How Inflation Could Impact Your Retirement and What You Can Do About It

Inflation is an economic buzzword you probably hear often, and with good reason. This term explains the rate at which the prices of goods and services increase over a specific period, decreasing the value of every dollar and leaving everyone with less purchasing power. 

Retirement planning becomes more challenging with inflation because the money you put away and invest won’t buy as much in the future. This could create numerous issues for retirees, mainly because there’s no telling what will happen in the coming years when planning for retirement inflation.

Questions like, “What inflation rate should I use for retirement planning” are common because there’s so much uncertainty. This guide examines the dangers of inflation and how you can reduce its influence on your retirement by planning ahead today.

The Dangers of Inflation for Retirees

Estimating how much inflation will impede your retirement is next to impossible, but you can examine some issues it will likely create. These challenges won’t necessarily force you to continue working longer, but some planning will be necessary to mitigate them. The problems inflation will create for you in retirement include the following:

Increased Cost of Goods

Retirees spend much of their income on goods and services, which typically see the most significant price increases in periods of inflation. Groceries, restaurants, clothing, and other retail purchases get more expensive through inflation, and your purchasing power will decrease significantly. These price increases can cause problems for retirees on a fixed income because they’ll have less money to spend on essentials, leaving them with difficult decisions regarding luxury purchases.

Higher Housing Prices

Housing costs tend to increase with inflation, which could cause significant issues for retirees renting places for at least half the year. Those spending their winters in the south, for example, might find condo rental prices reaching considerable levels, and local housing rentals will also get more expensive. Inflation will hit seniors who don’t own a home particularly hard in the coming years and is something retirees should plan for immediately.

More Expensive Healthcare

Healthcare is another industry that experiences significant price increases due to inflation. The fact that retirees will already have less purchasing power because of other cost increases could leave them struggling to come up with the money for prescriptions or doctor visits, especially those who retire early and have yet to reach Medicare age eligibility. You’ll want to consider your healthcare options as you approach retirement to ensure you have adequate coverage.

Understanding these dangers offers insight into how inflation could make retirement more challenging. You don’t have to simply accept that you’ll have less, though, because there are ways to plan for retirement with inflation in mind.

Six Retirement Planning Tips With Inflation in Mind

Remembering a few tips when planning for retirement inflation can make the process more manageable. You won’t avoid inflation altogether, but you can reduce its effects on your life when you stop working. Some ideas to keep in mind as you prepare to retire include the following:

1. Make Catch-Up Contributions

You should have at least nine times your current income put away for retirement by the time you’re 60. That amount provides a hedge against inflation so you can continue living a comfortable lifestyle when you stop working. You might consider making catch-up contributions to ensure you get to those levels by the time you retire. 

2. Diversify Your Assets

Investing in multiple asset types can hedge against inflation and help your investments keep pace with cost of living increases. Specific investments like inflation-protected treasury securities, Series I Savings Bonds, real estate, and some annuities account for inflation and provide some protection for the future. You’ll ideally have money in stocks, bonds, and cash when the time comes for retirement to ensure your plans stay on track.

3. Delay Social Security Claims

Social Security provides guaranteed retirement income and an excellent inflation hedge, but you don’t have to start claiming it as soon as you retire. Waiting longer means a more significant portion of your retirement income will be inflation adjusted, leaving you with more money overall. You can start taking partial payments at age 62, but waiting until you’re at least 67 allows you to maximize your benefits. 

4. Delay Retirement

Retiring later isn’t ideal, but it can help you combat inflation. Putting retirement off by a few years allows you to continue saving for retirement and gives your investments more time to earn returns. You might also spend less money delaying retirement because you won’t be traveling as much.

5. Adjust Your Retirement Goals

Hand in hand with delaying retirement is adjusting your overall retirement goals. Minimizing your expenses when you retire makes it easier to stop working at a younger age and gives you flexibility if inflation further reduces your purchasing power. You might consider downsizing your home, too, to provide more liquidity and lower your expenses. 

6. Meet With a Professional

Many inflation solutions might not sound particularly appealing, but meeting with a retirement planning expert can provide some clarity. These professionals understand how inflation works and can make recommendations based on your income and retirement goals so you don’t have to settle. 

Inflation is scary because it typically means your money won’t be worth as much. You can still pursue your retirement goals, but you’ll have to be smart about how you approach them in the coming years.

Get the Financial Advice You Need

A retirement planning specialist can help you make sense of inflation and what it means for your future. You don’t have to stay up at night worrying about money because you can develop a plan that makes sense for you and your family and ensures inflation won’t ruin your goals. 

Bogart Wealth offers retirement planning solutions in The Woodlands, Texas, and McLean, Virginia. We understand that inflation is a frightening concept as you approach retirement, but we can help you make sense of it all. Contact Bogart Wealth to speak with an expert about your retirement concerns.

Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bogart Wealth, LLC [“Bogart Wealth”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level (s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bogart Wealth. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Bogart Wealth is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bogart Wealth’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at bogartwealth.com

Please Note: Bogart Wealth does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Bogart Wealth’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
Please Remember: If you are a Bogart Wealth client, please contact Bogart Wealth, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently.
Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

latest posts

Stay up to date with our most recent news and updates!

Work with a financial advisor who puts your needs first.

Want to talk first? Call us at
(866) 237-0121

  • This field is for validation purposes and should be left unchanged.

You are now leaving the Bogart Wealth, LLC / Bogart Wealth™ (“Bogart”), website and entering a third party website that we do not control.

Bogart is not responsible for third party websites hyper linked our website, and does not guarantee or necessarily endorse any content, recommendations, products or services offered on third party sites.

In addition, third party websites may have different privacy and security policies than Bogart. Therefore, you should review the applicable privacy and security policies of any third party website before you provide any information.