By Kelley Muhsemann
Marketing Manager
If you’re having sticker shock at the grocery store, you’re not alone. A whopping 93% of Americans are concerned with the current level of inflation. 1
What is Inflation?
Inflation, defined as a measurement of how fast the prices of goods and services increase, is tied to a complex web of economic factors – such as supply and demand, wages, government spending, taxes, and more. As inflation rises, prices do too because it takes more dollars to buy the same things.
The Consumer Price Index (CPI) is a useful indicator of inflation. It looks at price changes, over time, for the goods and services used by households.2
The prices and predictions that follow are based on historical averages going back to 2000 for different areas of spending. Let’s take a look back in time at housing, healthcare, food and beverage, transportation, and education expenses, and then let’s see what experts are predicting our bills will look like in just seven years.
Housing: Average annual inflation rate 2.39%
Housing will likely be almost 27% more expensive by 2030. That means that a house that currently costs $400,000 could run you $506,000 in 7 years. Depending on where you are buying in the future, you could be paying much more than that. In fact, by 2030, the average home in Washington state will probably run you $782,000. If you prefer Hawaii, expect to fork over $889,000, and topping the list for the fastest rising housing prices is California, where the average home will likely cost more than $1 million by 2030.
A look back in time: In 1970, the average house in California cost $24,300.
Food & Beverage: Average annual inflation rate 2.33%
Food and drinks are likely to be about 26% more expensive by 2030. That means a trip to the grocery store that costs you $250 now could cost more than $314 in seven years.
If you like fresh fruit, your grocery bills could climb higher even sooner. The price of fresh fruit has been rising at about twice the pace of meat, poultry, and fish. Food prices may not be the only thing that changes in 2030. By 2030 it’s predicted that more folks may give up red meat, replacing it with poultry and dairy products.
A look back in time: In 1970, bananas were 12 cents per pound.
Healthcare: Average annual inflation rate 1.83%
Healthcare is likely to be 20% more expensive in by 2030. That means care costing you $5,000 today will cost $6,000 in 2030. In 2021, a retired couple was projected to need $300,000 in savings to cover healthcare in retirement. In 2030, that cost could rise to over $350,000.
A look back in time: In 1970, healthcare spending was approximately $353 per person annually.
Gas and Transportation: Average annual inflation rate 1.38%
Fuel and transportation are likely to rise nearly 15% by 2030. That means a car costing $40,000 today could run you nearly $46,000 in seven years. However, electric vehicles could act as a price disruptor, with as many as 145 million electric vehicles on the road by 2030. Plus, some carmakers are working to cut the cost of batteries for electric vehicles in half by 2030. Paired with self-driving technology, and the increase in fully remote and hybrid positions for U.S. workers, and the transportation industry could look completely different in by 2030.
A look back in time: In 1970, the average new car cost around $3,500.
College: Average annual inflation rate 4.93%
A public four-year college is likely to be about 62% more expensive by 2030. Annual tuition and fees of $4,000 today for a two-year degree could cost $6,300 by 2030. For a four-year university that runs you $20,000 today, you’re looking at $32,000 by 2030. Lastly, a private four-year university cost of $44,000 today could increase to $68,000. However, the higher education industry is being massively disrupted by virtual learning and changing educational preferences. Within seven years, these and other factors are bound to change, making higher education costs challenging to predict.
A look back in time: In 1970, the average private four-year university cost $1,706.
If you’re concerned about inflation, you’re not alone. Seven-in-ten Americans say inflation is a very big problem for the country.2
However, inflation isn’t all bad. When steady and predictable, a moderate amount of inflation can be good as it can signal a healthy, growing economy. Inflation causes problems when it increases suddenly and rapidly, or when folks haven’t planned for future price increases.
If you have questions about how inflation works or what it means for you, please contact us today for a complimentary discovery call at 631.218.0077 or info@rwroge.com or click here.
R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, Beverly, Massachusetts, and Naples, Florida office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary, since 1986. We help clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, click here.
1 https://nypost.com/2022/07/17/93-of-americans-concerned-with-inflation-most-fear-economy-will-get-worse-poll/
2 https://www.bls.gov/news.release/pdf/cpi.pdf
3 https://www.pewresearch.org/short-reads/2022/05/12/by-a-wide-margin-americans-view-inflation-as-the-top-problem-facing-the-country-today/
