Visualizing the Impact of Inflation on Retirement Savings with Money Eva
When planning for retirement, understanding the impact of inflation is crucial. Inflation isn’t just a theoretical concept—it’s the force that quietly erodes your money’s purchasing power over time.
Yet, grasping how inflation affects your long-term savings can be challenging, and that’s where Money Eva excels, offering tools that make inflation’s effects easy to understand, visualize, and act upon.
How Money Eva Helps You See Inflation in Action
1. The “Inflation-Adjusted” Toggle
One of Money Eva’s most powerful features is the Inflation Adjusted toggle, which lets you view your future money in today’s terms. Why is this important? Most of us understand the value of money today but find it hard to imagine what future amounts mean in real purchasing power.
When you turn on the Inflation Adjusted toggle:
- The future projections are recalculated to reflect their value in today's dollars.
- The curves in your charts are adjusted to show the real value of your savings over time, not just the nominal (unadjusted) amounts.
For example:
In the early years of retirement, your account balance might look relatively stable in nominal terms. But with inflation-adjusted values, you’ll see a linear decline, representing how your purchasing power diminishes over time—only to deplete much faster in a free fall as you approach life expectancy.
2. Cash Flow as the Central Concept
At the core of Money Eva is Cash Flow—the ins and outs of your finances. This simple yet powerful concept drives every scenario in the app and makes planning intuitive and accurate.
What makes Money Eva unique is how it handles cash flows:
- Follow Inflation: Define one inflation rate, and Money Eva adjusts every cash flow—expenses, income, or savings withdrawals—dynamically over time.
- Scale and Combine: Cash flows can be scaled and combined with simple math, providing an accurate and actionable view of your financial future.
This focus on Cash Flow & Time Value ensures your retirement planning is not only intuitive but also crystal clear. Instead of dealing with complicated spreadsheets, you’ll see exactly how your money moves over time, aligned with inflation and other real-world factors.
What Inflation Looks Like in Real Terms
Using these tools, you can clearly see:
- The Shrinking Value of Money
A $40,000 annual retirement income today might need to grow to $59,437.90 in 20 years just to maintain the same lifestyle at a 2% inflation rate. - The Necessity of Investment Growth
Inflation-adjusted projections reveal why investments need to outpace inflation. Even a small increase in the inflation rate—like 3% instead of 2%—can significantly shrink your savings' longevity.
Example: Inflation Rate Comparison (2% vs. 3%)
Let’s explore the impact of inflation using a British Columbia Retirement Planner:
- With 2% inflation, your savings could last 28 years after retiring at 65, until age 93.
- At 3% inflation, they’d run out 10 years sooner, by age 83—showing how a small rise in inflation can drastically cut your retirement timeline.
Connecting to Central Bank Decisions
Why do most central banks target a 2% inflation rate? Because it strikes a balance:
- It prevents the economy from stagnating (low or no inflation).
- It avoids eroding purchasing power too quickly (high inflation).
By visualizing inflation scenarios in Money Eva, you’ll understand why these targets matter—not just for policymakers but for your own financial decisions.
Take Control of Your Future with Money Eva
Money Eva doesn’t just show you numbers—it helps you understand the full story behind them. With tools like the Inflation Adjusted toggle and cash flow modeling, you can tackle complex retirement decisions with clarity and confidence.
Start planning today. Whether you're preparing for a steady 2% inflation rate or navigating higher uncertainties, Money Eva gives you the power to visualize your future and make smart, informed decisions.