A crucial factor of retirement planning is your assumption on inflation. While $5,000 a month in today’s dollars may be sufficient for your needs now, if you have no way of increasing that income to account for future inflation you may find it harder and harder to afford your everyday needs.
As the “Spending Power Decline” table below shows below, a tame inflation rate of 2% would eat away a third of real spending power in 20 years; 5% inflation would reduce real spending power by 62%.
