Many people are concerned about inflation on a national and global level. But a lot of my clients’ concerns are much closer to home. On a personal level, inflation unquestionably affects how much your retirement dollars will be worth. Over time, it can seriously dwindle your nest egg, which is the opposite of the direction you’re trying to go in. 

With that in mind, we wanted to share some helpful guidance regarding inflation’s impact on your retirement. You can also take some steps to mitigate its impact, which I also wanted to share.

Inflation’s impact on retirement

• According to research, a 1% inflation rate over twenty years would eat up $34,406 of your Social Security benefits alone (LIMRA, 2016). If the inflation rate increases to 3%, the difference would be over $117,000.
• In 2018, the Centers for Medicare and Medicaid Services estimated that healthcare expenditures increased by 4.6% over the previous year. Over that same period, inflation averaged 2.4%. Translation? Even when inflation is low, you may be hit harder than others because the expenses that affect you most continue to rise.
• Healthcare isn't the only thing that can drive up your expenses. Housing, travel, and supporting children and grandchildren also influence how much you spend and how fast your retirement savings deplete.

How to mitigate inflation’s effects

• Consider downsizing. Trading in a larger home for a smaller one, even if the mortgage is paid off, reduces your costs associated with property taxes, utilities, homeowners insurance, and maintenance.
• Expand your investments1. Add investments to your portfolio that may increase in value as inflation rises, such as Real Estate Investment Trusts (REIT) or energy sector stocks. 
• Balance with bonds2. Balance stock investments with more conservative options, such as bonds.

Inflation can lessen your retirement savings, but it doesn't have to affect your dreams for the golden years. Reach out, and let’s pull together an effective retirement planning strategy to help you overcome inflation’s subtle influence. Foundation Wealth and Tax Advisors is here and happy to help. Contact us for strategic retirement planning in Charlotte.