One of the key tasks when estate planning is to put enough money aside for your retirement. Yet, that can be hard when you do not know what things will cost in the future.
When making your estate plan, you need to allow for inflation. Yet, sometimes prices rise more than anyone expects. While some of these unexpected rises will later fall back in line with inflation, it is not always the case.
People are increasing their estimates of inflation
According to the Federal Reserve Bank of New York, people have been increasing their expectations of inflation during the last year. The bank’s May 2021 survey found the average American now expects inflation to be around 4% per year.
Allowing for a 4% year-on-year increase in prices may be enough when creating your estate plan, but you cannot bank on it. You also need to consider your particular situation and what you think you will be spending money on when you retire.
If you live in the city and use public transport to get around, you might not have noticed that gasoline has risen by over 50% during the last 12 months. Yet, if you aim to spend your retirement driving around the country’s national parks in a camper van, you need to recalculate your budget.
Maybe your plan is to finally stop renting in the city and buy a small property in the country when you retire. Yet, house prices continue to rise at levels well above the rate of inflation year after year.
Creating an estate plan is challenging when you do not have all the variables. That is why it is crucial to get help, so you can learn from other people’s experiences and make choices that are informed as possible.