retirement

Inflation Continues to Rise: How to Navigate the Uncertainty

Inflation is at a 40-year high. For those nearing or in retirement, it could pack a painful punch, but there are things you can do now to address inflation and make sure you don’t run out of money in your golden years.

So many retirees budget for their ideal retirement but don’t always consider one piece of the puzzle that could easily derail a solid plan with the impact of inflation. As of January 2022, inflation hit a 40-year high  as the Consumer Price Index increased to 7.5%, and everyone is feeling it when they go to the grocery store or fill up at the gas stations.

If you are nearing or are in retirement, there are some strategies you can use now to navigate high inflation and make sure your plan is secure.

Don’t Increase Your Risk with Your Savings

Risk management is a big part of dealing with high inflation, especially now, but the closer you are to retirement, the less risky moves you want to make in the market.

For example, if you meet with a financial professional to discuss ways to protect your retirement from inflation, and they suggest making drastic changes to your portfolio to give you a better chance of a higher rate of returns, that’s a big red flag. The only way to increase your chances of a higher return is to take on more risk of investment loss. If the market turns on you, this could leave you with a lot less in your nest egg to work with while you deal with higher prices due to inflation, and it could affect your ideal retirement.

Beef Up Your Social Security Benefits

Social Security benefits are one of your income sources that goes up automatically over time because of cost-of-living increases. In 2022, the Social Security cost-of-living adjustment increased to 5.9%, the largest boost since 1982.

One way to boost your Social Security benefits is delaying when you start taking them. You have the option to take Social Security at age 62 or wait until your full retirement age, which is usually either 66 or 67, depending on when you were born. You could even wait until age 70 to start. Putting off the date you start to collect will help your benefits grow by as much as 8% a year from your full retirement age up until age 70.

But if you can’t wait to claim your benefits, this isn’t the only way to beef up Social Security. Earning more, minimizing Social Security taxes and working for longer are just a few of the other ways to increase your payments.

Diversify and Coordinate Your Income Streams

Retirement requires you to transition from getting paychecks from your company to figuring out your own payment plan. You could be living in retirement for 20 years, 30 years or even longer, and adding inflation to the mix can make this process pretty overwhelming. Your plan will need to factor in retirement income increases over time.

A solid, diverse retirement income strategy can help you feel confident that you won’t run out of money. Make sure your plan utilizes more than just your 401(k) or Roth IRA. Other income streams could be Social Security, any real estate you own an inheritance or any other investments you have.

Regardless of what your ideal retirement looks like, planning in advance to deal with inflation, interest rate hikes and any unexpected changes is key. A financial professional can help you assess all of your options and create a comprehensive retirement plan that meets your goals and needs.

About the Author

Tony Drake, CFP®, Investment Advisor Representative

Founder & CEO, Drake and Associates

Tony Drake is a CERTIFIED FINANCIAL PLANNER™and the founder and CEO of Drake & Associates in Waukesha, Wis. Tony is an Investment Adviser Representative and has helped clients prepare for retirement for more than a decade. He hosts The Retirement Ready Radio Show on WTMJ Radio each week and is featured regularly on TV stations in Milwaukee. Tony is passionate about building strong relationships with his clients so he can help them build a strong plan for their retirement.

Most Popular

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!
estate planning

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!

Upstream basis planning is a trust strategy that can save wealthy people on their capital gains taxes and income taxes associated with highly apprecia…
July 3, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Don’t Be Tricked into Voluntarily Paying Higher Taxes on Your IRA
IRAs

Don’t Be Tricked into Voluntarily Paying Higher Taxes on Your IRA

Traditional IRAs are set up in a way that basically incentivizes you (and your heirs) into paying the highest tax bill possible. Don’t fall for it. Co…
July 4, 2022

Recommended

Should I Hire an Estate Planning Attorney Now That I Am a Widow?
estate planning

Should I Hire an Estate Planning Attorney Now That I Am a Widow?

Many estates are simple enough where no help is needed, but there are several situations where anyone would be much better off getting some profession…
July 5, 2022
Age Magnificently with the Help of a Geriatric Care Manager
retirement

Age Magnificently with the Help of a Geriatric Care Manager

Geriatric care managers help families map the coming changes and explore the options before they are even needed.
July 5, 2022
Don’t Be Tricked into Voluntarily Paying Higher Taxes on Your IRA
IRAs

Don’t Be Tricked into Voluntarily Paying Higher Taxes on Your IRA

Traditional IRAs are set up in a way that basically incentivizes you (and your heirs) into paying the highest tax bill possible. Don’t fall for it. Co…
July 4, 2022
How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!
estate planning

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!

Upstream basis planning is a trust strategy that can save wealthy people on their capital gains taxes and income taxes associated with highly apprecia…
July 3, 2022