Future Value of Money and Inflation

[NYCGuy]

I just read a LinkedIn discussion about how much you need for retirement here: https://www.linkedin.com/today/post/article/20140325152340-462880-want-to-retire-with-1-million-here-s-how-much-you-need-to-save-each-month?trk=tod-home-art-list-large_0

In the comments, many were discussing how inflation would drop the buying power of $1M to $250K in 45 years, if you were to retire at 65.

My question is, doesn't inflation cause the stock market to rise along with it?  For example, the Dow was at 800 some years ago, but is now at 16,500.  If inflation takes over, won't share prices rise to match inflation, meaning that if you're invested in, you've protected yourself from the inflation?  Given that, can't we assume that if you start at age 20 and invest the amount to get you to 1 million at 65 at 2% inflation, that even if there's 10% inflation you'll be fine, and the buying power at 65 will still be $1M?

And if we have rampant inflation, won't salaries rise to meet it, giving you more dollars to put toward retirement?

Sorry if this is confusing...

[matchewed]

The two aren't necessarily related. Stocks don't always track inflation. Historically they beat it which is one of the reasons they're a popular investment choice.

If there is 10% inflation and you're getting 7% returns you're down -3% for spending power.

Sometimes salaries rise to meet inflation sometimes they don't.

[matchewed]

Also browse through this topic - http://forum.mrmoneymustache.com/investor-alley/inflation-index-funds-and-their-relationship/

[NYCGuy]

Thanks, thats a great thread.  Looks like I'm not the only one with that question!

[innerscorecard]

That's why it's import to be as fully invested as you can. I feel bad for those who painstakingly sacrifice to save money but then just let the money rot to nothing in cash.