Three Reasons Why Inflation Won't Kill Your Retirement Savings
September 15, 2009
Worries over inflation. Already, CD rates are too slow to keep up with even a moderate rate of price growth.
1. Foreign Goods Help Keep U.S. Prices Low
The assumption that as the economy improves, inflation will become a problem, discounts the global nature of the U.S. economy. Foreign goods, especially from China, are cheap enough to affect pricing power.
When you could only get toys from F.A.O. Schwartz, F.A.O. Schwartz could raise prices with impunity. Now, Walmart rules that out.
2. Conspicuous Consumption Is Idiotic
There will always be people who want to have the big, flashy car and the mansion that they can barely afford. But there are less of those people now, perhaps, than there have been in decades.
The price-sensitive mentality of the U.S. consumer, worried about unemployment and struggling under a heavy debt load, is another reason why inflation may have trouble getting off the ground.
3. Mortgage Rates Still Lower Than Low
What would you rather get, five percent on a CD or a five percent mortgage?
For most people, it is better to get a lower mortgage rate than to make more money on CDs. Low mortgage rates give smart savers the opportunity to build a sustainable cost structure for years to come.
A low mortgage payment makes retirement planning much easier.