Inflation: the risk that never appears on a statement
A bad market year announces itself. Inflation never does — the balance on your statement is the same or higher, and the only evidence is that the same money buys less. Over a long retirement that quiet erosion outruns most of the risks people actually worry about.
The arithmetic of a long horizon
At a modest inflation rate, prices roughly double over thirty years. A retirement that starts at 60 and runs to 90 therefore ends in a world where the same lifestyle costs about twice as many dollars as it did on the first day. Nothing dramatic happens in any single year, which is precisely why it is easy to under-plan for.
An unindexed pension is the case worth naming clearly. It is a fixed nominal amount for life, which means its real value falls every year. Thirty years in, it buys roughly half what it did at the start — and the statement will report the identical number throughout.
Why this projection works in today’s dollars
A plan can be expressed in future dollars or in today’s dollars, and both are correct. Future dollars produce impressive-looking numbers that nobody can interpret; today’s dollars produce numbers you can compare directly to your current grocery bill. This projection uses the second, throughout, without exception.
The conversion runs through the relationship between nominal returns and inflation, applied in one place rather than by hand in several. That consistency is what stops the most common quiet error in a homemade spreadsheet: a nominal return compounding against spending that was never inflated.
The same wealth, two numbers
Priya — 54, Ontario, single. $118,000 salary, $410,000 in her RRSP and $88,000 in her TFSA, planning to retire at 63.
Priya’s plan ends with $422,378 in today’s dollars. Expressed in the nominal dollars of that final year, 36 years out, the identical wealth is $892,541.
The right-hand bar is more than double the left, and neither is wrong. But a plan presented in those terms invites you to feel twice as wealthy as you are — which is the reason a projection that mixes the two conventions is worse than one that picks either.
What actually protects against it
Indexed income sources, an equity allocation that can outpace prices over a long horizon, and spending flexibility. What does not protect against it is holding cash: nominally safe, and in real terms a guaranteed slow loss over decades.
Where a plan carries an unindexed pension — a fixed $38,000 for life, say — the honest way to model it is as a nominal amount that erodes in real terms every year, not as a flat real line. The distinction changes what the rest of the portfolio has to cover in the second half of a retirement.
Every figure in the projection is real, and the ledger can toggle to future dollars if you want to see the other convention — the same plan, restated, so the difference is a presentation choice rather than a hidden assumption.
Next: longevity — what the extra decade actually costs.
GlidePathEngine is an educational planning tool — not financial, investment, tax, or legal advice.