Many well-intentioned cynics have used this transaction as evidence of how the unscrupulous white man took advantage of the uninformed red man. However, I am not convinced that this business deal was not a fair arm’s length transaction. Let’s do the math, howbeit with some unsubstantiated assumptions.

The purchase of Manhattan Island took place in 1626, 379 years ago. Assuming a 3 percent inflation factor, $24 inflated at 3 percent per year equals a current value of $1,760,027. Manhattan consists of 14,478 acres. Through division we discover that the current value of the original per acre purchase price is $122.

I’ve been to Manhattan. Trust me; in my opinion, it’s not worth $122 an acre. However, what is important to note from our history lesson is that an assumed 3 percent inflation factor grew $24 into more than $1.7 million.

If anything, history has taught us that we must take inflation into account in our retirement planning. The following bread example may be more relevant to us than the purchase of Manhattan for $24. In 1970 $1 bought 3 loaves of bread. Today the same $1 buys about a half loaf. In other words, someone retiring in 1970 on an adequate fixed income is now struggling to survive on 17 percent of her original purchasing power.

Many retirees purchase certificates of deposit from banks, "because CDs are a safe investment." Let’s take a closer look. Assuming a $10,000 CD is paying 4 percent interest, this would presumably mean that after one year the value of our CD would be $10,400. Wrong.

Assuming a combined state and federal tax bracket of 33 percent, we would need to deduct $132 for taxes. We also need to think about purchasing power, that is, how much bread can we buy?

Our current inflation rate is 3 percent. We now need to reduce our CD by not only taxes, but by inflation as well. One year’s inflation reduction on $10,400 is $312. Therefore, our $10,000 CD grew

to $10,400, but after subtracting $132 for taxes and $312 for inflation, we are left with $9,956. A loss.

As one man recently put it, "investing in CDs simply means that you are safely going broke." As we invest through our retirement years, we need to remember that a loss is not a safe investment. We must take into account inflation and taxation, as well as safety, when evaluating where we invest our retirement monies.