Here are some more examples of how inflation will affect various types of income:

-- Social Security: Under IRS rules, Social Security benefits are tied to increases in the Consumer Price Index (CPI). If a person's Social Security benefit is $850 a month at the time of retirement, that amount will be adjusted each year with full cost-of-living adjustments (COLAs). In other words, the purchasing power of the benefit remains exactly the same from the very first check to the very last.

-- Investment Savings: Typically, bank saving accounts and some forms of investment tend to pay a fixed- percentage rate of interest. Keep in mind that if the annual rate of return (the yield) is less than the inflation rate, the purchasing power of these savings and investments will be eroded over time.

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Cost of Inflation 1978 - 2018

Inflation has averaged more than 5 percent a year over the past two decades, cutting the purchasing power of a dollar by about two-thirds. With a 5 percent rate of inflation, the buying power of your money is cut in half every 14 years. Here are examples of how inflation can affect the average prices of some common items:

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Year 1978 1998 2018

House $55,500 $162,900 $478,100
College $2,038 $7,628 $28,551
Postage $0.15 $0.33 $0.73
Car $5,814 $19,499 $65,061
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