by Bruce Helmer, President of Wealth Enhancement Group

Inflation is not a major concern with your savings, but with investing it takes on greater importance. The primary investment objective of most Americans is to provide for their retirement. With the life expectancy of American males reaching 74.7 years and American females, 80.4 (83.2 years for people who have reached age 65), many people will be living off their retirement investments nearly half as long as it took them to accumulate the money to invest for retirement. The big question is, will you outlive your investments? Inflation will likely play a big part in how you ultimately answer that question.

Once again, I would discourage you from worrying about monthly or yearly changes in the inflation rate. Even for investment purposes those fluctuations have little importance. What matters is that over many years the rate of inflation has remained consistently at 3 percent to 4 percent on average. You can use this number with some confidence in any financial plan.

The greatest impact of inflation on investing is that it can turn “low risk” investments to “high risk” investments. Many people like to invest in what they consider “low risk” investments, such as certificates of deposit (CDs), savings accounts, money marketing, and other fixed-interest investments. These vehicles provide ways to protect your principal-but for many that’s not enough. If you nest egg doesn’t grow faster than your cost of living, your purchasing power actually steadily decreases and it will have a detrimental impact on your lifestyle, especially if you’re retired and don’t have a source of income outside of your investments.