jeans to pay $5.50 for 2 tickets to see Harrison Ford star as Indiana Jones in Raiders of the Lost Ark.

That same year, Social Security benefits saw an increase of 11.2%. Fast forward just over 40 years, and we find the next highest annual increase since 1981 is in the year 2023. The Social Security Administration recently announced an 8.7% increase in benefits beginning next year.

Know what else recently hit a 40-year record high? You guessed it. Consumer prices have increased 8.2% over the last year (Bureau of Labor Statistics). Price of cereal grew by 16.6%, butter increased by 26.6%, ground beef +3.9%, chicken +17.2%, and the price for eggs rose by 30.5%. Airline fares are +42.9%, while smartphones are -21%. Men’s apparel is up by 3.9%, while women’s apparel is up by 7.3% (what’s up with that?).

I think it’s worth noting that juice prices increased by 12.7%, while wine saw an increase of just 2.7%….

While inflation is a global struggle right now, the inflation problem in the U.S. was made more severe by President Biden’s American Rescue Plan. The U.S. had a lot more government stimulus than other countries and started to see more core inflation faster. There’s a range of opinions among economists on how much of the U.S.’s higher inflation is attributed to the American Rescue Plan. On the right, some say it added three percentage points to the inflation rate. Some left-leaning economists say it contributed one or two percentage points.

The reality is, inflation never sleeps. It never stops. It might ramp up or it could slow down, but it never goes away. If you want to maintain your current standard of living in retirement, you must understand what rising inflation can do to your retirement income, and how you can help protect your savings. Remember, the cost of everything doubles about every 20 years. That means your lifestyle today may cost twice as much in 20 years.