inflation planning

How to Prepare for Inflation in Your Retirement Plan 

With inflation at a 40-year high and stocks in a bear market, how much should you be worried about the impact on your retirement income plan? If you plan right, you shouldn’t have to worry at all.

Over four dozen countries have raised interest rates this year in a bid to contain the most rapid inflation in decades. Including here in the U.S. Due to this, many retirees are now concerned about what retirement will look like for them. Many goods and services such as food, the cost of cars, and gas have seen a major price hike like we’ve never experienced before. There are several factors at play that are affecting inflation. The economy reopening after a historic pandemic, the invasion of Ukraine and supply chain issues have caused significant human and economic hardship for many.

The consumer price index rose 8.6% in May from a year ago, the highest increase since December 1981. Core inflation excluding food and energy rose 6%. Both were higher than expected. Today’s rate hike is a sign from the Fed of an increasingly aggressive stance towards monetary tightening in a bid to tackle soaring consumer prices. With everything happening in the world, this may have you worried about how this will play into your retirement plan. Here are a couple ways you can prepare for inflation to help ease future financial fears.

Be prepared for Inflation

A spring 2022 survey of more than 3,400 U.S. adults, found that nearly 60% of respondents said inflation has adversely affected their personal finances.  About one in four said it has had a major financial impact. A similar percentage said they will need to delay their retirement due to spiraling inflation.

While it may be early to adjust long-term inflation assumptions in your retirement planning, if supply chain issues and consumer spending don’t become more normalized to long-term trends, an increase in inflation to even 4% over the long run could have a significant detrimental impact on retirement savings and maintaining your lifestyle throughout retirement. This bears watching and making adjustments in your projections as needed.

Understandably, people fear running out of money once they reach retirement. Creating a retirement budget can help you make sure this doesn’t happen. A retirement budget outlines the funds you will have coming in during retirement and how you can use them to cover all your regular bills and unexpected expenses. 

Most retirees receive an income from a pension, but it’s highly likely that payments may not increase as prices rise. It’s important to note that even modest inflation can be an issue if the majority of one’s income is fixed. It’s important to keep at least some of your savings in investments that tend to keep up with inflation.

If you are nearing retirement or already retired, you should be taking these steps to keep up with rising costs:

  1. Start with an estimate of the income you will need.
  2. List your expected spending.
  3. Consider expenses that will change in retirement.
  4. Factor in big lifestyle changes.
  5. Estimate your retirement income.
  6. Set up a spending plan you can track and adjust.

Always make sure you’re spending wisely, but especially during these hard times. Are you considering a big purchase, such as a new home or car? If you think it might be more expensive later because of inflation, it may be a good idea to make the purchase today.

Equities and Stocks

Equities and stocks have the ability to help protect you from inflation. You need a combination of growth and income in your portfolio. A rule of thumb for some investors is to take 100 minus your age to get the percentage of your portfolio that should be in equities. 

However nowadays, retirees are going to need more. With where we are right now, the bigger risk is having a lot of long-term bonds, because when you have inflation start to pick up, those bonds get destroyed. One type of government bond, Treasury inflation-protected securities, is guaranteed to keep up with inflation.

Look for equity stocks that can pass through increased earnings. During times of high demand, companies can increase prices and positively impact earnings. They may pass these earnings to investors.

Don’t Rely on the Social Security increase

Social Security payments are adjusted each year to keep pace with inflation. The current cost of living (COLA) is 5.9 percent for Social Security benefits and SSI payments. However, Social Security cost-of-living adjustments aren’t always enough for individual retirees to cover rapidly increasing costs, such as health care. 

Along with your Social Security income, make sure your portfolio is built to withstand inflation in order to grow during retirement.


Some products with guaranteed payouts, like fixed index annuities (FIAS), are insurance products that may be able to help your savings outpace inflation. An FIA combines the benefits of tax deferral with the potential for interest earnings based on positive changes in an external index (a measurement of a section of the stock market) without actual participation in the market.

Annuities may be subject to restrictions, surrender charges, holding periods or early withdrawal fees, which vary by carrier. With some annuities, you can pay for an optional rider that helps your payouts keep up with inflation.

Make Inflation Adjustments to Your Financial Plan

For many Americans, skyrocketing inflation involves more than just griping about high prices — it means making fundamental lifestyle changes.

When determining how to use your retirement savings to pay your bills, factor in the impact of inflation on essential services. Don’t forget to factor in price increases for necessities such as food and healthcare. Overall, a detailed investment plan can help to make sure your portfolio keeps up with rising costs and lasts throughout retirement.

Working With APO Financial

If you’re retired or planning to retire soon and want to maintain your current standard of living, it’s time to take action against rising inflation. Let’s meet to discuss strategies to help protect your savings and address the main concerns posing a potential risk to your future.

At APO Financial, our goal is to demystify investing while helping to build real-life, holistic, sustainable income plans for our clients. We do this by focusing on retirement planning, wealth building, risk management and more. Our financial guide was designed for you and your family so you can easily navigate the path to retirement. 

Contact us here today to help protect your assets and maximize your income so you can live life to the fullest.

Investment advice is offered through APO Financial Services, LLC. Insurance and fixed annuity products are offered through our affiliates, Asset Protect One, Inc. and/or APO Financial Services, Inc. No persons associated with APO or its affiliates is a licensed attorney or tax professional and nothing on this Page should be considered tax or legal advice.
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