ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Even a low rate of inflation can significantly erode purchasing power in the long run, and retirees experience inflation at higher rates than other consumers. Retirees tend to spend more of their money on services and products heavily impacted by inflation, such as healthcare, housing and food.

Detailed explanation-2: -As you can see, inflation-adjusted average returns for the S&P 500 have been between 5% and 8% over a few selected 30-year periods. The bottom line is that using a rate of return of 6% or 7% is a good bet for your retirement planning.

Detailed explanation-3: -You can use history to help you estimate how much extra you’ll need to have available to cover inflation. If your retirement is 20 years away, and you use the 2001 to 2021 example as your guide, your $143.52 basket of groceries could cost you $205.97.

Detailed explanation-4: -That’s because a bit of inflation encourages spending in anticipation of rising prices, which can lead to higher wages and growth in the economy. But inflation can also degrade the value of people’s savings, fixed income investment returns, and can lead to a decrease in global competition for a country.