As any good parent would do, last week Dallas bribed his almost-three-year-old with a McDonalds ice cream cone, in exchange for good behaviour at grandma’s house. When he ordered the two 60-cent cones at the drive-thru (Dallas had been displaying some particularly good behaviour himself, and fair’s fair …) the young girl at the check-out informed him they actually now cost 75 cents.
After some deliberating, Dallas decided that was okay, and bought them.
Anyone over the age of thirty will most likely remember that these soft serve cones used to be just 30 cents. So in approximately 30 years, they’ve gone up to 75 cents, two and a half times more than what they originally cost.
Of course, an extra 45 cents seems trivial over 30 years. However, this is just the tip of the ice cream – everything around us is going up. But when we mention the word “inflation”, people tend to go running in the opposite direction, not wanting to hear any more. We get it: it makes your head hurt. So for now, we’ll call it the “rising cost of goods and services” – which is … marginally better.
When we explain it in even simpler terms ($60,000 in ten years’ time will be $80,000) – that makes sense to people, probably for the same reason as the acceptance of the cost of McDonalds ice cream cones. These rising costs are not particularly noticeable over the course of one year. But when you look at things like food, housing, insurance and council rates over time – they are going up dramatically, and this will make a big difference in your retirement.
This is important as we know that, usually, at least one member of a couple will live for 30 years after they retire. And, as we have seen with the soft serve cone, 30 years can make a huge difference to the cost of something. Also, don’t be fooled into thinking you’ll need less money once you retire – we have found this to be very untrue.
We aren’t trying to incite fear here, just simply stating some facts (without using the “i” word). And we know that even if your expenses are lower in retirement, which they most likely won’t be, you would still need a rising income to keep up with costs. And each year, that figure will go up.