What will your money actually buy in 25 years?
Over a long retirement inflation is not a background detail — it is the main event. At typical rates it cuts the purchasing power of a dollar roughly in half across a 25 to 30 year retirement, quietly, without a single bad market day.
What your savings are really worth
Purchasing power in today's dollars, with no withdrawals — just growth against inflation.
What the same lifestyle will cost
The return you need just to stand still
Making sense of this one
Inflation is the risk that never appears on a statement, which is exactly why it catches people out.
The thing that's easy to miss
A market crash announces itself. Your balance drops, it's in the news, you feel it. Inflation does the opposite: your balance stays exactly the same while what it buys shrinks a little each year. Nobody sends you a letter about it.
Over a year or two it genuinely doesn't matter much. Over a thirty-year retirement it's the main event. At 2.8% a year — an unremarkable rate — money loses half its purchasing power in about 25 years. A person retiring at 65 should expect the second half of their retirement to cost roughly double the first.
Raymond has $750,000 and spends $60,000 a year. He's cautious by nature and keeps almost everything in term deposits earning 3%, which after tax and fees is closer to 2.2%. Inflation runs at 2.8%.
Each year he's going backwards by about 0.6% in real terms. It's invisible — the statement always says a comfortable number — but after 30 years his $750,000 buys what roughly $630,000 buys today, and the $60,000 lifestyle he's used to costs about $137,000 a year.
He hasn't lost money. He's lost purchasing power, which spends exactly the same. A balanced portfolio over the same period would have left him with over $1.1m of buying power. The gap is what "playing it safe" cost.
Reading the results
- "Value halves every X years" is the most useful number on the page. It converts an abstract percentage into something you can picture.
- The flat red line on the chart is money under the mattress. Everything else is measured against it.
- The cost table shows the same lifestyle at future prices. It's worth looking at the 20- and 30-year rows and asking whether your income plan actually rises that far.
- "The return you need just to stand still" is inflation plus your fees. Anything less and you're consuming capital — which is fine in retirement, as long as it's a decision rather than a discovery.
One thing to bear in mind
Your personal inflation rate is usually higher than the published one. Headline figures are an average across everything people buy, including goods that get cheaper — televisions, clothing, computers. Retirees spend a larger share on the things that rise fastest: healthcare, insurance, home services, energy. Nudging the inflation input up half a point from the official figure is a reasonable adjustment rather than pessimism.
None of this argues for taking risk you can't afford. It argues for not mistaking "no visible losses" for "no losses". The allocation calculator works out where the balance sits for your situation.
General information only — not financial advice. Inflation is assumed constant, which it never is; your own inflation rate depends on what you actually buy, and retirees typically face higher-than-headline inflation because healthcare and services rise faster than average. Returns are shown before tax except for the drag figure you enter.