A hypothetical example is if a man has $1,000,000 which doubles every 10 years in the bank, while living expenses (initially $100,000 every 10 years) also doubles every 10 years.

http://en.wikipedia.org/wiki/Money_illusion

A hypothetical example is if a man has $1,000,000 which doubles every 10 years in the bank, while living expenses (initially $100,000 every 10 years) also doubles every 10 years. The man will have $1,900,000 after the first decade, $3,600,000 after the second, and $6,800,000 after the third (ignoring inflation before each 10-year mark), and will thus feel safe because each 10 years his net gains (interest subtract living expenses) are more than the previous 10 years, even though his purchasing power is decreasing because the interest rate matches inflation rate.