Which statement best describes how inflation impacts retirement planning?

Inflation significantly impacts retirement planning by increasing the cost of living over time, which in turn affects the required income for retirees. As inflation rises, the purchasing power of money declines, meaning that a fixed income amount will buy less in the future than it does today. This indicates that retirees need to account for the expected rise in prices for necessities such as food, healthcare, and housing.

As a result, it's crucial for individuals planning for retirement to factor in inflation when calculating how much they will need to live comfortably. This involves estimating future expenses and adjusting their retirement savings goals to ensure they can maintain their desired lifestyle, effectively highlighting why understanding inflation is essential to retirement planning.