Inflation is felt as a sustained increase in the general price level of goods and services in an economy over a period of time. When prices rise, the purchasing power of money decreases, which means that the same amount of money can buy fewer goods and services. This can be particularly concerning for savers, as their money may not be able to buy as much in the future as it can today.
Inflation can also have an impact on retirement accounts, as many retirement plans are based on the assumption that prices will remain relatively stable over time. If prices rise significantly, the value of the retirement account may not be able to keep pace, leading to a decline in purchasing power. This can be concerning for people who are planning to retire soon and rely on their retirement account as a source of income, as a lower balance may not be able to provide the same level of financial support.
One historical example of the impact of inflation on savers and retirement accounts is the period of high inflation in the 1970s. During this time, the rate of inflation in the United States was much higher than it had been in previous decades, reaching a peak of more than 13% in 1979. This had a significant impact on savers, as the value of their money declined over time, and it also had an impact on retirement accounts, as the purchasing power of these accounts declined as well.
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