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Saving, Managing Debt, and Budgeting

Risk / Reward

Why is “inflation risk” bad for my portfolio?

Inflation, the increase in prices over time, gradually erodes the value of your money. Since 1926, the gradual increase in prices has increased, on average, by approximately 3% per year. In some outlying years, the increase has been very high—approximately 13.5% in 1980, and averaging approximately 6% during the 1980s. This means that if you are planning for retirement soon, you may need much more saved and invested in order to have adequate income later on, as the value of your money may be less because of this inflationary price tendency.



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