Preparing for Inflation in Retirement

For a long time, inflation was an afterthought when it came to retirement planning. People often focused on saving a specific nest egg, diversifying their investments, and estimating future expenses, paying little attention to inflation. This once-overlooked economic factor has taken center stage, commanding the attention it deserves. The average inflation rate over the last century in the United States has hovered around 3%, demonstrating that inflation is a persistent force that can’t be ignored. When planning for retirement, individuals often create spending plans based on their anticipated expenses. They calculate how much they will need each year to maintain their desired standard of living. What many fail to account for is the corrosive effect of inflation. Higher non-transitory inflation rates can swiftly erode the purchasing power of retirees’ savings. In a matter of a few years, the dollars they saved diligently over decades may lose a significant portion of their value. This can force retirees to make difficult choices, such as cutting back on essential expenses or dipping into their principal savings, both of which can have dire consequences for the sustainability of their retirement funds. To protect a retirement plan from the ravages of inflation, it’s essential to incorporate inflation-adjusted strategies. This may involve investing in assets that historically outpace inflation, like stocks or real estate, and considering annuities or other financial instruments designed to provide reliable income streams that can grow with the cost of living. Additionally, it is crucial to periodically reassess your retirement plan to ensure it remains aligned with your evolving needs and the changing economic landscape. By acknowledging the real threat of inflation and adapting your retirement plan accordingly, you can enhance your financial security and maintain a comfortable lifestyle throughout your retirement years. Find other ways to cut costs in retirement to mitigate inflation's impact. Consider moving to a state with no income or sales taxes, paying off your mortgage, or downsizing to a smaller home. Reducing your debt now, while the US Dollar maintains its current buying power, will significantly lessen inflation's effect on your finances. Plan Ahead for a Comfortable Retirement When preparing your retirement plan, make sure to account for inflation's effects on your portfolio and budget. The steps you take now can help you achieve the retirement of your dreams. If you need personalized advice, our retirement coaches are available to assist you. Federal Retirement Experts offers a 3-Step Retirement Plan for federal employees. We'll work with you to create a personalized strategy that helps you navigate separation and sail smoothly into a financially secure retirement. We provide federal employees aged 50 and older with our free Federal Employee Benefits Analysis . This report is your tool to plan ahead and help you to better plan for retirement. To get connected with one of Federal Retirement Experts’ retirement coaches, schedule a no cost, 30-minute consultation . Our expert coaches will answer your CSRS, FERS and TSP questions, explain how your federal benefits work in retirement, and calculate a projected retirement income.