Do You Have a Strategy to Manage Inflation in Retirement?

Mike Gann Retirement Planning

You may have a retirement plan to address all of the financial risks you could face in retirement. There’s the risk of facing sizable health care and long-term care costs. There’s also the possibility that you could outlive your savings, possibly making your final years of retirement financially challenging.

There is another important retirement risk that often goes unnoticed by retirees. That risk is inflation, which is the incremental increase in the price of goods and services on a year-to-year basis. Inflation is easy to ignore because it’s often modest on a year-to-year basis. Over time, though, inflation can have a significant impact on your financial stability. For example, an average annual inflation rate of only 3 percent per year could double prices if it’s compounded over a 24-year period.

Inflation is caused by many factors, including interest rates, economic growth and much more. It often impacts everything from groceries to energy to health care and nearly every other type of product or service you might purchase.

You may already have an idea of how much money you can afford to spend each month in retirement. What if your cost of living doubles over the course of your retirement? Would that kind of increase in your cost of living impact your ability to support yourself? Is your retirement income fixed? Or do you have ways to grow your income through retirement.

Fortunately, there are steps you can take to manage inflation risk. Below are three strategies you can utilize to protect yourself and your financial stability. If you haven’t considered a plan to combat inflation, now may be the time to do so.


Wait to file for Social Security.

You might be tempted to file for Social Security at age 62, as soon as you become eligible. However, you may want to wait. If you file before your full retirement age, you could see your benefits reduced as much as 30 percent. Most people reach their full retirement age sometime between their 66th and 67th birthdays.1

If possible, you might consider waiting to file after your full retirement age to file. Social Security offers an 8 percent credit to your benefit for every year past your full retirement age that you delay filing. You can delay all the way to age 70. That additional income could provide much-needed protection against inflation in the later years of your retirement.2


Scale back your retirement budget.

Perhaps one of the most effective ways to guard against inflation is to reign in your spending. If you spend less, you will likely need to withdraw less from your savings. That means you can keep more money in your retirement accounts to grow and compound, and that growth could help you increase your income in the future.

Be creative and look for ways to cut back. You could take more affordable vacations or dine out less. You might also consider downsizing to a smaller home. You may even want to pick up a part-time job to generate additional income.


Use inflation-protection tools.

There are tools available that could help you better manage inflation. For example, annuities offer a number of ways to create income streams that are guaranteed for life. Some of those income streams can even increase from year-to-year.

You also may want to consider long-term care insurance that has inflation protection. Prices in the health care and long-term care industries sometimes increase at a faster rate than those of other goods and services. Long-term care insurance provides protection to help you pay for long-term care costs. If you add inflation protection to the insurance, the benefit will increase to keep up with rising long-term care prices.

Ready to develop your inflation protection strategy? Contact us at Advantage Retirement Services today. We can help you analyze your needs and create a plan. Let’s connect soon 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