If you’re like so many others, you’ve spent years working hard in hopes of answering the question on every soon-to-be retiree’s mind: Will I have enough when I retire? Will I have enough to buy a house in my retirement? There are many factors to consider, including inflation. Planning for inflation is paramount to ensure you’ve developed a financial strategy for years of comfort and enjoyment in your post-working life. 

What Is Inflation?

So what exactly is this “inflation” buzzword we’re inundated with daily by financial advisors, news outlets, and the like? To put it simply, inflation is the rate at which the value of money decreases over time, as a result of the rate at which the price of goods/services increases over time. 

Unfortunately, for many who will rely on a fixed income and savings in their retirement years, this means each dollar spent won’t go as far in the future as it does today. 

Expressed as an annual percentage, this number fluctuates depending on various economic factors. In June 2022, the United States saw this number reach a decades-high 9.1%, (the Federal Reserve generally likes to keep this number closer to 2%) dramatically raising the cost of so many of the goods and services retirees rely on.

How Do I Plan For Inflation?

Thankfully, while we can’t get rid of inflation altogether, there are a myriad of ways to bolster yourself against this dreaded drain on your long-term financial picture. Here’s how you can begin planning for inflation to ensure your retirement money lasts. 

Invest with a Purpose

Allowing your money to work for you leading up to and during retirement is one of the best ways to outpace inflation. 

While no investment is without risk, a diverse portfolio of aggressive investments like stocks and real estate, coupled with more stable investments like bonds and Treasury Inflation-Protected Securities (TIPS), which are designed to correlate with inflation, can help create a balanced strategy for keeping up with inflation. 

You may also invest in options like real estate or high-yield dividend stocks that can provide a consistent income as well.

Having a dedicated financial planner assist you with your asset allocation strategy is highly recommended. Their associated costs are generally a worthwhile investment for the benefit of securing your financial future. 

Be Flexible With Your Budget

Prepare a detailed budget that encompasses all the forms of income you’ll rely on, such as Social Security, pensions, annuities, 401(k)/IRA withdrawals, and investment income, including rental income and dividends. 

It’s important to know that Social Security receives a cost-of-living adjustment on an annual basis based on changes in the Consumer Price Index. This increase, however, may not always keep up with the inflation rate. 

Once you have a clear income picture, you can effectively decide when it may be necessary to either increase your withdrawal rate (at times of lower inflation) or reduce your withdrawal rate (during periods of high inflation), as well as re-allocating your investments and re-budgeting your overall spending. 

Revisit your retirement budget at least once per year, at a minimum, to avoid costly surprises. 

Plan for Healthcare Costs

Healthcare can be one of the largest drains against your retirement finances. It’s important to review your healthcare coverage and consider contributing towards a Health Savings Account (HSA) to cover medical expenses in retirement more tax-efficiently. 

The Big Picture 

Planning for inflation during retirement will require a multi-pronged strategy to be successful. Don’t be afraid to ask for sound advice and assistance as your retirement approaches. Be sure to ask big questions even if they seem a long way out in the future. Ask about buying a house in retirement, affording trips, tax implications, and more. 

This is where Solivita Living can help. We specialize in 55+ real estate, guiding you through every transaction with confidence and ease. If you’re nearing retirement or are already retired, Kissimmee, FL has the perfect lifestyle for you. Solivita Living offers active communities throughout central Florida for retirees ages 55 and up. Schedule a tour today to learn more.