The Inflation Challenge for Retirees

Prices are rising again, and retirees are taking notice. Inflation eats into the purchasing power of your savings, potentially making it harder to maintain your lifestyle over the long haul.

According to a recent Charles Schwab survey, 57% of 401(k) participants now see inflation as the biggest obstacle to a comfortable retirement. Many are still saving, but they’re also spending less and seeking cheaper options when they do.

Inflation is a fact of life. What’s important is to understand how it interacts with your retirement plan so you can decide how to handle it.

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—The Money Pickle Team

Running the Numbers

If you’re still working, it may be worth revisiting your asset allocation and considering your risk tolerance. A financial planner or financial planning software can help you review different scenarios and factor in inflationary concerns.

For example, some portfolios may be heavier in stocks than intended after the recent strong market run. A review might help you understand whether rebalancing makes sense for you.

While past performance is never a guarantee of future results, history shows that inflationary spikes don’t always require drastic changes. Even so, running the numbers can reveal whether you’re still on track.

Keep on Saving

If higher costs are putting pressure on your budget, it can be tempting to put less into your 401(k). However, those contributions can be valuable, even if you’re only a few years away from retirement.

Retirement can last 20+ years, so there’s still time for compounding to work in your favor. In Schwab’s survey, only 11% of savers reduced contributions due to economic concerns; most chose to adjust spending instead.

Already Retired? Your Allocation & Budget Matter

Inflation often hits retirees hardest in housing, healthcare, and insurance. Some people use income-generating investments, like dividend-paying stocks, to help keep pace. Treasury Inflation-Protected Securities (TIPS) and Real Estate Investment Trusts (REITs) can also provide regular payouts, but it’s important to weigh how each fits into your broader strategy.

Equally important: monitoring your day-to-day spending. Small adjustments can add up. Even cutting costs by $1,000 a year could make a meaningful difference over decades.

🥒 Pickle Tip:

Inflation impacts everyone, but your response doesn’t have to be drastic. A clear view of your portfolio, spending habits, and income sources can help you prepare without overreacting.

🌟 Final Thought

Inflation may be unpredictable, but being informed can make it less intimidating. If you want to explore how your retirement plan might handle rising costs, a quick conversation with a vetted Money Pickle advisor can help you ask smarter questions and make confident choices.

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