Inflation is one of those retirement risks that can be easy to overlook because its effects happen gradually. But if inflation were significantly higher than expected, the impact on your retirement budget could become much more noticeable.
Everyday expenses could rise
Groceries, utilities, insurance, housing, and home repairs could all become more expensive. A budget that works today may not stretch as far in the future.
Your purchasing power could decline
Even if the dollar amount in your savings account stays the same, its purchasing power can decrease as prices rise. That means your retirement savings may not buy as much 10 or 20 years from now.
Healthcare deserves attention
Healthcare is already an important retirement expense, and higher inflation could put additional pressure on a retiree's budget.
Fixed income can become more challenging
If your income doesn't increase as quickly as your expenses, you may have to adjust your spending or draw more heavily from your savings.
The goal isn't to predict inflation. It's to prepare for it.
No one knows exactly how inflation will behave throughout your retirement. Building a plan that considers different scenarios can help you think through how your income, spending, savings, and investments might respond if costs rise faster than expected. A retirement plan shouldn't only work when everything goes according to plan. It should also account for the possibility that the cost of living changes along the way.
This content is for educational purposes only and is not individualized financial advice.
