3 Tips to Keep Inflation from Derailing Your Retirement

Have you planned for all the financial risks you might face in retirement? There’s economic volatility, which could threaten your assets and your ability to withdraw income. There are medical costs and long-term care needs, which can often be sizable for retirees. And there are even your own financial decisions and purchasing habits, which could threaten your retirement if you don’t have discipline.

Inflation is one risk that often flies under the radar. Inflation is the regular, incremental increase in prices on a year-to-year basis. Inflation is driven by many factors, including growth in the economy, increased costs for materials and labor and much more. Inflation often impacts nearly everything you may buy, from groceries to clothing to health care and more.

In recent years, inflation has been modest. However, even a modest rate of inflation can have a big impact if it’s compounded over a long period of time. For instance, even a modest 3 percent inflation rate compounded over 24 years would lead to a doubling of prices.

That kind of gradual increase in prices could quickly erode your purchasing power and your ability to live comfortably in retirement. Fortunately, there are steps you can take to combat inflation and protect your retirement. Below are a few action steps to consider:


Delay Social Security to increase your benefits.

You might be tempted to file for Social Security retirement benefits as soon as you become eligible. After all, you’ve earned that benefit. It’s understandable that you’d want to receive the income as soon as possible. However, there are benefits to waiting to file.

For instance, if you file before your full retirement age (FRA), you could see your benefits reduced. Depending on how early you file, they could be reduced as much as 30 percent.1 That reduction is permanent.

On the other hand, if you wait past your FRA to file, you’ll receive an 8 percent credit for every year that you delay.2 That extra income could be helpful in fighting inflation.


Keep your spending in check.

It’s always a good idea to find ways to reduce your spending in retirement. If you reduce your spending, then increased prices won’t have as big of an impact on your wallet. Also, you may be able to take less income from your retirement accounts. Those reduced distributions could allow your balance to grow so you can withdraw more in the future.

Look for creative ways to reduce your costs. For example, you could scale back your travel plans, or you could cook more at home. You might consider downsizing to a smaller home to reduce housing costs.


Utilize inflation-protection tools.

There are some financial tools that have specific features designed to help you manage inflation risk. For example, many annuities offer ways to generate guaranteed lifetime income. In some cases, you can choose to have the income increase every year, giving you a rising cash flow stream.

Also, many long-term care insurance policies offer inflation protection riders. That means your benefit amount will increase each year to keep up with the rising prices of long-term care services. That could be important, because long-term care has at times had higher inflation than other goods and services.

Ready to develop a plan to fight inflation in retirement? Contact us at TB Financial. We can help you create your strategy. Let’s connect today and start the conversation.






Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

16530 – 2017/3/22

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