Retirees may be hit hard by inflation.
The state of the economy impacts people in all life stages.
While retirees may not be affected by aspects like the job market, they certainly feel the effects of inflation on cost of living.
Because inflation involves the diminishing purchasing power behind the dollar, it can be challenging for retirees who are no longer earning a wage to pay bills and maintain the same quality of life.
Although inflation is generally accepted as a financial reality, the severe jump in this past year has been a cause of concern for many.
According to a recent Kiplinger article titled “Is Inflation Costing You More as a Retiree?,” those on a fixed retirement income may find their anticipated budget is insufficient to meet their needs.
While inflation is a reality for everyone, it can be disproportionate in its effects.
Some people may barely notice a change.
Generally, those who spend the majority of their income on housing, gas, food, and healthcare feel the impact of inflation to a higher degree.
While these goods and services tend to see steep price increases, they are necessary and cannot be completely removed as an expense.
Whether married or single, retirees in particular may be faced with the challenge of how to both cover the cost of living and protect their retirement savings for the rest of their retirement years.
Because much of the income for retirees comes from fixed income or markets, large inflation stakes can do some major damage to current and future plans.
Although Social Security does have cost of living adjustments, the most recent increase was only 5.9 percent.
This falls significantly short of the eight to nine percent inflation of the past year.
How can retirees and those nearing retirement better protect their savings?
One option is to use Treasury Inflation-Protected Securities (TIPS).
These provide an interest distribution in alignment with CPI inflation rates.
As a result, retirees can mitigate inflation to some degree.
Retirees or those or nearing retirement should work with an experienced financial planner to discuss goals and strategies to meet their needs.
Reference: Kiplinger (July 16, 2022) “Is Inflation Costing You More as a Retiree?”