[Music] All right, Heather's question is up next. She says, Do you adjust for inflation when planning for retirement spending based on how high it's been lately? And I thought that was an interesting question. Like, how do you factor in inflation when thinking about retirement? Because it has been kind of high in the past couple years. It's been crazy. I'll give. I'll let you kind of fill in. But one of the things I think is important when we were developing 'cause I know not everybody is at the point where they graduate on the abundance cycle where they need a financial advisor. They're kind of still in that building or trying to figure out how you accelerate your path. One of the things I'm pretty proud of is we created a know your number tool and course. If you go to learn. money.com. And I love that you in within the tool you get to play around. Not only with inflation rates. So yes, it is important, Heather, when you're thinking about your planning is that we allow you to talk tole the inflation.

rate up or down. We also allow you to toggle your rate of return, as well as your savings rate. And all those things are going to have a dramatic impact on your final result. So that's why we wanted to make sure we gave you all the levers when you're trying to plan. So you can kind of start figuring out how do you live your best life. So that you know if you're ahead of the curve, behind the curve, or right on the curve. You've got to kind of have the metrics to know what you control and what you can actually do to catch up or start enjoying life even more. Yeah, the two things that I would add is that we all, it's part of the human condition, we all suffer from recency bias. That which has happened most recently is the thing that sticks in our mind the most. And so when we come through like this hyperinflationary environment where we saw the price of common goods go up 9% in one year.

then maybe it settled back in our mind. It is constantly wrapped on the idea that inflation was this, and it's going to stay this. However, one of the truths about numbers is that over a long enough timeline, with enough data points, reversion to the mean is a realistic thing, right? So while we have seen high inflation, I would argue that as we move through economic cycles, we see periods of higher inflation and periods of lower inflation, and periods of higher inflation and lower inflation. And so, realistically, when it comes to forecasting out your retirement living expenses, I think you can use a historic average inflation number. Maybe your estimate is that numbers 3% or 4%, or maybe you want to even be aggressive and say 5% inflation. I don't think that's crazy, and I think realistically, as time goes on, that's probably going to be what the mean reverts to, even if it has been a little higher recently. So I would keep that in mind. So when you think about, okay, today, I know in today's dollars we

spend $5,000 a month. That's our living expense. I do think it's prudent to inflate that up to your retirement age to figure out what that number is. We have a tool that can help you do that. And then when you figure figure out how big your pot of number, how big your pot of money needs to be, you use that number. You use the future dollar number so that you're actually saving an adequate amount. But I would not get caught in recency bias thinking, Oh, well, just because things were this way means that things are going to stay this way. Because I think if you do that, you'll send yourself into like a into like a death spiral, yeah.

Should We Adjust for Inflation When Thinking About Retirement?

Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life.

Subscribe today to stay up to date with our latest episodes, livestreams, and highlight videos: https://www.youtube.com/c/MoneyGuyShow?sub_confirmation=1

Are you ready to go beyond common sense when it comes to your money? Check out all the free resources The Money Guy Show provides: https://moneyguy.com/resources/



Should We Adjust for Inflation When Thinking About Retirement?

Should We Adjust for Inflation When Thinking About Retirement?

스크립트