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Accounting for inflation is key to retirement financial success

07/20/11

While it is imperative that individuals factor inflation into their retirement savings plans, figuring out exactly what that rate will be may be more difficult than people realize, according to Financial Planning. 

Advisors from Raymond James Financial services use a figure of 3 percent annual inflation in their retirement planning software before ever even sitting down with a client. This figure is based on the Department of Labor index for the ten-year span from 2000 to 2009 and the Labor Department's average retail price index for the years from 1972 to 2009, the media outlet reports.

However, experts believe that figuring out exactly what inflation will be two years or ten years in the future is really just a matter of guesswork. Investing into lifelong repayment opportunities such as annuities and whole life insurance plans may help individuals deal with this inevitable situation.

A common measure of inflation is the Consumer Price Index-Urban, which is also know as the CPI-U or "headline" CPI. The figure is based on a survey of 40,000 households, and includes 80,000 commonly purchased goods and services, the news source reports. This number is said to represent the spending habits of 87 percent of the American population. Many insurers offer life insurance plans which adjust based on this measure. 

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