Inflation increases & older age
Studies in recent years have shown that price inflation is higher for people in older age. This is the result of the goods and services being typically consumed by older people increasing in price at a faster pace.
A new measure of price inflation for older people, called Silver RPI, has been launched today by Age UK Enterprises.
Since the start of 2008, those aged over 55 have been on the receiving end of price inflation at almost 2% higher than those suggested by headline Retail Prices Index (RPI) figures.
This means that inflation leaves over 55s on average £600 a year worse off.
The impact of price inflation is worse the older you get. Whilst the difference between real and headline RPI in the 55-59 age group has been measured at 1.8%, this leaps to 4.1% for those over age 75.
Understanding this faster pace of price inflation in older age is important when it comes to planning for retirement income and investments in later life.
Whilst an annuity which is level in payment can appear to be more attractive, in terms of the starting price, the purchasing power of this level income can be quickly eroded by inflation. Older people tend to need greater protection from price inflation than younger people who might be in the wealth accumulation phase of their lives.
Photo courtesy of ccharmon.