Inflation Planning
Inflation & Retirement: Why 3% Inflation Cuts 30-Year Purchasing Power by 60%
People plan for €50k/year retirement spending. They forget that €50k in 2054 buys what €23k buys today.
The Math
| Years | 2% Inflation | 3% Inflation | 4% Inflation |
|---|---|---|---|
| 10 | 82¢ | 74¢ | 68¢ |
| 20 | 67¢ | 55¢ | 46¢ |
| 30 | 55¢ | 40¢ | 31¢ |
At 3%, €100k today = €40k in 30 years.
What This Means for Your Plan
| Mistake | Fix |
|---|---|
| Fixed €40k withdrawal forever | Increase withdrawal by CPI annually |
| "I need €1M" (today's euros) | You need €2.5M (future euros at 3%) |
| Bond-heavy portfolio (2% yield) | Real return = -1% at 3% inflation |
The Only Assets That Beat Inflation Long-Term
| Asset | 50-Year Real Return (After Inflation) |
|---|---|
| Global Stocks | ~5.5% |
| REITs | ~3.5% |
| Commodities | ~1.5% |
| Long Bonds | ~0.5% |
| Cash | -2% to -3% |
Cash guarantees purchasing power loss.
The Retirement Inflation Strategy
- Equity allocation ≥50% through age 70 (historically beats inflation)
- TIPS / inflation-linked bonds for 10–20% of bonds
- Flexible spending: Cut discretionary in high-inflation years
- Delay Social Security / State Pension = inflation-indexed annuity
Stress-test your plan
See future cost of any expense + Monte Carlo with inflation
Our Inflation Calculator shows future cost of any expense. Retirement Planner (Premium) runs Monte Carlo with inflation-adjusted withdrawals.