Free Wealth Management Guide Retirement Planning: What You Need To Know | Page 3

Taxes
Increased government spending on health care and other
areas, combined with the size of our national debt, means
it is likely that we will face increased tax rates in the future. Higher taxes take a bigger bite out of your income
and your investment earnings. This means you will have
to save more to maintain your standard of living. Careful
tax planning is important to reduce taxes and maximize
retirement income.

Inflation
Inflation is a critical factor in retirement planning. As inflation rises, every dollar you own buys a smaller percentage of a good or service. When inflation goes up, there is
a decline in the purchasing power of money.

Consider the ann ual increase in the items below you consume on a daily basis and how your income needs to keep
pace with their rising costs.

Investing in Retirement Years
Conventional thinking says that you must be conservative
with investments as you approach retirement, as well as
during your retirement years. If you have enough money
and if inflation is not a significant factor, it might be possible to invest in only conservative investments. However,
most people need a portfolio with the growth potential
of stocks and real estate in order to have the best chances
of providing an income that keeps up with inflation. On
the other hand, too much exposure to more aggressive
investments exposes you to the risk of a market downturn,
which, in turn, could put your retirement security at risk.

If your annual living expenses were $50,000 per year in
1980, you would need $141,247 in 2013 to maintain the
same standard of living.

THE EFFEC TS OF INFLATION OVER 30 YEARS

202%
increase

164%

(1 dozen)

2012

Gas

(per gallon)

1982

$1.55

$0.53

$1.28

Eggs

1982

$1.40

increase

$1.77
$0.95
2012

$2.78

$3.87

86%

increase

1982

79%

increase

2012

1982

Bread

(per pound)

2012

Orange Juice

(12 oz. frozen concentrate)

Source: U.S. Bureau of Labor Statistics, Consumer Price Index — Average Price Data, March 1982 and March 2012

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