Question: I heard tariffs will cost U.S. families $2,800 this year. I'm a retiree on a fixed income. How can I prepare?
Answer: Though retirement can be an exciting period of life, it can be scary to move from a steady paycheck to a fixed income. Granted, that fixed income may have multiple components: Social Security benefits, retirement plan withdrawals, and maybe even a modest pension.
Still, many people end up with limited spending power once their careers come to an end. The Transamerica Institute says that as of late 2023, retirees had a median annual household income of $55,000.
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If you’re a retiree with a similar household income, you may be worried about the impact of tariffs. That’s understandable.
A late April Gallup poll found that 89% of Americans think tariffs will lead to higher prices. Meanwhile, the Budget Lab at Yale University says tariffs could cost the average household $2,800 this year in lost income.
While tariffs could hurt U.S. consumers on a broad level, retirees may end up bearing the brunt of the impact. It’s important to prepare accordingly so you don’t end up struggling.
Do some proactive budgeting
Whenever you’re looking at costs going up, whether as a member of the workforce or a retiree, it’s a good idea to examine your spending closely and budget carefully. Jordan Mangaliman, owner and adviser at Goldline Financial Services, suggests that any retiree who’s worried about tariffs — and even those who aren’t — should do a spending assessment, especially when it comes to discretionary items.
“The first thing retirees should do is identify their living essentials that may rise, like groceries, utilities, and transportation,” he says. “This will help retirees get a good idea of how to budget their discretionary spending and vacations for the coming years to accommodate the increase in everyday expenses.”
While it’s particularly important for lower and moderate-income retiree households to go through this exercise, Mangaliman says, “Even retirees with decent incomes should be proactive when navigating potential increases in living costs due to tariffs.”
Stock up on essentials
The frustrating thing about tariffs is that it's hard to say exactly which products will rise in price and when those increases will come to a head. That's why Mangaliman suggests that retirees with wiggle room in their budgets stock up strategically on items like paper products, canned goods, and bathroom essentials.
"Retirees may also want to stock up now on essentials or non-perishable items," he says. "It’s important they do it soon while the prices are still low."
Gabriel Shahin, founder and principal at Falcon Wealth Planning, agrees. He encourages retirees to take advantage of bulk discounts when possible.
“Spending a little money on memberships like Sam’s Club or Costco can also help,” he explains.
“Buying in bulk allows you to reduce the frequency of purchases. So instead of restocking every few weeks or monthly, you might be able to buy enough to last three to six months, especially for essentials.”
Shahin also recommends prepaying for goods and services when possible. Not only can this lead to discounts, he explains, but it allows retirees to lock in current prices before they rise. And don’t be afraid to negotiate, either.
“Sometimes, just asking for lower rates or better deals can uncover promotional pricing or special offers you wouldn’t have received otherwise,” Shahin says.
Find creative ways to boost your income
Many people associate retirement with the end of actively earning an income -- period. Mangaliman says it's wise for retirees who are worried about tariffs to try to increase their income, such as with a side hustle. But you don't necessarily have to sign up for day shifts at a local retail store or get an office job.
"Purchasing a rental property can help offset increased living expenses due to tariffs," he says. And while he acknowledges that being a landlord may not be an option for all retirees, there's always part-time work in the gig economy.
In 2023, AARP reported that gig work was on the rise for older Americans. Flexible work arrangements, which the gig economy allows for, give retirees an opportunity to earn extra money and stay busy.
Make sure your investments are doing their job
At a time when costs could potentially rise, and soon, it’s important for retirees to keep a close eye on their portfolios, says Mangaliman.
"They should rebalance as necessary, positioning their money to offset inflation in the long term," he says.
The same holds true for near-retirees, who may be on the cusp of ending their careers in the midst of economic uncertainty.
"For those close to retirement, they’ll want to stress-test their retirement plan against inflation and market volatility,” Mangaliman says. “Doing so will help ensure they can live comfortably."
Both current and soon-to-be retirees should not only assess their portfolios’ risk profiles, but also take steps to ensure that they have some income-producing assets they can rely on for protection against rising costs. Dividend stocks, real estate investment trusts, and municipal bonds could all fit the bill, but ultimately, it’s best to work with a dedicated financial planner to create the right investment mix for your situation.
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