How To Cope With Inflation During Retirement- Strategies For Retirement

How To Cope With Inflation During Retirement- Strategies For Retirement

August 31, 2021

Your retirement is facing the boogeyman.. INFLATION.  It's time to be strategic on how to protect your retirement savings and conquer inflation once and for all.

So what exactly is inflation?  The definition: the rate at which the value of a currency is falling and, consequently, the general level of prices for goods and services is rising.*  AKA you can buy fewer goods and services for the same amount of money.  Ouch.  Prices go up, value of money goes down.  Inflation increases, purchasing power decreases.  You get the gist.  

The average inflation rate over the last century averages at about 3.25%.  So at 3% inflation, a $100 item costs $103 the following year.  Although this is the average, there have been extremes- like 23.7% inflation rate in June of 1920!  This just proves how important it is to keep an eye on it and adjust your plans as appropriate.  

& What causes it..?  There's a few theories.  One is that increasing demand for goods and services drives prices up to prevent inventories from being depleted.  Another is if production costs increase, companies have to increase prices to keep making a profit.  Lastly, if there is an oversupply of money, the value of that money goes down, and prices go up.  Now, these are all just situations where it could occur, there isn't one answer, but they offer perspective on why it exists in the first place.

What happens because of Inflation?

Those with fixed incomes without cost of living adjustments are very much negatively effected by inflation.  Their purchasing power decreases each year inflation rises.  In addition, if someone has money in the bank earning less interest than the rate of inflation (which in a bank, it more than likely is) they are losing to inflation as well.  When it comes to retirement planning, there's a couple things to keep in mind regarding inflation.  When wages don't keep up or you stop making money altogether, inflation can erode your savings and wreck your budget.  You will need more money to maintain your standard of living.  This is why it's important to have your money in an account earning more interest than dust, contrary to a bank!

How to Defeat the Boogeyman

To maintain and grow your retirement savings, the vehicle needs to be outdoing inflation. 

You should also consider placing your money in an account safe from market risk that will continue to grow with interest rates better than a bank.

You could also keep working, it seems most people do this anyway, at least part time to fill their time, but this also keeps income flowing in that IS keeping up with inflation.

If you have enough money to retire, you could also delay social security benefits.  Social security does keep up with inflation, but if you delay your payments, you will also receive a larger check that is ALSO keeping pace with inflation.  Win win!  

The older you get, the more you're playing catch up with closing the gap between what you used to pay and what's required now.  Plan ahead, and you will defeat the Boogeyman no problem.  (We're experts at this, give us a call 203-372-4442)


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