You may have heard the saying, “inflation hurts savers and benefits borrowers.”
The expression suggests that borrowers benefit from inflation because they pay back lenders with dollars worth less than when the money was initially borrowed. But for savers, your hard-earned dollars may lose buying power over time.
One popular way to show the “hurts savers” illustration is with retirement calculators. A fixed amount of money will lose buying power at a much faster rate if inflation averages 7% versus 1% over an extended period.
That’s one reason why we caution against using some online tools. You can plug in a set of numbers, and the results may take you by surprise. They often raise more questions than answers.
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