Hennion & Walsh Trending

The latest Consumer Price Index figures will be released on July 22, and we can expect to see inflation figures (rising prices) continuing their slow but steady increase over 2013. In May, the 12-month moving inflation rate was 2.1 percent, an increase of 0.1 percentage points over April.

Compare these numbers to 2013, when the inflation rate for the year was just 1.5 percent. (Examine inflation figures from the U.S. Bureau of Labor Statistics for the past 10 years here.) It all adds up to the fact that while the inflation tiger remains relatively docile, it seems to waking up from a long slumber. This means we should be thinking about the impact of rising prices on our retirement plans.

Those of us old enough to remember when the U.S. inflation rate hit 14 percent in 1980 may be breathing easy at 2-percent inflation. (See Mike Patton’s blog on Forbes.com about the countries with the highest current inflation rates.) But let’s not make that mistake. As we’ve noted in previous blogs, inflation can have a major impact on your retirement.

For example, if you budget $75,000 per year to retire in comfort, an annual inflation rate of just 3 percent can, over time, put a major dent in your retirement plan. At that rate, in 10 years you would need to spend $100,000 per year just to maintain your lifestyle.

So they key goal here would seem to be the ability to have your investments beat inflation, right? Yes and no. Certainly, that’s a good starting point. But also keep in mind that each family has its own inflation rate based on personal spending habits. You will need to consider this as you plan your retirement investing.

Do you live in an affluent city? (Check out this list of the priciest cities from CBS MoneyWatch.) Perhaps moving to a less-expensive suburb would help you stretch your retirement dollars. Do you shop at the local organic market? Maybe switching to the grocery store will help you beat inflation.

Yes, retirement planning that factors in inflation can be complicated. But investing your time – as well as your money – wisely and talking with an experienced financial advisor can pay huge dividends over the long run.