How to Protect Your Long-Term Financial Plans from an Insidious Threat
The trap that gets even financial experts and banks
In the mid-1950s, my parents bought their first house using a fixed-rate 15-year mortgage. The payments were exorbitant, eating up almost half of my dad’s take-home pay. By the time they paid off the loan in the late 1960s, the same payment cost only as much as a nice dinner out for the family! How did that happen, and what can that “ancient history” teach you that can save your retirement plan?
The Insidious Effects of Inflation
If you’ve read much about retirement planning, you know that the earlier you start setting money aside and investing for retirement, the better. That’s because your investment returns compound over time. However, investment returns aren’t the only things that compound over time. Inflation does too, and not to our benefit.
As you can see above, if you took $1 million in 1978 and stashed it under a mattress, 40 years later that million would buy less than $300,000 worth of goods as measured in 1978 dollars. That’s an extraordinary loss of more than 70%…
