Impact on Your Buying Power

Inflation is an increase in the price you pay for goods and services over time. In other words, it represents a decline in your purchasing power.

Every year, the United States Department of Labor records prices of a variety of products and services. This information is used by many economists to calculate an average inflation rate. The average annual inflation rate since 1913 has been 3.24% per year.*

Just to illustrate this trend, here is a table displaying the data from the last 10 years.**

2001 2.83%
2002 1.59%
2003 2.27%
2004 2.68%
2005 3.39%
2006 3.24%
2007 2.85%
2008 3.85%
2009 -0.40%
2010 1.60%
*Data calculated based on Annual Consumer Price Index published by the US Dept. of Labor, Bureau of Labor Statistics

What Does This Mean For Me?

Based on historical averages, your buying power is going to decrease an average of over 3% every year. That means when you plan for the future, you have to take into account that your money in the future will probably buy less than it does now. In other words, in the future, you will probably need more money to buy the same things you bought today.

What Can I Do About It?

One thing to consider when investing or accumulating assets is to think about whether the interest you are earning is going to be higher than the rate of inflation. If your rate of return is lower than inflation, you may not really be growing your money.

**This chart is not warranted to be accurate, complete, or timely.
Tranont Life, its affiliates, and its representatives are not responsible for any damages or losses from use of this information.