Inflation is a natural enemy of retirement savings. No matter how much money you stash away, rising prices can erode the value of those dollars. But retirement savers aren’t helpless. There are many things they can do to guard their nest eggs from spiking consumer prices — and even use those higher costs to their advantage.
“Higher inflation has some benefits,” said David Edmisten, the founder of Next Phase Financial Planning in Prescott, Arizona. “Savvy retirees can make adjustments in their financial plans to help them remain confident in their retirement.”
Edmisten is one of many financial advisors guiding their clients through the storm of soaring costs on items from groceries to furniture — and it’s not clear when that storm will end. By one popular measure, the year-on-year increase in the consumer price index, inflation has fallen for the past seven months straight. On the other hand, the number that measure landed on — 6.4% in January, the most recent reading — was still one of the highest since the early 1980s. Even as the rate of increase comes down, prices remain stubbornly high, and prices for many goods and services have spiked well above that official rate.
Understandably, clients are anxious. More than 70% of Americans aged 50 and older are worried inflation will cause “serious hardship” during their golden years, according to a survey by Kiplinger, a business publisher. And 40% of U.S. workers are already postponing retirement due to the rising cost of living, a study by the Nationwide Retirement Institute found.
But for all those nervous investors, wealth managers across the country have a simple message: Don’t panic. There are many tools retirees and soon-to-be-retirees can use to fend off the inflation beast, whether it’s investing in bonds, opening a high-yield savings account, getting the most out of Social Security or simply saving more money.
“As individual citizens, we don’t have much control over inflation,” said Spencer Stephens, the owner of Rooted Interest Financial Planning in Holladay, Utah. “However, we do have control over how we use the money we have worked so hard for.”
Here are advisors’ tips for how to take back that control: