What is inflation, and how does it affect retirement savings?
- 2 years ago
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Inflation is a general rise in prices across the board, including those for goods and services people use to live their lives. As such, it's important to understand how inflation affects retirement savings because it can greatly impact how much money you can draw down from your 401(k) or another retirement account when you retire. In this video, we'll discuss the different types of inflation and their effects on retirement savings. We'll also give you tips on minimizing the risks associated with inflation and protecting yourself against its negative effects on your retirement savings.
Causes of inflation
Inflation is a process in which prices of goods and services rise over a period of time. There are many reasons for inflation, but some common causes include the following:
1) Increased demand for goods or services: When people have more money, they are likely to spend it on things they think will make them happy or need. This increased demand can lead to high levels of inflation.
2) Increased production: Companies may decide to produce fewer items to purposefully not meet increased demand, which can also lead to higher inflation levels.
3) Changes in tax rates: When the government imposes new taxes or reduces old taxes, this can cause businesses to increase prices to pass along some of the costs associated with these changes (the so-called “price stickiness” effect).
4) Oversupply and overproduction: Sometimes, when companies produce more items than consumers are willing or able to buy, they end up selling at a loss
Inflation is a general rise in prices across the board, including those for goods and services people use to live their lives. As such, it's important to understand how inflation affects retirement savings because it can greatly impact how much money you can draw down from your 401(k) or another retirement account when you retire. In this video, we'll discuss the different types of inflation and their effects on retirement savings. We'll also give you tips on minimizing the risks associated with inflation and protecting yourself against its negative effects on your retirement savings.
Causes of inflation
Inflation is a process in which prices of goods and services rise over a period of time. There are many reasons for inflation, but some common causes include the following:
1) Increased demand for goods or services: When people have more money, they are likely to spend it on things they think will make them happy or need. This increased demand can lead to high levels of inflation.
2) Increased production: Companies may decide to produce fewer items to purposefully not meet increased demand, which can also lead to higher inflation levels.
3) Changes in tax rates: When the government imposes new taxes or reduces old taxes, this can cause businesses to increase prices to pass along some of the costs associated with these changes (the so-called “price stickiness” effect).
4) Oversupply and overproduction: Sometimes, when companies produce more items than consumers are willing or able to buy, they end up selling at a loss