Battling Inflation In Retirement, by Rick Viader

Combating the Threats of Inflation in Retirement

It is not uncommon now for Americans to retire for two, three, or even four decades. This means that folks will have plenty of time to unwind and fulfill their bucket list goals. On the other hand, retirees must ensure that they have sufficient savings to survive for the rest of their lives. One complicated element is that inflation is unavoidable, and it can lead to significant increases in costs over time.

Inflation rates are at an all-time high, as you’ve probably noticed in recent news. According to the Consumer Price Index 1, living expenditures increased 5% in the 12 months ended in June, much more than the 1-2 percent yearly rises we’ve become accustomed to over the past decade.

Inflation is a struggle for all consumers, but it is especially difficult for retirees who are living on a fixed income. Higher inflation can throw off your retirement plan’s calculations for normal costs. Although it’s unclear whether this rise in living costs will continue, you should plan for the effects of inflation anyway. Here are some things to be aware of and to do:

Keep Everything In Perspective.

The current inflation rate of 5 percent is high by recent standards, but not unprecedented. We may be a long way from another period of high inflation like the 1970s and 1980s, when inflation in the US peaked at 13.5 percent. Inflation has only topped 5% once in a calendar year since 1982, and that was in 1991. While another decade of inflation is improbable, living costs may continue to climb rapidly in the near future.

Examine Your Expenses Once More.

If the cost of basic things like food and gas, as well as discretionary spending like travel, is breaking your budget, you may need to look for methods to save. Is it possible to buy food in bulk to save money? Should you cut back on your casual driving in order to save money on gas? Are there any additional luxuries you may forsake for the time being? By answering these questions now, you may be able to avoid depleting your assets too soon.

Make Changes To Your Investments.

Is your investment portfolio well-positioned to keep up with inflation? Investing a portion of your assets in stocks may make sense. The S & P 500, a measure of large-cap stock market performance in the United States, has gained more than 10% yearly on average during the last 30 years, well above the 2.3% average annual rate of inflation. Higher returns on money you’ll need in 10 to 20 years should help it grow enough to satisfy inflated income needs then, but a major percentage of your portfolio should still be placed cautiously to safeguard it from market volatility.

Consider Other Methods For Improving Your Situation.

If rising living costs are putting a burden on your finances, investigate other choices such as part-time employment or consultancy. Even in retirement, it’s critical to have flexibility in order to respond to changing circumstances that may disrupt even the best-laid plans. Check with your financial advisor to evaluate your best options for dealing with today’s inflation issues.

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