Looking back to 2022, that was the first time we’ve truly felt inflation in the United States in decades. Inflation hadn’t run that hot since the 1970s/1980s. It was real. We all felt it. I finally found myself saying, “I remember when a movie ticket was $6 back when I used to go”… or “it wasn’t too long ago when I could buy a dozen eggs from Aldi for $0.59”. Fill in for whatever experience you had in 2022/2023 where the prices of our everyday items were substantially higher than what they used to be.

Said in another way, the value of your dollar decreased. Your one-dollar bill in your pocket in 2022 was worth less than it was in 2021. To show this visually, see the chart below:

Since 1996, the value of the United States currency has decreased by 54%. Meaning, if you had a dollar in 1996, that same dollar is only worth 46 cents today. It truly does not go as far as it used to in 1996.

I share this because I was genuinely shocked at seeing this visually. Inflation is a silent tax on anyone holding too much cash or being too conservative in their investing. The chart above is truly scary. But the takeaway isn’t “the dollar is doomed”… rather, it’s that standing still is its own kind of risk. Cash may feel safe because the balance shown on your statement typically doesn’t fluctuate, but inflation can gradually erode its purchasing power over time. Growth-oriented investments (stocks, real estate) may experience greater short-term fluctuations, but they have historically offered returns that may outpace inflation over longer periods. That’s why they play an important role in a financial plan, even if it means welcoming some volatility along the way.

This is exactly why we don’t build your plan around today’s cost of living. We build it around what things will likely cost in 10, 20, or 30 years. A retirement that looks fully funded using today’s numbers can quietly fall short if inflation isn’t part of the math from the start. It’s also why your portfolio isn’t parked entirely in cash: While no investment strategy can eliminate inflation risk, equities have historically provided the potential to outpace inflation over longer time horizons.

None of this is meant to be alarming… it’s meant to be a reminder. Inflation can erode purchasing power over time and is one of several important factors to consider when building a financial plan.

If you’ve been holding more cash than usual lately, it’s worth asking whether that’s intentional or just inertia. Either way, we’re happy to talk through how your plan accounts for this.