Don’t Let Inflation Hurt Your Retirement

Inflation and economic uncertainty are creating new sources of anxiety around planning for retirement. In fact, pessimism is so high that more than 50% of Gen X say they won’t have enough money for retirement, according to Bloomberg.

Not only does inflation make it more difficult to pay for necessities such as groceries and gas, it also erodes the value of investments and retirement savings. For retirees, inflation can make it difficult to meet basic needs.

For the late baby boomers and early Gen Xers preparing for retirement now, the challenge of inflation increases the pressure to make smart financial decisions—while also reminding millennial and Gen Z workers that resilience is an essential element of a strong retirement plan.

Everyone has unique goals, needs and personal circumstances, from age to risk tolerance, so it’s crucial to tailor retirement plans to individual needs, explains Rod Mims, SVP and National Sales Manager at Athene.

Working with a financial professional can provide an objective viewpoint to help people make smart financial decisions and develop a plan for retirement. A financial professional can clarify retirement planning options, provide product solutions to help handle life events and balance retirement strategies with long-term market trends and short-term market volatility in mind.

Mims offers the following strategies that could help those nearing retirement shield their savings from inflation:

1. Diversify your portfolio: Unlike bond portfolios, fixed annuities and registered index-linked annuities may still accumulate value as inflation and interest rates rise while protecting your retirement assets in a market downturn.
2. Help your children achieve financial independence: Paving the way for young adult children to take on more responsibility for their daily expenses can free up more potential savings to invest and grow.
3. Become a one-car household: Between loan payments, insurance and maintenance costs, it’s possible to save hundreds each month by not having a second car.
4. Downsize your home: If you live in a home with more space than needed, you can sell it and use the profits to build up your retirement account.
5. Evaluate unnecessary subscriptions: From streaming services to club memberships, take a closer look at automatic monthly charges and cancel anything that is no longer in use.
6. Make catch-up contributions: For those 50 or older, retirement accounts such as traditional and Roth IRAs allow you to make higher contribution amounts than younger savers.

The unpredictability of the future, from inflationary trends to how long we will live, makes it challenging to adequately plan for retirement.

The main thing to remember about retirement planning is that you can’t do it all in one day. Large decisions can be broken down into simple, more manageable tasks.

A good way to start thinking about retirement is to build a stronger emotional bond with your future self, says UCLA Anderson School of Management professor Hal Hershfield. Create a tangible vision you can work toward. When you create that relationship between yourself now and your retired self in five, 10 or 20 years from now, you will start putting more value on saving for the future versus spending today.

“Picture yourself in retirement,” Hershfield says. “What are you doing and who is there with you? And what can you do now to ensure that your next chapter in life is a fulfilling one?”

As inflationary pressures persist, so do stressors on savings—and a focus on the future can prove essential to realize financial goals.