Petco Barking About Benefits Magazine Q3 2012

Inflation Impacts Purchasing Power

$28,414

10 Years

$38,724

20 Years

$52,042

30 Years

$69,940

40 Years

$0

$10K

$20K $30K $40K $50K $60K $70K Price in thousands

The price of a new car will dramatically increase over time due to inflation. Look at what a new car priced at $21,440 today will cost over the next 40 years, assuming 3% annual inflation.

Inflation Takes a Bite! Inflation is the increase in the cost of goods and services over time. It means that every year, the same amount of money buys less. Inflation can take a hefty bite out of your savings and purchasing power. That’s why experts say it’s critical to factor the effects of inflation into your long-term financial plan. Though the rate can vary greatly, the historical average inflation rate is around 3% per year. This means a can of cat food that costs $1.50 this year will likely cost around $1.55 next year, and around $1.59 the year after that. Inflation doubles the cost of goods and services approximately every 24 years, so in 2036, the can of cat food that costs $1.50 today could cost $3.00, or maybe more.

Here’s Help

Imagine what the bite of inflation could do to your hard-earned retirement savings. When you are living off retirement savings, inflation nibbles at your income. Your best defense is to be prepared, be smart and save like a dog. Estimate how many times your cost of living will double by the time you need your retirement money, and plan accordingly. Get an early start with Petco’s 401(k) Plan to get the power of compound interest and matching contributions. Also consider your investment strategy. If you are years from retirement, consider the pros and cons of investing in stocks and bonds.

For help calculating the amount of money you’ll need during your retirement years, try some of Fidelity’s online planning tools at www.401k.com . After you login, click on the Guidance and Retirement tab then click on Retirement Planning in the middle of your browser window.

Despite their volatility and risk, stocks and bonds may potentially deliver higher returns over the long-term, which could prevent inflation from biting your tail.

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