Inflation-Adjusted Retirement Planning

Frequently Asked Questions
(FAQs)

Below is a table of questions, with qualitative answers, which are frequently asked.  For help in quantifying answers for you particular circumstances, refer to the chapter for specific details.

Retirement Questions

Qualitative Answer Reference

Why should I plan my retirement?

Because if you don't,  you may not be able to enjoy one, or you find your quality-of-life severely degraded in retirement

Obstacles to Planning

How much should I be saving?

From 5% to 10% of your income. More, if you want to retire early.

The Planning Cycle

When should I start saving?

The sooner, the better. Now, if you haven't already started.

Model Development
Pre-retirement Planning

When can I retire?

When your retirement fund will support  your retirement plan.

How long will I live?

Probably much longer than the 50% "Life Expectancy" probability.

Planning Lifespan

What retirement income do I need?

In today's dollars, between 50% to 100% of your pre-retirement income, depending on your life-style, and what work-related expenses will not follow you into retirement.  That amount must be adjusted upwards to account for inflation, and then each year afterwards your retirement income must be adjusted to offset inflation.

Adjusting your retirement income  for inflation

Will my Social Security retirement benefits be enough?

Social Security Retirement Benefits play an important part of most peoples retirement plan.  However SS was never designed to be an all-encompassing retirement plan.  For most people, and especially higher-income earners, relying on SS retirement benefits alone may result in a severely degraded quality-of-life in retirement.

Social Security Retirement Benefits

What happens if my retirement fund is exhausted before I die?

If you also have Social Security, you will always have that to fall back on.  If you do not have SS, your quality-of-life will likely be severely degraded in retirement, and you may have to work.  If you can't work, you may be destitute.

Adjusting your retirement income  for inflation

How do I know how long I will live?

You don't know for sure, but prudent planning dictates you estimate the 90% to 100% probability of dying for your race and gender.

Planning Lifespan

What if I plan to retire on a US military pension?

Your US Military retirement plan will be inflation-adjusted, but if your years of service will result in a pension below your desired  quality-of-life expectations, you probably will want  to supplement it with a private retirement plan 

US Military Retirement Benefits

What if I plan to retire on the US Civil Service Retirement System (CSRS)?

CSRS provides most government workers with an adequate, inflation-adjusted income.  But if you retire early, the penalties may results in a pension below your quality-of-life expectations, and you may want a supplemental private retirement plan 

Other Federal Retirement Systems

What if I plan to retire on the US Federal Employees Retirement System (FERS)?

FERS combines Social Security with a thrift savings plan. The Social Security portion is inflation-adjusted, but income from the thrift savings is not.  It is highly recommended that you supplement the FERS Thrift Savings Plan with additional private retirement plans 

Other Federal Retirement Systems

How can I maximize my retirement account during my savings years?

Generally, you must invest your savings in financial instruments that yield a net return-on-investment  (ROI) that is much higher than the rate of inflation. 

Investment Strategies

Why do I need to worry about inflation?

Inflation reduces the purchasing power of your retirement fund every year, so each dollar in it it buys less and less. 

Inflation

What is an inflation-adjusted retirement plan

An inflation-adjusted retirement plan adjusts your retirement pay-out each year so that your quality-of-life remains fairly constant throughout your retirement years.

Model Development

2008, Simon Revere Mouer III
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