Inflation is a topic on everybody’s mind, especially those near or in retirement. In a time where it feels like everything from gas to groceries has doubled in price, it’s natural to worry about your retirement income and whether it is protected. While there are steps you can take to reduce the effects of inflation, including a diverse portfolio and careful monitoring, it’s also a good idea to stay informed of the current situation.
What Is The Current Inflation Rate?
As of March 2024, the United States is experiencing an annual inflation rate of 3.48%. This rate is calculated based on the Consumer Price Index (CPI) over the past 12 months. Inflation measures the rate at which the general level of prices for goods and services is rising, and subsequently, how purchasing power is eroding. A 3.48% inflation rate indicates a moderate increase in consumer prices, reflecting changes in the cost of living and economic conditions. This level of inflation can impact various economic sectors, influencing interest rates, consumer spending, and monetary policy.
What Is The Inflation Rate For The Last 5 Years?
Over the last five years, the United States has experienced varying annual inflation rates, largely influenced by economic activities and global events. In 2019, the inflation rate was about 1.81%, followed by a significant dip to 1.23% in 2020 during the global economic slowdown during the COVID-19 pandemic. The rate rebounded to 4.70% in 2021 and surged to 8.00% in 2022 amid recovery and supply chain issues. However, it has since moderated, falling to 3.2% in 2023 and stabilizing around 3.5% in 2024. This trajectory reflects the dynamic nature of economic conditions affecting consumer price changes over the period.
What Is The Highest Inflation Rate Ever?
The highest inflation rate ever recorded in the United States occurred in 1920, peaking at approximately 23.7%. This dramatic spike in inflation was part of the post-World War I economic environment, characterized by rapid changes in the supply of goods and demand pressures. This period saw significant disruptions and adjustments in the global and domestic markets, leading to a short but intense inflationary period. Such a high rate of inflation resulted in a severe cost of living crisis, affecting wages, prices, and economic stability, and was followed by a significant deflationary period as the economy adjusted and stabilized in the subsequent years.
How To Calculate Inflation Rate
The inflation rate is typically calculated using the Consumer Price Index (CPI), which measures the average change over time in the prices paid by consumers for a basket of goods and services. To calculate the inflation rate:
- Obtain the CPI for two different periods, usually a year apart.
- 312.23 (2024 CPI) and 301.74 (2023 CPI)
- Subtract the earlier CPI value from the later CPI value.
- 312.23 – 301.74 = 10.49
- Divide the difference by the earlier CPI value.
- 10.49 / 301.74 = 0.0348
- Multiply the result by 100 to convert it to a percentage.
- 0.0348 x 100 = 3.48%
This formula gives the percentage increase or decrease in prices over the specified period, reflecting the rate of inflation or deflation.
Why Is Inflation So High?
In 2024, our current high inflation can be attributed to several interrelated factors, primarily including the lingering effects of global supply chain disruptions that began during the COVID-19 pandemic and were intensified by the Russian invasion of Ukraine. These disruptions have sharply increased the prices of essential commodities like oil and food, impacting the broader economy. Increased consumer demand, stimulated by economic recovery and government fiscal policies, has also driven prices up. Additionally, rising labor and raw materials directly impact production costs, which are often passed on to consumers at higher prices.
Have questions about what you can do to protect your retirement income against inflation? Contact Zynergy Retirement Planning today.