If Mr. Micawber was right, if the way to avoid misery is to balance your budget, then happiness is easily achieved as long as you are employed. When inflation raises prices you can make do with less, you can work longer hours, or you can get a second job. In any case, periodic pay raises tend to offset, and usually exceed, the erosive effect of inflation. But unless you are one of the lucky few who have their pensions tied to the cost of living, your position is less flexible when you retire. If you have a fixed pension and spend all of it during the early years of retirement, you must expect to see your purchasing power drop as inflation takes hold. The alternative is to pace yourself like a marathon runner, spending less than you earn in the early years of retirement and building up a financial cushion so that you can maintain an approximately constant standard of living.
KeywordsInterest Rate Inflation Rate High Interest Rate Marathon Runner Retirement Income
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